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Countercyclical Capital Regime – A Proposed Design and Empirical Evaluation

Author

Listed:
  • Scott Smith

    (Federal Housing Finance Agency)

  • Jesse Weiher

    (Federal Housing Finance Agency)

Abstract

Motivated by the Great Recession in 2008, countercyclical capital regimes are now being considered by financial regulators. This paper provides a methodology on structuring a countercyclical capital requirement to achieve the goal of determining, at the time of acquisition, an amount of capital sufficient to survive a plausible but worst case stress period, in essence to fully capitalize the asset at acquisition.

Suggested Citation

  • Scott Smith & Jesse Weiher, 2012. "Countercyclical Capital Regime – A Proposed Design and Empirical Evaluation," FHFA Staff Working Papers 12-02, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:12-02
    as

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    File URL: https://www.fhfa.gov/sites/default/files/2023-04/2012-04_WorkingPaper_12-2_508.pdf
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    File URL: https://www.fhfa.gov/research/papers/wp1202
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Stephen D. Oliner & Morris A. Davis & Will Larson, 2019. "Mortgage risk since 1990," AEI Economics Working Papers 1001502, American Enterprise Institute.
    2. Smith, Scott & Fuller, Debra & Bogin, Alex & Polkovnichenko, Nataliya & Weiher, Jesse, 2016. "Countercyclical capital regime revisited: Tests of robustness," Journal of Economics and Business, Elsevier, vol. 84(C), pages 50-78.
    3. Alexander N. Bogin & Stephen D. Bruestle & William M. Doerner, 2017. "How Low Can House Prices Go? Estimating a Conservative Lower Bound," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 97-116, January.
    4. Gete, Pedro & Tiernan, Natalie, 2014. "Lending Standards and Countercyclical Capital Requirements under Imperfect Information," MPRA Paper 54486, University Library of Munich, Germany.
    5. Mark Skidmore, 2014. "Housing Affordability: Lessons from the United States," Treasury Working Paper Series 14/11, New Zealand Treasury.
    6. Patricia C. Mosser & Joseph Tracy & Joshua Wright, 2013. "The capital structure and governance of a mortgage securitization utility," Staff Reports 644, Federal Reserve Bank of New York.

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