United States
Selected Issues

This Selected Issues paper analyzes the condition of household, corporate, and bank balance sheets; sustainability of the U.S. external current account deficit; the impact of a slowdown in the growth on the euro area economy; and the implications of the reduction in U.S. treasury securities for monetary policy and financial markets. The study discusses the pros and cons of investing government assets in private securities; the recent changes in agricultural support policy and their impact on other countries; technological innovations and the adoption of new technologies.

Abstract

This Selected Issues paper analyzes the condition of household, corporate, and bank balance sheets; sustainability of the U.S. external current account deficit; the impact of a slowdown in the growth on the euro area economy; and the implications of the reduction in U.S. treasury securities for monetary policy and financial markets. The study discusses the pros and cons of investing government assets in private securities; the recent changes in agricultural support policy and their impact on other countries; technological innovations and the adoption of new technologies.

I. The Condition of Household, Corporate, and Bank Balance Sheets1

1. During the 1990s, households and corporations increased their debt levels sharply, raising concern about their vulnerability during a prolonged economic downturn. A key factor in determining the depth and duration of the current economic slowdown rests on whether households and businesses encounter balance sheet problems which could spill over to the banking sector. Financial indicators suggest that household and corporate balance sheets generally remain healthy so far. A rise in mortgage debt accounts for much of the overall increase in household debt levels, but low unemployment and continued relatively high household net worth have meant that the credit quality of households has been solid. As long as unemployment remains relatively low, debt default is unlikely to create significant financial problems. Leverage and liquidity ratios of U.S. corporations show that the sector is in a sound position to weather the effects of the current economic slowdown, despite some concerns arising from the significant increase in corporate bond defaults and downgrades particularly in the telecommunication sector Similarly the improvement of asset quality in the banking sector during the 1990s together with strong profitability and capital mtios should cushion the impact of the economic slowdown on financial firms.

A. Household Balance Sheets

2. During the second half of the 1990s, personal saving in the United States fell to new lows, while household debt levels and net worth—through the rise in stock prices—increased dramatically (Figures 1 and 2). These developments have raised concerns that in the event of a prolonged economic downturn, the household sector could face considerable strains, and through defaulting on debt and sharply curtailing consumer spending could amplify the weakness in economic activity.

Figure 1.
Figure 1.

United States: Household Net Worth1

(In percent of disposable income)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

1 Includes net worth of nonprofit organizations.
Figure 2.
Figure 2.

United States: Total Household Debt

(In percent of disposable income)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

3. Rising household debt is not a new development in the United States. Household debt relative to income has been trending up since the 1950s (the earliest years for which data are available), but the trend rate of growth in debt picked up in the late 1970s, reflecting innovations in financial markets which provided households with easier access to credit (see Figure 2). Continuing this trend in the 1990s, household debt reached about 110 percent of disposable income in 2000. Other major industrial countries have also experienced a trend rise in household debt, and current household liabilities relative to disposable personal income in all major industrial countries, with the exception of France and Italy, are broadly similar to that in the United States (Table 1).

Table 1.

International Comparison: Household Net Wealth, Assets, and Liabilities

(In percent of personal disposable income)

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Source: OECD. 2001, Economic Outlook, June; and national data sources

Assets and liabilities are amounts outstanding at the end of the period. Figures are based mainly on die UN System of National Accounts 1993 (SNA 93) (for Japan 1990–98 only) and, more specifically, for European Union countries, the corresponding European System of Accounts 1995 (ESA 95). Households include nonprofit institutions serving household: (according to SNA 93 and ESA 95, households also include self-employed persons and sole proprietors). Net weal* is defined as non-financial and financial assets minus liabilities; net iinancial wealth is financial assets minus liabilities. Nonfinancial assets include stock of durable goods and dwellings. at replacement cost aild at market value, respectively. Financial assets comprise currency and deposits, securities other than shares, loans, shares and other equity, insurance technical reserves; and other accounts receivable/payable. Mot included are assets with regard to social security pension insurance schemes. Equities comprise shares and 1 other equity, including quoted, unquoted and mutual fiind shares.

