Jul 24, 2017

Describe the 2008 financial crisis as a modern-day bank run.

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Describe the 2008 financial crisis as a modern-day bank run.


Describe 2008 financial crisis as a modern-day bank run.


(Reuters) - The following are highlights from Federal Reserve Chairman Ben Bernanke`s testimony on Thursday to the Financial Crisis Inquiry Commission on the problem of financial institutions that are "too big too fail."


"My general tone and attitude was is there anything we can do and I believe that that goal was shared by the other principles, by (NY Fed) President Geithner and (Treasury) Secretary Paulson and (SEC) Chairman Cox. And none of those folks have been known for timidity in previous episodes in terms of trying to find ways to prevent a worsening of the financial crisis and what I heard from them was just a sense of defeat, this is just way too big a hole. My own view is that it`s very likely that the company was insolvent even, not just illiquid."


"I think one of the lessons of the crisis is that innovation is not always a good thing."

"The new financial stability oversight council, for example, ought to pay close attention to financial innovations, and regulators, as we look at risk managements and systemic consequences of these decisions, need to be assertive if there are developments that we find either counterproductive from the perspective of consumer protection or systemically risky."


"The only way we could have saved Lehman would have been by breaking the law and I`m not sure I`m willing to accept those consequences for the Federal Reserve and for our system of laws. I just don`t think that would be appropriate. So, I wish we had saved Lehman but -- and we tried very, very hard to do so -- but it was beyond our ingenuity or capacity to do it."

The 2008 financial crisis as a modern-day bank runNameCourseInstructorDate The 2008 financial crisis placed enormous pressure on the U.S. financial system following a sudden loss on the value of financial assets in investment banks and financial institutions dealing with mortgage- backed securities. The financial crisis led to the global recession, and the Federal Reserve’s efforts to bail out failing banking institutions put doubt on the strength of the U.S financial system. In any case, there was a gradual fall in house prices and rising unemployment while subsequent government intervention was seen as controversial. Republicans were against the government’s efforts to interfere with free markets, while the Democrats were against bailing out of elite Wall Street financiers. This paper describes the 2008 financial crisis as a modern day bank run. The 2008 financial crisis caused a shock to the financial sector, and beginning with the failure of the Lehman Brothers led to panic among consumers, bank depositors and investors. The events were like a bank run on financial markets especially the Repo market where there was no insurance guarantee. Various financial institutions suffered simultaneously, to the extent that various banks suffered insolvency because the value of their assets declin...

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