NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Continued Interest Rate Vulnerability of Thrifts

Patric H. Hendershott, James D. Shilling

NBER Working Paper No. 3415
Issued in August 1990
NBER Program(s):   ME

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.

download in pdf format
   (326 K)

download in djvu format
   (214 K)

email paper

This paper is available as PDF (326 K) or DjVu (214 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3415

Published:

Users who downloaded this paper also downloaded these:
Diamond and Rajan w15197 Illiquidity and Interest Rate Policy
Spencer and Jones w3023 Trade and Protection in Vertically Related Markets
Grossman w6901 Imperfect Labor Contracts and International Trade
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us