4. During the 1990s, rising mortgage debt—which accounts for about 65 percent of overall debt-explains the bulk of the increase in overall U.S. household debt (Figure 3). Factors fuelling the rise in mortgage debt in the 1990s have been low unemployment, lower interest rates relative to the 1980s, the rise in refinancings that allows homeowners to liquefy equity in their houses,2 and the tax advantages associated with home equity loans.3 In contrast, consumer debt which accounts for about 21 percent of total household debt edged up relative to personal income in the early 1990s, but has remained relatively flat in the second half of the 1990s with a trend increase in revolving consumer debt (primarily outstanding credit card balances) offset by a decrease in nonrevolving debt (consumer loans) (see Figure 3).

Figure 3.
Figure 3.

United States: Mortgage and Consumer Debt1

(In percent of disposable income)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

1 Includes liabilities of nonprofit organizations.Source: Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United Smtes.

5. The household debt-service burden increased during the 1990s, reaching over 14 percent by the end of 2000, its highest level since the end of 1986 (Figure 4). Although consumer debt is about one-third the size of mortgage debt outstanding, required payments on consumer debt are higher because of the shorter maturity structure and typically higher interest rates. Mortgage interest rates during the 1990s have trended downward so that mortgage debt service as a percent of disposable income has remained relatively flat at 5 to 6 percent of disposable income. However, the debt-service burden is not distributed uniformly across households of different income classes. Lower-income households have a much higher debt-service burden making them and their creditors potentially more vulnerable to an economic slowdown.4

Figure 4.
Figure 4.

United States: Household Debt-Service Burden1

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System.1 Household debt payments (both interest and principal) in percent of disposable income.

6. Despite the rise in the debt-service burden, consumer delinquencies remained relatively flat in the second half of the 1990s, but increased noticeably at the end of 2000, particularly for mortgages (Figure 5). The number of personal bankruptcies declined in 1999 and 2000, from a peak in 1998, but edged up in late 2000 and early 2001 (Figure 6).

Figure 5.
Figure 5.

United States: Consumer Delinquencies

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Sources: American Bankers Association, Consumer Credit Delinquency Bulletin; and Mortgage Bankers Association of America, National Dehnquency Survey.1 Delinquency rate on all loans on 1 to 4-unit residential mortgage loans past 30 days due.2 Average ratio of eight types of closed-end loans.
Figure 6.
Figure 6.

United States: Personal Bankruptcies

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Administrative Office of the U.S. Courts.

7. Although household debt relative to disposable income increased over the 1990s, total assets rose by even more, resulting in a sharp increase in net worth that peaked at about 640 percent of disposable income in 1999, before falling in 2000, mainly because of lower equity prices (see Figure 1).5 Reflecting sharp gains in equity prices in the second half of the 1990s, the share of financial assets rose to about 70 percent of total assets (Figure 7, Table 2).6 Household portfolios remain diversified, but equities as a share of financial assets doubled to about 40 percent in 1999, compared to the early 1990s (Figure 8).7 Recent evidence in Tracy and Schneider (2001) suggests that although a number of factors may have helped to raise the household equity share—including the increased prevalence of defined contribution retirement plans and the aging of the baby-boom generation and their need to seek higher returns to have adequate savings for retirement—the most important factor has been the high relative return on equity during the second half of the 1990s. More households are now exposed to movements in equity prices, with about 50 percent of households holding equities in the late 1990s up from just 30 percent in the late 1980s.

Figure 7.
Figure 7.

United States: Household Total Assets1

(In percent of disposable income)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States.1 Includes assets of nonprofit organizations.2 Includes real estate, equipment and software owned by nonprofit organizations and consumer
Figure 8.
Figure 8.

United States: Household Composition of Financial Assets1

(1950-2000)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States.1 Includes results of nonprofit organizations.2 Includes defined benefit pension plans.3 Includes direct holdings of corporate equities, mutual funds, and equity shares held by bank trusts, pension funds, life insurance companies and mutual funds.
Table 2.

United States: Composition of Household Assets

(In percent of total household assets)

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Source: Board of Governors of the Federal Reserve, Flow of Funds Accounts of the United States.

