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In a speech at Case Western Reserve University, Federal Reserve Bank of Cleveland President and CEO Sandra Pianalto discussed how the recovery is unfolding, focusing on the stubborn nature of high unemployment and her concern about our uncomfortably low rate of inflation. She also explained why she supported the Fed’s decision to purchase additional Treasury securities. Read more

Think you know what you’re looking at when you see your credit score? Maybe not, says Cleveland Fed Researcher Yuliya Demyanyk. Your score isn’t a rating of your credit worthiness; it’s a ranking of your credit worthiness compared to everyone else in the country at a specific point in time. This explains, for example, why your credit score can change when your credit behavior doesn’t. Or how the same credit score could qualify you for a loan at some point and time, and not at another point and time. Read more (PDF)

Cleveland Fed Contest: Students Can Show Their Stuff and Win Prizes!
The Federal Reserve Bank of Cleveland wants to shine the light on area high school students who have great ideas about changing their neighborhoods by encouraging them to participate in the Fed’s annual Creative Writing Contest. This year’s theme is "Be the Change You Want to See." The contest asks juniors and seniors in high school to explain in an essay, play, short story, or poem how they would improve their neighborhoods. As they craft their submissions, students must think about the economic impact of their actions, the costs and benefits of their endeavor, and whether there are any unintended consequences. Submission deadline is January 31, 2011. Top prize is a $500 savings bond. Each qualifying entry will be evaluated on comprehension, organization, conclusions, creativity, and clarity. Read more

Could Subprime Loans Be Contagious?
It has been well documented that people who live in poorer neighborhoods are more likely to take out subprime loans when purchasing a house than those living in more affluent neighborhoods. But new research by Francisca G-C Richter and Ben Craig suggests that there could also be a social component that influences who ends up with a subprime loan. Read more

Be the Change You Want to See! Are you a bystander? Or are you an upstander? Are you waiting for the world to change? Or are you changing the world? Read more

Educating people may not sound terribly urgent during difficult economic times, but when it comes to creating jobs and finding people who have the skills to fill them, nothing is more important than education. The latest issue of Forefront presents a package of articles focused on the compelling returns to education. Read more (PDF)

The Federal Reserve Bank of Cleveland’s 2009 Annual Report essay stresses the importance of defining and measuring systemic risk in order to help contain future economic crises. The essay advocates using the "Four Cs" to gauge systemic risk: contagion, concentration, correlation and context. Read more (PDF)

This installment of the Cleveland Fed’s Drawing Board video series (really bad drawings, real simple explanations) focuses on how the Federal Reserve operates and why it?s structured the way it is. The Fed is in the news a lot these days, and we hope the video helps people understand the complicated institution a little better. Read more

With credit scores affecting so many important aspects of our lives, it’s no wonder that people are concerned with improving their scores. Once they start to pay attention to them, though, consumers often find their scores changing in unpredictable ways. Knowing that your score is not a rating of your creditworthiness but a measure of where your creditworthiness ranks relative to everyone else is the first step in understanding your score and how to manage it. Read more (PDF)

At the end of September 2010, the United States Census Bureau released the 2009 data from the American Community Survey (ACS). One of the questions that participants are asked in this survey is where they were living one year ago. The answer to this question is of particular interest to labor economists since it is one way to assess the degree to which workers are moving around the country to pursue jobs or educational opportunities. Data from the past 10 years of surveys reveal that the fraction of the population living in the same house as they were one year ago has fluctuated between 83.5 percent and 85.5 percent. Read more

Pedro S Amaral
The first estimate for GDP and its components in the third quarter of 2010 is out and it is not a very encouraging one, at least as far as the recovery goes. The positive contributions from personal consumption expenditures and from changes in private inventories were attenuated by strong import growth and a further decline in residential investment. In all, GDP is estimated to have grown at an annual pace of 2 percent in the third quarter. To put things in perspective, just to keep up with its trend, GDP should be growing at an annual rate slightly above 3 percent, but since we are recovering from a recession it should actually be growing at an even faster pace. It is no wonder then that people are throwing out words like subpar or anemic to describe the current recovery. But compared to what? Read more

One of the key arrangements used to avoid the bankruptcy of American International Group (AIG) in the fall of 2008 was the creation of two special purpose vehicles (SPVs) named Maiden Lane II and Maiden Lane III. SPVs are subsidiary companies with an asset/liability structure and legal status that makes their obligations secure even if the parent company goes bankrupt. Of course, if the assets are not valued correctly, the SPVs may not be able to pay off any creditors. In the case of Maiden Lane II and III, the creditor is the Federal Reserve Bank of New York, which made the loans that were used to purchase assets from AIG subsidiaries and counterparties. Currently, the estimated values of those assets exceed the amounts of the respective loans that were extended. Interestingly, asset revaluations in conjunction with the cash flowing in from the assets have been sufficient to maintain both a steady pay down of the loans and a steady if not rising value of the portfolio. Because the New York Fed will share in any profits remaining after the loans are paid in full, the prospects for a positive return on its investment look very good at this point. Read more