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Ten Years After the Global Financial Crisis, the System Is Safer

Ten Years After the Global Financial Crisis, the System Is Safer

Ten Years After the Global Financial Crisis, the System Is Safer
The BriefGet Up To Speed

More than 10 years ago, Lehman Brothers collapsed, and the world witnessed one of the worst financial crises in global history. In the United States, the stock market plummeted, unemployment soared, and the economy was thrown into a recession. And many other countries faced a similar fate. Has the world learned its lesson? Some argue that the international framework for handling and responding to a future crisis is lacking. Beyond that, they argue, there is reduced market-making activity, less scope for reduced interest rates, and increased government spending and borrowing. But others are more optimistic, arguing that the past decade was one of recovery and reform, with governments passing regulations to deal with failing institutions and creating oversight infrastructure that shored up the banks. And, they say, there are fewer sketchy loans on the books. Is the global financial system more resilient? Or are we ill-prepared for next time?

  • Kenneth Rogoff

    11 Items
    • American Economist & Professor, Harvard University
    Read Bio

    "A decade after the collapse of Lehman Brothers and the start of the global financial crisis, it is clear that many lessons have been learned, while many economic misconceptions remain embedded in the public consciousness. If economic history teaches us anything, it is to be mindful of our own limitations in a world of infinite uncertainties."

    Friday, September 7, 2018

    Kenneth Rogoff presents at the Nobel Symposium on Money and Banking, May 26 - 28, 2018 in Stockholm about Indebtedness of governments, firms, and households.

    Harvard Professor Kenneth Rogoff discusses the risks posed by emerging markets and warns that the next global crisis may potentially come from China. He speaks on "Bloomberg Surveillance." 

    Wednesday, September 12, 2018

    Kenneth Rogoff argues, "[o]f course, there are still issues with the Eurozone. But the only country which is sort of in a different place in the cycle and which is important is China. China is probably the place most at risk of having a significant downturn in the near term. It’s certainly the leading candidate for being at the center of the next big financial crisis."

    Friday, January 19, 2018

    "Most economic forecasts suggest that a recession in China will hurt everyone, but that the pain would be more regionally confined than would be the case for a deep recession in the United States. Unfortunately, that may be wishful thinking."

    Wednesday, November 7, 2018
    Harvard University Professor and Former IMF Chief Economist Kenneth Rogoff and CNBC's Rick Santelli discuss wages, inflation and monetary policy.
     
    Friday, February 2, 2018

    "Economists who assure us that advanced-economy debt is completely “safe” sound eerily like those who touted the “Great Moderation” – the supposedly permanent reduction in cyclical volatility – a generation ago. In many cases, they are the same people."

    Wednesday, June 6, 2018
    Kenneth Rogoff argues, "[i]n an era where cash is becoming less important in the legal tax-compliant economy outside small-scale transactions, and where banking and retail transactions are increasingly electronic, it is perhaps time for macroeconomists to stop treating the zero bound as an immutable constant of nature. The zero lower bound was a major problem in the 1930s and again in the most recent global financial crisis. It does not need to be a major obstacle in the next one, and there are perfectly viable ideas for eventually solving it without going all the way to a cashless economy."
    Saturday, July 1, 2017

    Kennth Rogoff argues, "[s]till, how much should [Europe] worry about whether inflation is under 2 percent right now when the euro could fall apart in the next year or two?"

    Saturday, October 1, 2011

    "While each financial crisis no doubt is distinct, they also share striking similarities in the run-up of asset prices, in debt accumulation, in growth patterns, and in current account deficits."

    Tuesday, February 5, 2008
    "Do $100 bills encourage tax evasion, drug deals and prostitution? We asked Harvard economics professor Kenneth Rogoff about the power of 'big bills.'"
     
    Wednesday, December 21, 2016
  • Gillian Tett

    12 Items
    • U.S. Managing Editor, Financial Times
    Read Bio
    "A decade ago, it seemed natural to expect that the crisis would lead to a resurgence of the political left. In 2009 the Occupy Wall Street movement initially gained support for its campaign against free market excess. But today it is largely rightwing parties that have grabbed the biggest electoral rewards. Even when these groups campaign under the mantle of anti-establishment rhetoric, they generally have limited interest in overhauling (or even talking about) the structure of finance."
     
    Thursday, September 6, 2018

    "But here is one crumb of comfort: history suggests that bull markets usually end with a sudden crash, not a series of disorientatingly wild swings. In that sense, then, today’s markets are indeed unusual. But they also give seasick investors opportunities to jump ship."

     
    Thursday, December 6, 2018

    "Can China learn enough lessons to avoid the fate of Japan in 1997 — or America a decade ago? That trillion-dollar question will not be answered for several years. But the one thing that is already crystal clear is that if Beijing does ever succumb to its own boom and bust, the implications for the global economy could be devastating."

     
    Friday, August 31, 2018
    "Better still, why not create a new version of the bilateral Simpson-Bowles Commission, which proffered some sensible ideas under the last administration? This does not necessarily make for thrilling headlines, but it is what American voters and investors desperately need — particularly with the Fed still determined to keep raising rates. Let us hope someone shows the president that eye-popping $1.43bn daily debt bill — and then urges him to act."
     