8. Household real estate holdings—which represent the bulk of nonfinancial assets-reached $11 trillion dollars in 2000, or about one quarter of household assets. Since the mid-1990s, housing prices nationwide increased at a relatively modest average annual rate of about 4¾ percent, although they rose by over 7¾ percent in 2000 (Table 3).8 Case (2000) suggests that recent housing price increases have been driven by fundamental factors—including low unemployment, strong growth in personal income, demographics, and gains in stock market wealth-rather than by speculation and price inertia as was the case during the boom in housing prices in the late 1980s. Therefore, the slowdown in economic activity is unlikely to trigger a sharp decline in housing prices although a substantial decline in equity wealth and a protracted recession would likely result in falling real estate prices. Since the mid-1990s, increases in real estate prices have been considerably smaller than the rise seen in land prices in Japan during the “bubble economy” period in the 1980s.9

Table 3.

United States: Change in Housing Prices

(In percent at compound annual rate)

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Source: Office of Federal Housing Enterprise Oversight, House Price Index, October 4, 2000.

B. Corporate Balance Sheets

9. After declining in the first half of the 1990s, corporate debt as a percent of GDP increased by nearly 10 percentage points, reaching more than 45 percent in 2000, raising questions about the vulnerability of the corporate sector to an economic downturn (Figure 9). Broad indicators of corporate sector financial health, however, provide a reasonably encouraging picture. Various measures of leverage comprising long-term debt, total debt, long-term liabilities, and total liabilities as a share of equity have declined significantly through the 1990s (Figure 10).10 The debt-to-equity ratio, for example, has fallen in the 1990s from an average of above 80 percent in the 1980s to below 40 percent since 1997. The stock market correction that started in 2000 has brought these measures of leverage up slightly, but they are generally less than half their levels of the 1980s A further stock market correction of over 40 percent from the April 2001 level would have to occur for the leverage ratio to rise back to its level of the 1980s. The evolution of corporate leverage in the United States in the 1990s stands in contrast to developments in Japan during the bubble period of the 1980s; and corporate leverage in Japan in the 1980s was more than four times the level in the United States in the 1990s (Figure 11). However, individual sectors, such as telecommunications or health care could be under increased pressures in the event that the slowdown in economic activity turns out be more prolonged.

Figure 9.
Figure 9.

United States: Corporate Sector Debt

(Percent of GDP)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board or Governors ot the Federal Reserve System,Flow of Finds Account of the United States.
Figure 10.
Figure 10.

United States: Corporate Sector Leverage Ratios

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States.
Figure 11.
Figure 11.

United States and Japan: Corporate Sector Leverage During Possible “Bubble” Periods1

(Debt to equity ratio)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Sources: Board of Governors of the Federal Reserve System. Flow of Funds Accounts of the United States; and Japan, Ministry of Finance.1/ For the United States t = 2000, and for Japan t = 1990.

10. Various liquidity measures suggest that the corporate sector, in aggregate, is not highly vulnerable to adverse shocks that might be associated with an economic downturn. The ratio of net interest expenditures to income before taxes, which averaged 20 percent in the 1980s, fell to an average of 11 percent in 1994–98, before rising to 12½ percent in 2000. Net interest expenses would need to rise nearly 60 percent, or income would need to fall nearly 40 percent from their end-2000 level for the liquidity ratio to move back to the 20 percent mark of the 1980s (Figure 12).

Figure 12.
Figure 12.

United States: Corporate Sector Liquidity Ratio

(Net interest to income before taxes)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States.

11. In this regard, the effects of the current economic slowdown have started to show up in rising numbers of corporate bond defaults and downgrades. After falling significantly in the first half of the 1990s, corporate defaults have increased since 1998, although by the end of 2000 they still remained well below previous peaks. In particular, defaults in the high-yield segment of the corporate bond market have risen since 1998, but so far the differential of default rates between high-yield and investment-grade securities has not widened to the extent observed in previous recessions (Figure 13). The recent increase in default rates can be traced to various industrial sectors, including technology and telecommunications, consumer products, and retail activities. Looking forward, credit rating agencies have forecasted that default rates would increase steadily through 2001 and approach previous cyclical highs.11

Figure 13.
Figure 13.

United States: Default Rate in the Corporate Sector

(In percent of firms rated)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Moody’s.

12. Corporate downgrades by rating agencies have also increased since 1997, after falling sharply in the early 1990s; the ratio of downgrades to upgrades at the end of 2000 reached the highest level seen in the 1990s, but still below the 1990 peak (Figure 14). In turn, high-yield downgrades as a ratio to upgrades have risen sharply since 1998, after reaching relative downgrade rates below those of investment-grade firms in 1996–97.

