Toxic Loans - Publications - Faculty & Research

2024
Working Paper

Public Debt and Investment Under Political Competition: Evidence from Toxic Loans

By: Julien Sauvagnat and Boris Vallée

We examine the response from local governments and their voters to a large and exogenous increase in municipal indebtedness. We first show that municipalities with loans that become “toxic” exhibit a reduction in municipal investments as large as the associated... View Details

Keywords: Public Debt; Public Investments; Political Contestation; Toxic Loans; Borrowing and Debt; Investment; Public Sector; Government and Politics; Local Range; Financing and Loans

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11 Feb 2015
Research & Ideas

Politicians Benefited From Using Toxic Loans

Talk of the recent financial crisis often falls into a simplistic narrative of villainous banks, marketing toxic financial products to innocent customers who did not understand their risks. Among the storied victims are municipal... View Details

Keywords: by Carmen Nobel; Financial Services

June 2017
Article

The Political Economy of Financial Innovation: Evidence from Local Governments

By: Christophe Pérignon and Boris Vallée

We examine the toxic loans sold by investment banks to local governments. Using proprietary data, we show that politicians strategically use these products to increase chances of being re-elected. Consistent with greater incentives to hide the cost of debt, toxic loans... View Details

Keywords: Financial Innovation; Political Elections; Financing and Loans; Innovation and Invention

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21 Dec 2009
Research & Ideas

Good Banks, Bad Banks, and Government’s Role as Fixer

rating agency after it was selected by the third party. Q: You note in your book that loan securitization collapsed at the end of 2008. Has it revived yet, and why is it important for a healthy economy? A: The monthly volume of... View Details

Keywords: by Roger Thompson; Banking; Financial Services

Research Summary

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By: Boris Vallee

Professor Vallée focuses on financial innovation, investigating it from different angles. This research thread has led him to relate the methods and insights of corporate finance and banking with those of other subfields, including household finance, public finance,... View Details

12 Sep 2007
Op-Ed

Building Sandcastles: The Subprime Adventure

the subprime lenders—willing to take the risk on riskier borrowers, for a price. Thus far the tale testifies to America's entrepreneurial spirit. New mortgage banks specializing in subprime loans sprang up. Their panoply of products... View Details

Keywords: by Nicolas P. Retsinas; Banking; Construction; Real Estate

20 Dec 2016
First Look

December 20, 2016

Publisher's link: https://www.hbs.edu/faculty/Pages/item.aspx?num=51989 forthcoming Review of Financial Studies The Political Economy of Financial Innovation: Evidence from Local Governments By: Vallée, Boris, and Christophe Perignon Abstract—We examine the View Details

Keywords: Carmen Nobel

29 Sep 2008
Research & Ideas

Financial Crisis Caution Urged by Faculty Panel

securities. "In 2004 and 2005 as these subprime loans started to emerge, it really wasn't a particular problem because of the lag effect, because people who couldn't pay off these mortgages with toxic... View Details

Keywords: by Martha Lagace; Financial Services

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