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This edition was written by Elijah Asdourian, Alex Conner, Georgia Nabors, Comfort Oshagbemi, and Louise Sheiner.
Undiagnosed early-stage cognitive impairments can affect financial decision-making. Using credit bureau and Medicare claims data, Carole Roan Gresenz of the Federal Reserve Bank of New York and co-authors find that credit scores declined by one to two points on average in the five years preceding a diagnosis of Alzheimer’s or a related disease. This effect grows larger closer to the diagnosis date. In the year before diagnosis, credit scores were four to six points lower, and the probability of credit card delinquency was 34% to 52% higher. They find that delinquency was 17% higher for mortgage borrowers in the year before diagnosis. In addition, Black borrowers faced larger credit impacts relative to white counterparts prior to diagnosis. The authors argue that credit reporting data may be useful for early identification of cognitive disorders.
The number of community banks—banks with assets under $10 billion that serve a small geographic area—has declined significantly in recent decades. Using data on bank closures and small business lending from 1999 to 2019, Bernadette Minton of Ohio State, Alvaro Taboada of Mississippi State, and Rohan Williamson of Georgetown find that, contrary to popular belief, community bank closures lead to an increase in lending to small businesses. However, the increase only occurs in counties with a high concentration of other community banks and is larger when the consolidated entity is a community bank that maintains a presence in the local county. The findings reestablish the importance of community banks in small business lending but suggest that the increased size and stability of community banks following consolidation increases community banks’ capacity to lend.
Daniel Lewis of University College London, Davide Melcangi of the Federal Reserve Bank of New York, and Laura Pilossoph of Duke exploit random variation in the timing of tax rebates from the 2008 Economic Stimulus Act to estimate how the portion of the rebate that households consume—the marginal propensity to consume, or MPC—varies across households. The authors find that households spent between 4% and 133% of the rebate, with more than three quarters of households spending 23% or less. All households spent part of their rebate on nondurable goods, but only about 70% of households spent on durable goods. The authors show that only 8% of the variation in MPCs is explained by characteristics like education, income, and homeownership. “Since observable characteristics explain a minor portion of the estimated MPC heterogeneity,” the authors explain, “we posit that other latent factors, such as preference heterogeneity, are likely important in determining marginal propensities to consume.”
"I was in Kyiv and Germany this week to discuss with my counterparts what we can do to continue to put sand in the gears of Russia’s war machine. First and foremost, we must recognize that this machine is powered by and reliant on imported components critical to the manufacture of ammunition, missiles and tanks. Before, certain sectors of the Russian economy imported dual-use goods to carry out normal economic activity. But now Russia’s entire industrial base is on a war footing, we need to ensure that sensitive dual-use goods — from machine tools to microelectronics — are not getting into the country. We need the private sector to help us accomplish this goal," says Wally Adeyemo, U.S. Deputy Secretary of the Treasury.
"It is important to recognize that the success of our sanctions and export controls is only possible because of a partnership with the private sector. Companies have already done a great deal to help us constrain the Kremlin’s access to goods, but we need them to do more. It is critical that our manufacturers take every step within their power to scrutinize their supply chains and prevent western-made equipment ending up in the weapons being deployed by the Kremlin. We also need financial institutions in our countries to examine their correspondent relationships in the nations that are providing the Russian military industrial base with material support. This includes paying special attention to the small and mid-sized banks that are often the Kremlin’s preferred vehicles to process payments for military goods."
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