Australia  

Celebrating 10 Years of Trusted News Discovery
One News Page
> >

Bank CEO's: Two Biggest Risks to the Financial System -- ICYMI

Video Credit: The Street - Duration: 01:21s - Published < > Embed
Bank CEO's: Two Biggest Risks to the Financial System -- ICYMI

Bank CEO's: Two Biggest Risks to the Financial System -- ICYMI

Although Senator Mark Warner (D-VA), member of the Senate Banking Committee and an original engineer of the Dodd-Frank Act, recently told TheStreet, "I think most Americans should sleep better at night, knowing the banks have more capital," there are still systemic risks to watch.

During Wednesday's informational hearing between the CEO's of Goldman Sachs , Morgan Stanley , Citigroup , Bank of America , Bank of New York Mellon and the U.S. House Committee on Financial Services, something important was revealed.

Two Big Systemic Risks Democratic House Representative from Connecticut Jim Himes asked each CEO to tell which market risk is the greatest to the financial system.

JPMorgan Chase CEO Jamie Dimon asserted without hesitation: "(1) Leveraged lending and (2) student lending." The answers from all the CEO's were weighted most heavily toward those two risks.

Himes' question was motivated by the sore memory of what caused the financial crisis: Excesses in mortgage debt.

Related.

Goldman's Marcus Platform, Apple Partnership, Set the Stock Apart For those slightly hazy, here's a run-down of what happened to cause the 2008 financial crisis: What Was the Financial Crisis?

The Federal Reserve, then led by Chairman Alan Greenspan, kept interest rates too low for too long, as the economy heated up.

This caused overheated activity in the housing market, as almost any person could get a mortgage loan (loose lending regulations weren't helping quell the activity either).

Banks would put hidden provisions in mortgage contracts saying that the borrowers interest rate would spike during the life of the loan.

A lot of home buyers had poor credit and headed for default when their rates spiked.

Meanwhile, banks were creating a huge financial market for the loans.

The loans were packaged into collateralized debt obligations (CDO's), which were financial products containing thousands of mortgage bonds, many of which were of bad credit, but they were listed as having triple A credit.

Other banks bought the products.

Insurance companies like AIG insured CDO holders against losses in some cases.

All parties long on the credit, and with large positions in the asset, crumbled.

The banking system was subsequently in danger of freezing.

Sign up for the In Case You Missed It newsletter here.

Goldman Sachs and Citigroup are holdings in Jim Cramer's Action Alerts PLUS member club.

Want to be alerted before Jim Cramer buys or sells GS or C?

Learn more now.

0
shares
ShareTweetSavePostSend
 

You Might Like


Recent related videos from verified sources

What Is Blockchain and How Does It Work? [Video]What Is Blockchain and How Does It Work?

Blockchain is one of the biggest buzzwords of the decade — how does it actually work? Matt Spoke is the CEO and founder of The Aion Foundation, a nonprofit open-source software organization that..

Credit: Entrepreneur     Duration: 02:58Published

The Long Slow Road To Scale & Power: Finecast’s Nielsen On Advanced TV [Video]The Long Slow Road To Scale & Power: Finecast’s Nielsen On Advanced TV

Building the infrastructure required to deliver addressable TV ad campaigns at scale is a "10-year sprint" for the man charged with doing that for the world's biggest media agency holding group. But..

Credit: BeetTV - Affiliate     Duration: 07:36Published

3 Things Millennials Should Do to Ensure Their Financial Futures [Video]3 Things Millennials Should Do to Ensure Their Financial Futures

People in their 20s and 30s are typically just starting to find their way in their careers, but when it comes to their financial lives, they usually make one of two mistakes -- they're either not doing..

Credit: The Street     Duration: 00:34Published

U.S. bond market's inflation gauges rise [Video]U.S. bond market's inflation gauges rise

On Wednesday the U.S. bond market’s gauges of investors’ inflation views climbed as the Federal Reserve signaled it may lower interest rates later this year to counter slowing global growth and..

Credit: Rumble     Duration: 00:35Published

Environmentally friendly: One News Page is hosted on servers powered solely by renewable energy
© 2019 One News Page Ltd. All Rights Reserved.
About us  |  Contact us  |  Disclaimer  |  Press Room  |  Terms & Conditions  |  Content Accreditation
 RSS  |  News for my Website  |  Free news search widget  |  In the News  |  DMCA / Content Removal  |  Privacy & Data Protection Policy
How are we doing? FeedbackSend us your feedback  |   LIKE us on Facebook   FOLLOW us on Twitter  •  FOLLOW us on Pinterest
One News® is a registered trademark of One News Page Ltd.