Figure 14.
Figure 14.

United States: Corporate Sector Downgrades to Upgrades Ratio

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Moody’s.

C. Bank Balance Sheets

13. The quality of assets in the U.S. banking sector has improved markedly through the 1990s, especially in the first half of the decade as the banking sector recovered from the difficulties experienced in the 1980s. Beginning in the late 1990s, the asset quality of commercial and industrial loans deteriorated modestly, but this was offset by improvements in delinquency ratios of other asset categories, including consumer credit loans (Figure 15). The deterioration in commercial and industrial loans reflected slowing profit growth and weakness in certain industrial sectors (particularly telecommunications and health care). In general, the loans encountering difficulties were the ones made prior to 1998, when credit standards were more relaxed. Following a series of warnings by the banking supervisory agencies against the dangers of lax lending practices beginning in mid-1998 lending terms and conditions have been tightened.

Figure 15.
Figure 15.

United States: Banking Sector Delinquency Ratios

(Percent)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Federal Deposit Insurance Corporation.

14. Banks’ charge-offs have increased slightly since the mid-1990s, led initially by charge-offs related to consumer lending and later to commercial and industrial loans (Figure 16). Although charge-offs in 2000 were well below their peak in 1991 and the level of the 1980s, the effect of the economic slowdown on banks’ loses may only fully emerge in coming quarters. Bank provisioning has closely followed the general pattern of charge-offs in the 1990s; after declining sharply in the early 1990s, provisions have increased moderately since 1995 and remained relatively subdued at a level greatly lower than that achieved in the late 1980s and early 1990s (Figure 17).

Figure 16.
Figure 16.

United States: Banking Sector Charge-Offs

(Percent)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Federal Deposit Insurance Corporation.
Figure 17.
Figure 17.

United States: Banking Sector Loan-Loss Provisions

(Percent)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Federal Deposit Insurance Corporation.

15. In the aftermath of the real estate related banking problems of the 1980s and early 1990s, real estate lending has been an area of persistent concern and monitoring for the supervisory authorities. Residential and commercial real estate loans as a percent of total lending remained virtually constant in the second half of the 1990s, at about 25 and 12 percent, respectively. But construction and land development (CLD) lending, after declining in the first half of the 1990s, rebounded strongly in the second half of the decade raising some concerns. Overall, banks’ real estate exposure, accounting for over 40 percent of total loans, has been high and well above that in the 1980s, especially in the residential and nonfarm, nonresidential categories. Nevertheless, the quality of the real estate portfolio has been very good with the lowest delinquency ratios of all loan categories in 2000. In contrast to the 1980s, currently there are no indications of over-investment in commercial buildings.

16. Banks have remained profitable and well-capitalized, which provides a cushion to weather the effects of an economic slowdown on the quality of assets. The indicators of banks’ returns on equity and on assets improved markedly in the early 1990s, and have remained broadly stable at about 15 percent and 1.2 percent, respectively (Figure 18). Net-interest margins, after increasing sharply in the early 1990s, fell back to the 1980’s average of about 5.5 percent of loans. Noninterest income continued its upward trend, partly offsetting the reduction in the net-interest margin in this period (Figure 19). However, in 2000, bank profitability experienced some downward pressures due to slower revenue growth, losses on security sales, and higher provisioning. The slowdown in revenues was primarily due to a slowdown in noninterest income, a primary engine of revenue growth in the 1990s, affecting larger banks more significantly; net-interest income growth improved slightly, despite a fall in net-interest margins, due to an acceleration in loan growth in 2000. Overall, sound recurring earnings, stemming from strong market positions in higher-margined products, have been regarded by rating agencies as placing banks in good standing to cope with the effects of the economic slowdown on credit quality12.

Figure 18.
Figure 18.

United States: Banking Sector Earnings Ratios

(In percent)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Federal Deposit Insurance Corporation.
Figure 19.
Figure 19.

United States: Sources of Income in the Banking Sector

(As a percent of loans)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Federal Deposit Insurance Corporation.

