Category Archives: Financial Crisis

Your pension could be at the center of America’s next financial crisis | TheHill

The looming pension crisis is not limited by geography or economic focus. These including former public employees, such as members of South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — and is a staggering $24.1 billion in the red. These include former blue collar workers such as roughly 100,000 coal miners who face serious cuts in pension payments and health coverage thanks to a nearly $6 billion shortfall in the plan for the United Mine Workers of America. And when the bill comes due, we will all be in very big trouble.

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Your pension could be at the center of America’s next financial crisis | TheHill

U.S. Banks’ Real Estate Boom Could Be Signaling Next Crisis – InsideSources

In short, the vast bulk of the dramatic increase in the size of the banking system relative to the economy comes from the acceleration of real estate exposure — a rising trend for more than six decades. How can the banks keep doing this? Well, it helps to have your liabilities guaranteed by the government, both explicitly through deposit insurance and implicitly through bailouts and central banking.

Should the banking system keep getting bigger relative to the economy, and should this increase continue overwhelmingly to reflect real estate risk? That is a dubious proposition. As Columbia University’s Charles Calomiris has written (in a not-yet-published paper): “The unprecedented pandemic of financial system collapses over the last four decades around the world is largely a story of real estate booms and busts. Real estate is central to systemic risk.”

Very true. But as Calomiris notes, the Financial Stability Oversight Board, set up as part of the Dodd-Frank Act to oversee the U.S. financial system, “seems to be uninterested.”

U.S. Banks’ Real Estate Boom Could Be Signaling Next Crisis – InsideSources

New book by Wall Street Journal reporter ,‘The Spider Network,’ weaves compelling tale about Libor, global financial crisis | The Charlotte Observer

Enrich plunged into the story in 2013, when Hayes began texting him and then meeting with him to discuss Libor, his criminal case and sometimes his increasingly fragile personal life – a goldmine for any reporter. These interactions turned into a captivating 2015 series for The Wall Street Journal, “The Unraveling of Tom Hayes.”

In the “The Spider Network,” published by HarperCollins, Enrich builds on this narrative, fleshing out Hayes’ rocky path to a banking career, his high-flying days as a trader in Japan and then his downward spiral after facing prosecution. At one point, his wife no longer trusted leaving their son home alone with the distraught Hayes.

More broadly, Enrich explores the gray areas where bankers push the envelope – and the disastrous consequences they can face if they’re caught, especially if their conversations are preserved in emails and chat sessions.

New book by Wall Street Journal reporter ,‘The Spider Network,’ weaves compelling tale about Libor, global financial crisis | The Charlotte Observer

Are we heading toward another subprime mortgage crisis? – CNN.com

The Federal Reserve bailed out Bear Stearns on March 14, nine years ago. What has the Fed learned from that mistake? Not enough, perhaps.

Today, the Fed is again ignoring the GSEs and their potential contribution to future instability. According to Freddie’s 2016 annual report, “Expanding access to affordable mortgage credit will continue to be a top priority in 2017.” Fannie/Freddie have redefined “subprime” to a credit rating of below 620; previously, these firms and banking regulators had used 660 as the dividing line that defined a subprime borrower. Now by using the lower number, they may be buying even weaker mortgages than before the financial crisis.

The GSEs are wrapping new sub-subprime mortgages into the mortgage-backed securities they sell to the market. Fannie and Freddie guarantee these securities, and because the federal government stands behind the GSEs, there is little market discipline. Think about that: With regard to subprime mortgages we may now be in worse shape than we were before the crisis.

Are we heading toward another subprime mortgage crisis? – CNN.com

A Mountain of Debt: Is China’s Economy Going To Crash? | The National Interest

U.S. billionaire investor George Soros has noted an “eerie resemblance” between conditions in China and those in America leading up to the 2008 financial crisis.

“It’s similarly fueled by credit growth and an eventually unsustainable extension of credit,” he told the Asia Society last April.

