Like many international doctoral candidates in the Harbert College, Yanfei Sun rarely sees family, hasn’t been home in years, and wanted to fit in on the Plains. But Sun, from greater Shanghai, China, wanted more than a PhD with a concentration in finance—she wanted to make a difference. Her co-authored paper “Bank funding sources: A new look at brokered deposits,” has already made its way to staff members in the US House Committee on Financial Services and was circulated within the FDIC by Chief Economist Richard A. Brown.
The purpose of the paper, co-authored by Eminent Scholar Jim Barth, is to reduce regulatory policies regarding brokered deposits, used by roughly 40 percent of banks within the US.
“To know that I—a PhD student at Auburn University—am working on changing the regulations is quite important to me,” says Sun, who collected and analyzed data from 59 journal articles, edited literature of the paper, and wrote part of the paper’s conclusion. “I feel very satisfied for the accomplishment and contributions that I made.
“This research is mainly aimed at regulatory authorities in hopes that they will change laws. This is very different from a regular academic research paper. It’s helping bankers to change the law that would relieve their regulation burdens.”
The FDIC defines a brokered deposit as “any deposit that is obtained, directly or indirectly, from or through the mediation or assistance of a deposit broker,” which is “any person engaged in the business of placing deposits, or facilitating the placement of deposits, of third parties with insured depository institutions.”
The FDIC deemed brokered deposits as dangerous in the 1980s and slapped the practice with stiff regulations. Sun and Barth conclude, however, that brokered deposits are not as dangerous as believed and that the FDIC must re-examine its approach to brokered deposits and should regulate how troubled banks use funding rather than regulate the funding sources.
Barth says Sun helped expedite the paper’s release.
“We were able to cover more work over a shorter period of time and produce a better product by having her work on it with me rather than my trying to do it alone,” says Barth, a former bank regulator. “There are gains from working with a PhD student. Obviously, they are younger and more energetic and have skills that a lot of the professors do not have.”
“As an equal co-author, it turns out that she can do some things better than I can do, and I can do some things better than she can do.”
Sun, who hopes to earn her doctorate in 2019, hopes her experience working with Barth helps meet career aspirations.
“Dr. Barth really teaches you how to work hard,” she says. “He also pushes you to be very careful in your work. Like this paper, it’s serving a great audience that will make a contribution. So we need to be very careful with what we write and think thoroughly so that we can persuade people that brokered deposits are not as bad as we thought. Hopefully, people will see my contribution.”