Who Holds the Toxic Waste? An Investigation of CMO Holdings

20 Pages Posted: 22 Oct 2007  

Joseph G. Haubrich

Federal Reserve Bank of Cleveland

Deborah J. Lucas

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Date Written: June 2007

Abstract

Toxic waste refers to the riskiest derivative structures arising from collateralized mortgage obligations (CMOs). We use simulations to predict how this risk would manifest itself in various interest rate environments. We also look for evidence on the total dollar value of these securities, who holds them, and how much they hold. Very limited public information is available, but commercial banks are required to report on their holdings, and we investigate the extent to which the risk is concentrated in that sector.

Suggested Citation

Haubrich, Joseph G. and Lucas, Deborah J., Who Holds the Toxic Waste? An Investigation of CMO Holdings (June 2007). FRB of Cleveland Policy Discussion Paper No. 20. Available at SSRN: https://ssrn.com/abstract=1023688 or http://dx.doi.org/10.2139/ssrn.1023688

Joseph G. Haubrich (Contact Author)

Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States
216-579-2802 (Phone)
216-579-3050 (Fax)

Deborah J. Lucas

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-8333 (Phone)
847-491-5719 (Fax)

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