Systemic Task Posted on March 29th
“HAPPY FAMILIES are all alike,” Tolstoy wrote. “Every unhappy family is unhappy in its own way.” And so it is with financial booms and busts. The prosperity we enjoyed until last year looked like previous upswings: easy credit, rapid financial innovation, appreciating asset prices and — finally and fatally — a certain blindness to risk. The current crash, however, has presented U.S. policymakers with original problems. Just as the Panic of 1907 highlighted the need for a Federal Reserve System and the Great Depression called forth federal deposit insurance, the burning issue today is what to do about institutions — such as American International Group, Bear Stearns or Lehman Brothers — that are not banks but are so large and so intertwined with other institutions that their collapse would threaten the entire system.
Trackback URL