TY  - JOUR
AU  - Hendershott,Patric H.
AU  - Shilling,James D.
TI  - The Continued Interest Rate Vulnerability of Thrifts
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3415
PY  - 1990
Y2  - August 1990
UR  - http://www.nber.org/papers/w3415
L1  - http://www.nber.org/papers/w3415.pdf
N1  - Author contact info:
Patric H. Hendershott
Fisher Hall
Ohio State University
2100 Neil Avenue
Columbus, OH 43210
Tel: 218/963-1393
Fax: 218/963-9484
E-Mail: hendershott.2@osu.edu

James D. Shilling
M1  - published as Patric H. Hendershott, James D. Shilling. "The Continued Interest-Rate Vulnerability of Thrifts," in R. Glenn Hubbard, editor, "Financial Markets and Financial Crises" University of Chicago Press (1991)

M2  - featured in NBER digest on 1990-12-10
AB  - 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.
ER  -