But we need to be much more alert to their destructive potential, acting quickly and aggressively when the next bubble pops up somewhere-as it could in smaller banks and commercial real estate. We probably can’t prevent individual firm or even sectoral financial risks they’re built into the system. Systemic financial and economic risks don’t just come from the biggest banks. SVB and the growing concerns about smaller banks show we need tighter regulation and supervision of all financial institutions, including smaller and regional ones. Malcolm authenticity and, 107 'Buffalo Gals', 62 commercial value of. (Remember that no one seemed to think SVB presented risks to the overall financial system until suddenly it looked like it might.) 83, 135 'Born Free', 135 'Boyz', 1345 'Double Bubble Trouble', 135 Michael. The worry is that we’ll see system-wide contagion revealing risks in other parts of finance that aren’t apparent now. The FDIC can handle individual bank failures. So we might be in for another “Minsky moment”-a financially driven crash tied to risky lending and contagion-driven this time by small banks and CRE lending. He memorably said “stability leads to instability,” as financial “innovators” seeking high profits will “always outpace regulators the authorities cannot prevent changes in the structure of portfolios from occurring.” Minsky saw these recurrent risks as endemic to the system. In our time, we’ve seen crises erupt from savings and loans, developing country debt, energy finance speculation, Japanese asset bubbles in the 1980s, the “dot-com” bubble that burst in 2000, and of course the mortgage and securities crisis of 2008 that threatened not only financial decline but a global depression. Periodic financial subsector crises spread through contagion to other sectors, sometimes causing deep pain across the economy. These can spread through financial markets and also infect the real economy of goods and services through a process of “contagion” where other firms join in the speculative boom, increasing the risks to the entire economy. has declined 1.7 from 2.81 trillion in January to 2.76 trillion in May, but private asset managers have been. Economists get guidance here from the late Hyman Minsky, whose work emphasized how “financial fragility” in a capitalist economy threatens not only financial firms and sectors, but potentially the entire economy.įor Minsky, investors (especially financial agents) become overly optimistic during growth periods, taking on increasing risks. The value of commercial and industrial loans from all commercial banks in the U.S. The even bigger worry is how these risks might hurt the entire economy.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |