English, Article, Journal or magazine article edition: The Continued Interest Rate Vulnerability of Thrifts Patric H. Hendershott; James D. Shilling

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Bookmark: http://trove.nla.gov.au/version/141026
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • The Continued Interest Rate Vulnerability of Thrifts
Author
  • Patric H. Hendershott
  • James D. Shilling
Physical Description
  • preprint
Notes
  • The 1980s S&​L debacle is generally viewed as the result of: (1) sharply rising interest rates eliminating the net worth of thrifts funding fixed-rate loans with short-term deposits and (2) thrifts responding by taking even greater interest-rate and credit risks. The question investigated in this paper is how vulnerable do thrifts remain to an interest rate experience like that which triggered the 1980s S&​L debacle? The short answer is that thrifts are even more vulnerable in 1989 than they were in 1977. The dollar volume of fixed-rate mortgages funded by short-term deposits in 1989, $400 billion, is slightly greater now than it was in 1977, and thrifts have also put over $325 billion of adjustable-rate loans with rate caps on their balance sheets. A sharp rise in interest rates (the one-year Treasury rate rose by 9 percentage points between 1977 and 1981) would cause significant losses on these capped loans, as well as on the fixed-rate loans.
  • RePEc:nbr:nberwo:3415
Language
  • English
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