17. Banks’ off-balance sheet activities have been increasing in the 1990s. The significant increase in notional values of derivative transactions, however, represents a small share of the loan portfolio. Moreover, measures that track bank exposure to risks from derivative activities indicate that banks’ uncovered positions are very small (Figure 20). Off-balance sheet activities are concentrated in a few banks; in 2000, a total of five banks accounted for about 90 percent of derivative notional values. Swaps have been the most dynamic instruments, while credit derivatives have started to grow from very small notional values. The concentration of derivative activities in a few institutions raises some questions; although economies of scale may call for a limited number of participants at this stage, the increased counter-party risk and heightened dependence on this income source pose a challenge to both banks and supervisors. On the other hand, the small number of institutions that the oversight authorities need to pay close attention to simplifies the task of supervision.

Figure 20.
Figure 20.

United States: Notional and Fair Values of Derivatives, All Insured Commercial Banks

(Billions of dollars)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System.

18. Capital ratios in the banking sector have remained solid in the 1990s. Total risk-based capital has diminished marginally since the mid-1990s, by about ¾ of a percentage point, to 12¼ percent at end-2000 (Figure 21). However, core capital at end-2000 was higher than in the mid-1990s.

Figure 21.
Figure 21.

United States: Total Risk-Based Capital Ratio, All Insured Commercial Banks

(Percent)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Board of Governors of the Federal Reserve System.

19. Market valuation of bank shares, relative to broad market indices, increased significantly in the 1990s through 1998, recovering the ground lost in the later part of the 1980s. After 1998, bank stocks fell, and started to recoup part of their loss only in 2000 (Figure 22). Bond spreads to comparable industrial bonds fell significantly in the early 1990s and turned negative by almost 20 basis points in early 1993 (Figure 23). Since then, banks’ bond spreads have increased, reaching a peak of 50 basis points in 1998, then falling sharply in 1999 and moving up to 30 basis points in late 2000.

Figure 22.
Figure 22.

United States: Relative Stock Market Performance of the Banking Sector S…P Bank Composite vs. S…P Index

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Bloomberg.
Figure 23.
Figure 23.

United States: Interest Rate Spreads Ten-Year Al Bank Minus Industrial Interest

(Basis points)

Citation: IMF Staff Country Reports 2001, 149; 10.5089/9781451839586.002.A001

Source: Bloomberg.

List of References

  • Bassett, W., and E. Zakrajsek, 2000, “Profits and Balance Sheet Developments at U.S. Commercial Banks in 1999,Federal Reserve Bulletin, June.

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  • Bertaut, C. and M. Starr-McCluer, 2000, “Household Portfolios in the United States,Federal Reserve Board of Governors, unpublished paper, April.

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  • Brady, P., G. Canner, D. Maki, 2000The Effects of Recent Mortgage Refinancing,Federal Reserve Bulletin, July.

  • Case, K. 2000, “Real Estate and the Macroeconomy,Brookings Papers on Economic Activity, Vol. 2.

  • International Monetary Fund, 2000, United States: Staff Report for the 2000 Article IV Consultation, IMF Staff Country Report No. 00/89, July.

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  • Kennickell, A., M. Starr-McCluer, and B. Surette, 2000, “Recent Changes in U.S. Family Finances: Results from the 1998 Survey of Consumer Finance,Federal Reserve Bulletin, January.

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  • Kwan, S., 2000, “Has Bank Performance Peaked?,FRBSF Economic Letter, Number 2000-32, October 27.

  • Maki, D., 2000, “The Growth of Consumer Credit and the Household Debt Service Burden,Board of Governors of the Federal Reserve, Working Paper, February.

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  • Moody’s Investor Service. 2001a, Default and Recovery Rates of Corporate Bond Issuers: 2000, February.

  • Moody’s Investor Service, 2001b, U.S. Banking System Outlook, April.

  • Osier, C. and Gijoon Hong, 2000, “Rapidly Rising Corporate Debt: Are Firms Now Vulnerable to an Economic Slowdown?,Federal Reserve Bank of New York, Current Issues in Economics and Finance, Vol. 6, June.

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  • Peach, R., and C. Steindel, 2000, “A Nation of Spendthrifts? An Analysis of Trends in Personal and Gross Saving,Federal Reserve Bank of New York Current Issues in Economics and Finance, Vol 6, September.

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  • Starr-McCluer, M. and C. Bertaut, 2000, “Household Portfolios in the United States,Board of Governors of the Federal Reserve, Working Paper, June.

