Importance of Measuring Household Liability Details and Net Worth

1
Importance of Measuring Household Liability
Details and Net Worth

• Working Party on Financial Statistics
• OECD
• Paris, France
• October 13, 2008
• Susan Hume McIntosh
• Sr. Economist and Special Project Coordinator
• Federal Reserve Board
• Washington, DC 20551
• smcIntosh_at_frb.gov

2
Background on Data Collection

• SNA approach is to collect short-term and
  long-term loans
• OECD collects data on financial and nonfinancial
  assets of households
• Liabilities split into mortgages, consumer
  credit, and other debt could be more useful
• U.S. financial accounts present this split
• Useful in analyzing current crisis

3
Household Home Mortgage Debt
4
U.S. Home Mortgage Debt

• Mortgages not written down until lender
  charges-off the loan
• Charge-off treated as a flow
• Better approach might be to treat charge-off as
  an other volume changes
• MBS are recorded at book value
• Mortgages on investment properties and
  construction loans are recorded in the
  nonfinancial noncorporate sector

5
House Prices
6
U.S. House Prices

• Benchmarked to the 1999 American Housing Survey
• Perpetual inventory method using OFHEO
  purchase-only price index
• Investigating using Case-Shiller national price
  index or national index from Loan Performance

7
Consumer Credit
8
Consumer Credit

• Continued borrowing in the form of consumer
  credit
• Recently heavy reliance on revolving credit
• Nonrevolving credit driven by auto sales remains
  very weak
• Tells different story than mortgage debt growth

9
Household Financial Obligations Ratio
10
Home Mortgage Lenders
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Household Net Worth Relative to Disposable
Personal Income
12
What Does All This Mean

• Collection of financial statistics is important
• More liability details could help
• Data on securitization vehicles would also be
  useful
• A full household balance sheet should be a goal