Standardizing Yields on Mortgages and other Securities

The existence of a difference between the yield to maturity of a coupon bond and the expected holding period return on a coupon bond, referred to as coupon bias, is well recognized. This paper discusses the nature of coupon bias for mortgages, estimates the magnitude of the bias under different assumptions about the characteristics of the mortgage security and the term structure, and compares the magnitude of the coupon biases on mortgages and comparable coupon bonds. For a moderately upward sloping term structure at current levels of interest rates, coupon bias for a thirty-year mortgage can be on the order of 75 basis points.     

The incidence of excess interest costs paid by municipalities in the competitive sale of bonds

State and local governments often pay higher interest rates than necessary on their new municipal bonds sold competitively because of the use of inefficient bidding rules and of a flawed measure of interest rate to evaluate the bids. This paper answers the question: if municipalities pay more than necessary, who benefits? The evidence suggests that the largest beneficiary is the Federal government, which collects capital gains taxes that it would not if the bonds were sold more efficiently. Most of the remainder of the excess interest costs are absorbed as economic waste or as windfalls to inframarginal investors.     

Depositor Liquidity and Loss Sharing in Bank Failure Resolutions

Bank failures are widely feared because depositors may suffer losses in the value of their deposits and restrictions in access to their deposits. In the United States, this is not true for insured deposits, which are made fully available to depositors almost immediately. But both problems may occur for uninsured deposits. One way to mitigate liquidity loss to uninsured depositors is to make the estimated recovery value of their deposits quickly available to them by the Federal Deposit Insurance Corporation (FDIC). Such a policy would greatly enhance the FDIC's ability to resolve large bank insolvencies without having to protect uninsured depositors through too-big-to-fail policies. (JEL G21 , G28 , G10 )     

Exploring goal‐setting as a tool for leadership development

Goal‐setting theory is based on the premise that conscious goals affect action and is supported by four decades of research and more than 1,000 scholarly publications. Although the theory has been widely applied in management settings, it is an underused framework in the broader field of leadership development. This study considers the effects of goal‐setting as applied in a leadership program conducted for local board members in a nonprofit membership organization, the Florida Farm Bureau Federation. A final reduced regression model explains about 25% of the variance in individual performance by considering goal specificity, goal difficulty, education level, and gender. This study has implications for professional development programming and its application of goal‐setting theory. Additional research is needed to explore further the application of goal‐setting theory in programming for volunteer leaders.