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  • Stavins, J., 2000, “Credit Card Borrowing, Delinquency, and Personal Bankruptcy,New England Economic Review, My/August

  • Tracy, J. and H. Schneider, 2001, “Stocks in the Household Portfolio: A Look Back at the 1990s,Federal Reserve Bank of New York, Current Issues in Economics and Finance, Vol. 7, April.

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1

Prepared by Paula De Masi and Martin Kaufman.

2

Particularly in 1997–99, homeowners took advantage of lower interest rates to refinance their mortgages, with many of these refinancings involving borrowing in excess of the original balance—so-called cash-out refinancings. Although there has been considerable speculation that refinancing fuelled the consumption boom, survey evidence suggests that the effect on consumption was modest, while the impact on investment spending—that is, spending on home improvements—was probably more significant. In addition, cash-out refinancing funds were also used to pay off other debts. See P. Brady, et al. (2000).

3

Federal tax laws allow for interest deductibility on mortgages and home equity loans but not on credit cards or other nonmortgage debt.

4

For example, households with a debt-service burden in excess of 40 percent (a level considered to be indicative of financial distress) was about 13 percent overall, but over 30 percent for households earning less than $10,000 in 1998 (the most recent year for which data are available). See Kennickell, Starr-McCluer, and Surette (2000).

5

Household net worth also rose in other G7 countries over this period, but with the exception of the United Kingdom these gains were smaller than in the United States (see Table 1).

6

In contrast, in the United Kingdom, the rise in total assets was attributable to increases in both financial and nonfinancial assets.

7

Relative to other G7 countries, equities as a share of total assets range from a low of 8 percent in Japan, over 40 percent in France and Italy.

8

Aggregate figures mask considerable regional price variations. For example, since the mid-1990s housing prices increased at an annual rate of 6 percent in New England and by just 3½ percent in the East South Central region.

9

Over the period 1985 to 1990s, Japanese land prices tripled in value. See IMF (2000).

10

Leverage ratios of smaller firms have risen sharply since 1995 and are fairly high by historical standards, as noted by Osier and Hong (2000). However, smaller firms represent a small fraction of stock market valuation and total outstanding debt.

11

See Moody’s Investor Service (2001a).

12

See for example Moody’s Investor Service (2001b).

United States: Selected Issues
Author: International Monetary Fund
  • View in gallery

    United States: Household Net Worth1

    (In percent of disposable income)

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    United States: Total Household Debt

    (In percent of disposable income)

  • View in gallery

    United States: Mortgage and Consumer Debt1

    (In percent of disposable income)

  • View in gallery

    United States: Household Debt-Service Burden1

  • View in gallery

    United States: Consumer Delinquencies

  • View in gallery

    United States: Personal Bankruptcies

  • View in gallery

    United States: Household Total Assets1

    (In percent of disposable income)

  • View in gallery

    United States: Household Composition of Financial Assets1

    (1950-2000)

  • View in gallery

    United States: Corporate Sector Debt

    (Percent of GDP)

  • View in gallery

    United States: Corporate Sector Leverage Ratios

  • View in gallery

    United States and Japan: Corporate Sector Leverage During Possible “Bubble” Periods1

    (Debt to equity ratio)

  • View in gallery

    United States: Corporate Sector Liquidity Ratio

    (Net interest to income before taxes)

  • View in gallery

    United States: Default Rate in the Corporate Sector

    (In percent of firms rated)

  • View in gallery

    United States: Corporate Sector Downgrades to Upgrades Ratio

  • View in gallery

    United States: Banking Sector Delinquency Ratios

    (Percent)

  • View in gallery

    United States: Banking Sector Charge-Offs

    (Percent)

  • View in gallery

    United States: Banking Sector Loan-Loss Provisions

    (Percent)

  • View in gallery

    United States: Banking Sector Earnings Ratios

    (In percent)

  • View in gallery

    United States: Sources of Income in the Banking Sector

    (As a percent of loans)

  • View in gallery

    United States: Notional and Fair Values of Derivatives, All Insured Commercial Banks

    (Billions of dollars)

  • View in gallery

    United States: Total Risk-Based Capital Ratio, All Insured Commercial Banks

    (Percent)

  • View in gallery

    United States: Relative Stock Market Performance of the Banking Sector S…P Bank Composite vs. S…P Index

  • View in gallery

    United States: Interest Rate Spreads Ten-Year Al Bank Minus Industrial Interest

    (Basis points)