Robert L. Schweitzer

Bond rating agencies and their role in bank market discipline

This study examines whether changes in the ratings of bank debt have any information content. Bank holding companies are monitored both by bank regulators and by debt rating agencies, leading to the view that duplication of effort may render superfluous the monitoring service of rating agencies. However, our results show that downgrades of bank debt are associated with statistically significant wealth losses, irrespective of whether the rating change is across rating classes or within a rating class. Moreover, the results hold even when observations with potentially confounding events are removed from the sample. These results suggest that rating agencies provide valuable information to the capital market regarding the risk exposure of bank holding companies.

Is Race an Important Factor in Bank-Customer Preferences? The Case of Mortgage Lending

This paper tests whether there is a preference by borrowers and lenders of a particular ethnic or racial group that may predispose them to borrow and lend from each other. Using a narrow geographic area called zip code clusters, this paper groups minority-owned and non-minority-owned banks to allow for a homogenous applicant pool from which both borrower and lender preferences can be determined. This study compares Asian-owned, black-owned and Hispanic-owned banks versus white-owned banks that are located in the same zip code and adjacent zip codes. The results show that borrowing preferences exist between all applicant groups and banks from the same racial classification. In addition, some cross-racial borrowing preferences exist. The results show that across sample lending preferences exist for both black and white applicants with black-owned banks and white applicants with white-owned banks that are located in the same area as Asian-owned banks. Also, the results of the within sample lending preference model shows that white-owned banks have a preference for white applicants, at the expense of Hispanic applicants and both white-owned and Asian-owned banks exhibit a preference for Asian applicants.

Comparing lending decisions of minority-owned and White-owned banks: Is there discrimination in mortgage lending?

Abstract A recent paper by Black, Collins and Cyree [J. Financ. Serv. Res. 11 (1997) 189.] attempted to determine if Black-owned banks discriminated against Black applicants for mortgage credit. They concluded that Black applicants were more likely to be rejected than White applicants when applying for mortgage credit at a Black-owned bank. However, the use of the Metropolitan Statistical Area (MSA) as the geographic delineation from which minority-owned and non-minority-owned banks are compared may not provide a narrowly defined market from which an accurate comparison can be made. Here, the zip code cluster technique developed by Clair [Econ. Rev. (1988) 11.] is used to control for differences in applicant base that may result when using a broader geographic definition such as an MSA. The results reported in this study show that contrary to the results of Black, Collins and Cyree, Black-owned banks are not statistically more likely to reject Black applicants. The study also considers Asian-owned and Hispanic-owned banks. The results show that Asian-owned banks are equally as likely to provide a mortgage to Asian applicants, while Hispanic applicants are more likely to receive a mortgage from a Hispanic-owned bank.

The effect of common bond on credit union performance: The case of black-controlled credit unions

This article compares the financial characteristics of black-controlled credit unions by type of common bond. The study found that many of the operational differences of these credit unions can be attributed to institutional characteristics associated with the three distinct types of credit unions. It also found that black credit unions are viable financial institutions, regardless of type of common bond. This finding is linked to the ownership of credit unions by its membership. This unique relationship has implications for black economic development.

“Too big to downgrade”: the response of financial analysts to bond downgrades of money center banks

Outlines previous research on the effects of bond rating changes on the share prices of US banks, noting opposing views on whether they contain new information. Examines revisions in analysts’ earnings forecasts for downgraded and non‐downgraded banks (separating regional banks from large money centres) to test the value of this information using 1981‐1991 data on 14 downgrades of money centre banks; and explains the methodology used. Shows that downgrades affected forecasts for the downgraded banks and other money centre banks but not for regional banks. Concludes that bond rating agencies assist market discipline by providing useful information on risk.

An Analysis of Market Segmentation in Mortgage Lending Between a Commercial Bank and a Mutual Savings Bank

This paper is concerned with determining whether commercial banks and mutual savings banks serve separable clienteles in the mortgage market. In order to test the hypothesis, determinants of mortgage lending terms at a major commercial bank and a large mutual savings bank were analyzed. The results indicate that market segmentation does exist. However, some variable signs were other than anticipated. Nevertheless, the significance level of the summary statistic shows that the overall population was separable for the two institutions. Thus, the results of this paper are preliminary. To draw general conclusions, additional data from a larger sample must be obtained. Copyright American Real Estate and Urban Economics Association.

Do lenders discriminate against low-income borrowers?

Summary and ConclusionThe purpose of this paper is determine whether the use of a narrow geographic definitions of the market served by banks results in conclusions that are different from those found if a broader geographic definitions is used. Using ZIP code clusters for a sample of low-income applicants, we find results that are different from those when the traditional MSA sampling technique is used.

Mortgage lending determinants in a major metropolitan area

The purpose of this paper is twofold. First, the paper analyzes the determinants of mortgage lending terms at a commercial bank and at a mutual savings bank in a major metropolitan area. Secondly, the paper addresses the question whether the clientele of the institutions differ with respect to the mortgage applications. The data set consists of observations on mortgage lending terms and borrower and property characteristics for mortgage loan applications from each of the financial institutions. The survey was conducted from January 1978 to June 1978. The coefficients from the estimated equations are tested for statistical significance. The estimated equations include the following variables. The loan terms are amount requested, percentage down payment, years to maturity, and interest rate. Although it is recognized that those terms may be interdependent, that particular problem is not considered here. Indeed, interdependence of loan terms exists given that the market for mortgages is not cleared solely by the movement of interest rates. That is due either to the inflexibility of mortgage rates because of political constraints such as usury ceilings or the willingness of the applicant and institution to trade off among the various terms. 1 In particular, a lower interest rate may be offered the applicant provided a higher down payment is forthcoming. Thus, to clear the market for mortgages, the rationing of credit is accomplished through an interaction of the entire package of loan terms rather than simply via movements in the mortgage interest rate. Moreover, in the case of mortgage applications, the determination of the willingness of the financial institution to grant the application will depend on the creditworthiness of the borrower. The functions used in this paper include as measures of creditworthiness ratio of monthly hous

Did regulatory actions discourage consumer demand for treasury bills

Abstract This paper studies the demand for Treasury bills by consumers during each period of significant regulatory change intended to discourage such demand. The results show that there were significant changes in the structure of the publics demand, although the changes were not always in the direction intended by the regulatory authorities.