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2023-05-21

The great banking houses, such as the Medicis of Florence, were lenders of last resort to rulers at risk of being overthrown.

 Now it is banks that threaten to bring down the state; a switch that has led to more and more oversight from official organs. Things shifted sharply a century ago, with intervention in the Depression. 

The global financial crisis of 2007-09 reinforced the trend. Recent turmoil has pushed the banking system further along the path to state control.

The safest assets are both government-issued and short-term. Yet the more super-safe short-term government securities banks are instructed to hold, the more the industry would move away from its basic principle: that the point of banking is to transform short-term deposits into long-term assets.

The Economist 18 May 2023

https://www.economist.com/finance-and-economics/2023/05/18/the-financial-system-is-slipping-into-state-control


Banking stands revealed as a part of the state masquerading as part of the private sector.

Martin Wolf FT 21 March 2023 

https://englundmacro.blogspot.com/2023/05/us-deposit-insurance-debate.html


Big banks must become globally resolvable – or significantly ‘smaller’

The main question is whether a resolution of a global systemically important bank is indeed feasible in plausible scenarios. An affirmation would clearly be the best possible result of this analysis. However, if such a resolution proves not to be realistic, then there should be no hesitation to drastically reduce the global risks of such institutions via regulation of their business models.

Aymo Brunetti Vox 1 May 2023

https://cepr.org/voxeu/columns/big-banks-must-become-globally-resolvable-or-significantly-smaller

Editors' note: This column is part of the Vox debate on "Lessons from Recent Stress in the Financial System"


Banks are inherently fragile — they transform short-term and safe funding into long-term and risky lending. This is the alchemy of the banking system. 

Mervyn King FT 12 May 2023

https://www.ft.com/content/43b926a6-b1ba-47a6-91f7-9ad5f776f8f8

The writer was governor of the Bank of England from 2003 to 2013



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