Fed research desk: bank closures, non-competes, fees and exports

Four papers, one caution about averages

Four Federal Reserve publications share a caution about reading headline numbers at face value. New York Fed research argues that modern bank failures follow supervisory decisions more than market runs. Minneapolis Fed research reports no detectable early labor market effect from a non-compete ban. A Federal Reserve paper on service fees argues that an average hides how differently consumers react. St. Louis Fed analysis shows global exports moving together, but with swings far larger than output. m:…8878 m:…9469 m:…9169 m:…5280

That shared caution is useful for professionals who use Fed research in supervision, labor policy, consumer protection and trade analysis. A bank closure date, a null labor result, an average fee response and a global export total each conceal a process underneath, described below as the authors present it. m:…8878 m:…9469 m:…9169 m:…5280

Failing banks: closure follows supervision

Bank failures in the modern era typically result from supervisory closure decisions based on hard information about book equity, according to the New York Fed blog post. Supervisors require troubled banks to recognize potential losses, which partly produces the hard information used for closure decisions, according to the post. m:…8878

The timing evidence is stark. Of 557 commercial bank failures since 2000, only 28 occurred on a day other than Friday, according to the post. Before 1935, failure dates were effectively distributed evenly across weekdays, a pattern the authors read as consistent with market-driven timing. The shift to Friday closures supports the argument that closure timing is now largely administrative. m:…8878

Capital levels track the risk closely. The probability of failure increases rapidly once equity falls below 5 percent of assets, and rises to almost 70 percent over the subsequent year when equity falls below 2 percent, according to the post. In the five years before failure, a typical failing bank experiences an 8 percentage point decline in its equity-to-assets ratio, with revisions accounting for nearly 3 percentage points, according to the post. m:…8878

The mechanism runs through examinations and reporting. The probability of revising a previously submitted call report increases sharply in the month of and two months after an on-site examination, according to the post. Stricter supervision during the 2008 Global Financial Crisis caused banks to recognize more losses and report lower book equity, increasing the likelihood of failure, according to the post. Stricter supervision can reduce resolution costs but may tighten capital constraints and reduce credit supply, according to the post. m:…8878

Non-competes: no detectable early effect

Minnesota implemented a non-compete enforcement ban in 2023, and a Federal Reserve Bank of Minneapolis study assessed its impact on earnings and mobility outcomes, according to the research summary. The study found no detectable labor market impacts for new hires and no detectable impacts for workers overall, according to the summary. A null result of this kind does not prove the policy had no effect at all, and the study itself offers several possible explanations. m:…9469

The study used a synthetic differences-in-differences methodology, a synthetic control methodology, and a triple-difference methodology based on industry prevalence, according to the summary. Using multiple methods matters because each rests on different assumptions about how Minnesota compares with other places. m:…9469

The study suggests the null results could be due to the policy being studied too soon, to methodological imperfections, to small effects not discernible by current methods, or to a true non-effect, according to the summary. Job postings data shows limited change in employer use of non-competes, according to the summary, but that data is described as very noisy. m:…9469

Fees and exports: averages hide the action

Service fees are proliferating across a wide range of markets, including retail and payments, according to a Federal Reserve paper on fee sensitivity, and that proliferation raises questions about consumer choice, competition and fairness. The paper explores how sensitivity to service fees varies across consumers, use cases and competitive settings, according to the summary. Its central finding is that average elasticity estimates for service fees mask substantial heterogeneity in consumer sensitivity. m:…9169

Market mechanisms and behavioral mechanisms help explain that heterogeneity, according to the paper, and consumers strategically adjust their behavior in response to service fees. The paper examines whether consumer learning affects sensitivity to service fees, according to the summary. The empirical analysis uses a high-frequency panel data set on surcharged ATM cash withdrawals. m:…9169

The St. Louis Fed post turns to a different kind of average problem. Global merchandise exports do not change smoothly over time, and merchandise exports rise and fall together worldwide, according to the post. Export growth has generally ranged from about minus 30 percent to plus 45 percent, according to the post. The FRED graph tracks the value of exported goods between April 1981 and August 2026, and exports are measured in United States dollars, deflated by United States consumer prices, according to the post. m:…5280

Trade swings more than GDP, according to the post. During the 2007-2009 Great Recession, world trade shrank by as much as 34.6 percent while inflation-adjusted GDP decreased by 4.3 percent. Currency measurement also matters, because when the dollar strengthens, other countries exports are worth fewer dollars even if shipments do not change, according to the post. The broad dollar index rose 11 percent in a year during the 2015-16 global slump, according to the post. As of July 2026, global export growth is picking up, according to the post. m:…5280