F. Stevens Redburn

Modelling Mortgage Terminations in Turbulent Times

Techniques used to predict mortgage defaults during a relatively stable period proved less successful during the turbulent financial cycle of the early 1980s. An alternative specification of the relationship between defaults, homeowner equity, and interest-rate movements better captures the effect of interest rates on default probability. Results confirm the powerful effect of equity on mortgage defaults and the strong, but asymmetric, influence of interest rates on both defaults and prepayments. The new specification allows direct measurement of the interest-rate effect on defaults, distinguishing the effect when rates rise or fall. Copyright American Real Estate and Urban Economics Association.

Q Factor Analysis: Applications to Educational Testing and Program Evaluation.

The potential use of Q factor analysis for evaluating and designing educational and clinical programs is discussed and illustrated. The advantages of this technique in comparison to normative measurement employing prevalidated or a priori scales include additional richness of theoretical insight, discovery of the structure as well as the content of the individuals thinking, relative independence from prior conceptualization, and efficiency in gathering detailed information quickly. Q factor analysis is most appropriate for use in clinical or educational situations where available typologies or scales seem inadequate, where the psychological dynamics of learning or treatment are not well understood, or where it is desirable to avoid anticipating the precise direction and character of program impact. Several practical applications of the technique are suggested.

Plant Closings: Impacts and Responses:

In this review essay, Terry F. Buss and F. Stevens Redburn dispute many of the reputed impacts of plant closings on workers and their families. They also find that the traditional publicly provided social service programs do not meet the needs of displaced workers. For example, they find that income maintenance programs such as AFDC play a minor role in aiding dislocated workers; that the public employment services play a minor role in helping displaced workers find jobs; that retraining plays a small role in the reemployment of displaced workers; and that mental health services are among the services least often used by displaced workers. Buss and Redburn call for a better targeting of public programs toward people with greater-than-average risk offailure: less-educated or less-experienced people, older workers, the unskilled, minorities, and the handicapped. They also advocate some new ways to meet the health insurance needs of many displaced workers.

Never lost a penny: An assessment of federal deposit insurance

Current problems of the Federal deposit insurance system threaten not only to increase future Federal costs but also to destabilize the U.S. banking system as it faces new competitors. The systems problems can be traced to weakness in both the political and market feedback mechanisms. Current policies governing Federal deposit insurance are flawed in numerous respects. Recent extension of capital forbearance to troubled institutions appears to be another step in the wrong direction. Reforms are suggested that would improve political accountablity and market discipline. However, given resistance to such reforms, only a banking crisis seems likely to break the impasse.

Practical Imagination: A Possible Future for Federal Budgeting

To develop a federal budget process that delivers better fiscal outcomes for the nation consistently over an extended period would require new information and analysis, applying these to decisions through properly designed procedures, and strengthening the institutions that support wise fiscal choices. Changes in each of these process components intended to contribute to good fiscal outcomes are described, and obstacles to their adoption and use are noted. Such reforms could yield budgets that deploy public resources today to carry out strategies promising to increase the nations ability to survive inevitable social and fiscal shocks and to take advantage of expected and unexpected opportunities for its citizens to thrive, grow, and fulfill their dreams.

Introduction to the symposium

The U.S. economy is in a state of crisis (Magaziner and Reich 1982; Schwartz and Choate 1980). Americas industrial base, which once relied heavily on steel, automobile, and rubber production, is in decline. The Northeast and Midwest have been devastated as plant closings and work retrenchment have idled workers in numbers unprecedented since the Great Depression. Out of this decline, new industrial sectors such as energy, electronics, computing, and communications, are replacing obsolete enterprises. The so-called Sunbelt states are now experiencing growth comparable to the decline of the heavy industrial heartland. Economic upheaval and rapid change can be psychologically devastating to individuals, whether they reside in declining or growing regions (Buss and Redburn 1982; Slote 1969). The loss of a job may be a stressful life event similar to divorce, death of a relative, terminal illness, or other personal disaster. Even reemployment may not alleviate stress; the lingering effects of previous job loss accompanied by stress induced in performing on a new job may be destructive. Laid-off workers are not the only ones subjected to stress. Families, friends, and relatives all may be directly or indirectly touched by the misfortune of a worker. Job loss among skilled workers may also create problems for those who are searching for their first job or for those who are difficult to employ. The poor, unskilled, less educated, minority, handicapped, or elderly worker may be pushed aside from lower status or entry-level jobs, for which they typically apply, as highly skilled unemployed workers scramble to secure replacement jobs (King 1982). This may cause problems for both groups: the skilled worker may be under stress because he is forced to accept a lower status, lower paying job; while the hard-to-employ worker is forced to accept welfare benefits. Few people in a community are left unscathed or untouched by plant closings and mass unemployment. Living in a rapidly growing community may also be a stressful life event (e.g., Freudenberg et al 1982). As economic growth occurs, the social fabric of a community may be strained and modified. Newcomers will demand a share