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2022-09-25

15 years on from the great financial crisis, there’s still plenty of risk in the market

The financial system is still dealing with the fallout from 2008

A recent Brookings Institution report on the topic put it: “without changes, the size of the Treasury market will outstrip the capacity of dealers to safely intermediate the market on their own balance sheets, causing more frequent bouts of market illiquidity that will raise doubts over the safe haven status of US Treasuries.”

The $24tn US Treasury market.

The core, and still unanswered, questions of the great financial crisis — why are banks so special? 

Yes, the major US banks are far safer and better capitalised than they were before 2008. But why do they chafe at single-digit capital requirements when businesses in any other industry hold multiples of that?

The biggest question that we never answered in the wake of 2008 — who is the financial system meant to serve? Wall Street or Main Street?

Everything from an increasingly volatile T-bill market to a home lending market now dominated by shadow banks

Rana Foroohar FT 25 September 2022

https://www.ft.com/content/cbf8214d-0fb7-46bb-94dd-b70b1210c040

Rana Foroohar is Global Business Columnist and an Associate Editor at the Financial Times


Report of the Task Force on Financial Stability

Brookings June 2021

https://www.brookings.edu/research/report-of-the-task-force-on-financial-stability/


Shadow banking — in the form of everything from repos and eurodollars to commercial paper and money market funds — grew, and the Fed continued to support all these shadow entities. 

Paul Volcker had to take away the “punch bowl”

Rana Foroohar FT 16 May 2022


The decade between the 2008 financial crisis and this one saw the creation of a vast asset price bubble in just about everything. 

That bubble is now bursting

Rana Foroohar FT 19 April 2020

https://englundmacro.blogspot.com/2022/05/fed-managing-inflation-it-helped-to-set.html


How shadow banks threaten the global economy

Shadow banks manage $63tn in financial assets — up from $30tn a decade ago.

Ruchir Sharma FT 23 May 2022 

https://englundmacro.blogspot.com/2022/05/how-shadow-banks-threaten-global-economy.html


Authorities successfully pushed for more capital in the aftermath of the 2008 financial crisis, but never went far enough. 

Capital levels have waned along with political will: As of June 2021, that tangible equity ratio stood at around 6.4%.

Bloomberg Editorial Board 14 september 2021

https://englundmacro.blogspot.com/2021/09/banks-consider-one-crucial-indicator-of.html


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