Former Treasury Secretary Says Banks May Be Riskier Now Than in The 2008 Crisis
- Former Treasury Secretary Says Banks May Be Riskier Now Than in The 2008 Crisis
by Simon Black, https://www.sovereignman.com/
… Candidly, our financial system has borrowed the same principle. There’s no real safety in our financial system– merely the illusion of safety.
Leading up to the 2008 financial crisis, most people thought the banks were safe. After all, we’ve been told our entire lives that the banks are rock solid. What could go wrong? This turned out to be an illusion. Banks had loaded up their balance sheets with toxic assets, rendering themselves completely insolvent. They started dropping like flies.
Bear Stearns, Lehman Brothers, Merrill Lynch, Washington Mutual, Wachovia… some of the most established banks in the US collapsed. Poof. Ever since then, the banks, the US government, the Federal Reserve, and other financial regulators in the United States have been working to rebuild the illusion of financial safety.
Most notably came a bunch of laws and regulations like the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law in 2010, designed to make the banks safer… … or at least give the appearance that banks are safer. As you can imagine, these regulations have merely created another illusion of bank safety.
Today, former US Treasury Secretary Lawrence Summers published a new paper that slams these regulations for not having made the US banking system any safer:
“To our surprise, we find that financial market information provides little support for the view that major institutions are significantly safer than they were before the crisis and some support for the notion that risks have actually increased.”
This is important. Most people have handed over their entire life’s savings to financial institutions that are far, far riskier than we are led to believe.
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