Soros is not alone in ringing the alarm bell. BlackRock’s CEO Laurence Fink has also warned investors to be worried, while Goldman Sachs has reported that China’s shadow banking sector raised concerns about its “underlying credit problems and sustainability risk.”

A Mountain of Debt: Is China’s Economy Going To Crash? | The National Interest

Albert Edwards says bond market bloodbath coming – Business Insider

“I believe the US Fed has created another massive credit bubble that will, when it bursts, lay the global economy very low indeed. Combine this with the problems of a Chinese economy dependent on increasingly ineffective injections of credit to produce increasingly pedestrian GDP growth and you have a right global mess. The 2007/8 Global Financial Crisis will look like a soft-landing when the Fed blows this sucker sky high. The seeds for that debacle have already been sown with the Fed having presided over one of the biggest corporate credit bubbles in US history. All that is needed now is for the Fed to sprinkle life-giving rate hikes onto these, as yet dormant, seeds of destruction.”

Albert Edwards says bond market bloodbath coming – Business Insider

3 Lessons From the Last Global Financial Crisis – Barron’s

But, perhaps more than anything, it was hubris that did for us. A belief that crises were a thing of the past. Or that, for no really good reason, they would be manageable. Or simply an inability, or unwillingness, to understand exactly what was going wrong.

So a decade on, are we safer from financial crises? Drawing on the lessons of what happened 10 years ago has probably made us safer from the same sort of crisis. But history tends to rhyme rather than repeat: The next financial crisis will probably be different, and hubris will manifest itself in a different way.

Learning the lessons may delay the next crisis; it may blunt the impact of the next crisis, but it can’t guarantee that nothing bad will ever happen again.

3 Lessons From the Last Global Financial Crisis – Barron’s

Could the $1.3T of College Debt Spark the Next Financial Crisis? | Fox Business

In an exclusive interview with FOX Business’ Liz Claman, Washington College President and former Federal Deposit Insurance Corporation (FDIC) Chair Sheila Bair said the student loan debt crisis could spark next financial crisis, since it is a “tremendous drag” on the U.S. economy.

During the financial crisis of 2008–09, excessive mortgage debt collapsed consumer spending as more families opted to pay off debt. Bair said the same dynamic could be seen if the student debt bubble bursts.

“With so many student borrowers, even after they graduate, being burden with debt, they are not spending money on other things,” Bair said.

Could the $1.3T of College Debt Spark the Next Financial Crisis? | Fox Business

Could Greece Be The Trigger Of The Next Financial Crisis? | The Daily Caller

Greece is in battle over its next debt payment, and this time, if the conflict is not resolved, it could lead to the unraveling of the Euro.

Unless Greece is able to raise, or borrow, nearly $7.39 billion, it will default on its debt payments due in July. If Greece defaults, it could catalyze a domino effect in the Eurozone, causing sovereign debt crises to spread throughout Europe. A widespread fear is that defaults in Greece will trigger a debt crisis in Italy — one of the largest bond markets in the world.

“If you get a Greek default, you also have very serious problems in Italy. We could be talking about the Euro coming unstuck,” Resident Fellow at the American Enterprise Institute Desmond Lachman, tells The Daily Caller News Foundation. “If the Euro does come unstuck, that is going to be a huge crisis globally. As soon as countries leave the Euro, they will almost certainly default on their debt.”

Could Greece Be The Trigger Of The Next Financial Crisis? | The Daily Caller

This is how you know something desperate is going on in China’s economy – Business Insider

Things are looking a bit desperate in China.

The country has been suffering from money outflows for months — something that troubles Beijing because it pulls down the value of the Chinese yuan and makes the economy harder to manage.

But government measures to stem the outflows — like requiring citizens to report transfers over $10,000 and discouraging overseas acquisitions— still aren’t showing up in the numbers. In January, up to $82.7 billion left the country, according to Bloomberg economist Tom Orlik, bringing currency reserves down below the $3 trillion mark.

This is how you know something desperate is going on in China’s economy – Business Insider