    Thursday, November 8, 2018

    A review of Gillian Tett's book "Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe."

    Thursday, June 12, 2008

    "But the most interesting (and urgent) debate that needs to take place in response to what Mr Bernanke and the others have to say does not concern the US at all. The trio also revealed this week that they are surprised and dismayed by the degree to which Europe’s financial system remains troubled a decade on."

     
    Thursday, July 19, 2018
    "The FT's Gillian Tett discusses the 'flaw' in Alan Greenspan's thinking and how culture has been overlooked at the cost to the global economy 10 years on from the financial crisis. By understanding the role of culture in banking, are we more resilient to another crisis now?"
     
    Monday, August 27, 2018
    "The FDIC “works” because it does what it says: kills ailing banks, while protecting depositors. If the eurozone could build similar clarity, with whatever regulatory structure it chooses, it might start building a better financial world. Or, put another way, if the eurozone could kill 450-odd Spanish, Greek or French banks without a consumer or market panic, the euro might have a more viable future."
     
    Monday, July 16, 2012

    Gillian Tett shares stories about her experience at the Financial Times and explains how her background in anthropology has helped her identify financial bubbles in technology and the economy. 

    Sunday, July 22, 2018

    "Tett's doom-mongering did not make her tremendously popular. Largely, her cautions were ignored, and when they weren't ignored they were subject to criticism. 'We had enormous kickback from the bankers in the City saying, 'Why are you being so critical of the industry? Why are you being so negative?' All that kind of stuff.' On a trip to the economic forum Davos in 2007, she was even denounced from the stage. 'One of the most powerful people in the US government at the time stood up on the podium and waved my article, the article that predicted the problems at Northern Rock, as an example of scaremongering.'"

    Thursday, October 30, 2008

    Gillian Tett argues, "[o]f course, the US’s credibility could crash if it suffers its own sovereign debt crisis. This is a real and rising threat in the medium term, given Mr Trump’s budget-busting tax cut and spending bills. Some people on Wall Street are so concerned about this that they tell me they are developing dollar alternatives, as a hedge for clients. But these focus on digital hedges, using blockchain or gold — not euros, yen or renminbi."

     
    Thursday, September 27, 2018
    "But this economic logic is unlikely to sway Mr Trump right now, least of all when the White House is preparing for a meeting with Chinese president Xi Jinping. So it is worth asking why the bilateral statistics are moving the wrong way. Part of the explanation is — ironically — the US’s current economic strength: fast growth usually sucks in more imports. (Or, as some of Mr Trump’s own advisers used to half-jokingly tell him, with limited success, the easiest way to solve a trade deficit is to create a recession.)"
     
    Thursday, November 15, 2018
Background
Wednesday, August 9, 2017
David Brett
"Key Points:
- Survey data collected before the 2008 financial crisis show that Americans have long had doubts about Wall Street, banks, and financial institutions, even though they recognize that these institutions are necessary for the US economy to flourish.
- The 2008 crash profoundly affected people’s views of Wall Street, the economy, and their family’s prospects. For example, in a November 2009 Gallup poll, the view that it was a good time to find a quality job dropped to its lowest level ever, 8 percent.
- There has been a small recovery in the major confidence-in-institutions indicators, and most Americans do not feel the economic system is more secure today than it was before the financial crisis."
Monday, September 10, 2018
Karlyn Bowman

"Although the deterioration of household balance sheets and the associated deleveraging likely contributed to the initial economic downturn and the slowness of the recovery, I find that the unusual severity of the Great Recession was due primarily to the panic in funding and securitization markets, which disrupted the supply of credit. This finding helps to justify the government’s extraordinary efforts to stem the panic in order to avoid greater damage to the real economy."

Thursday, September 13, 2018
Ben Bernanke

"The crisis seriously called into question financial globalisation, which to a certain extent amplified risks linked to banking activities and financial markets and brought about financial imbalances among leading economic powers. The question of what rules should apply to global financial activity is crucial in channelling the risks inherent to globalisation."

Tuesday, January 1, 2013
Jean-Yves Huwart and Loïc Verdier

"This 2018 Annual Report to Congress states that risks to U.S. financial stability remain in the medium range, reflecting a mix of high, moderate, and low risks in the financial system. Market risk is highest, reflected in historically high stock prices and the sensitivity of bond prices to changes in interest rates. Credit risk is moderate, with risk rising from leveraged lending (lending to companies with lower credit ratings), tempered somewhat by risks from consumer credit."

Thursday, November 15, 2018
Office of Financial Research
For the Motion
"The build-up to the financial crisis was marked by a rapid growth in wholesale funding, where banks borrow from one another and other financial institutions, rather than raising money through deposits from retail banking customers."
 
Tuesday, August 22, 2017
Alan Smith & Martin Arnold
"The system is a lot safer, but some important changes have been put off until the next meltdown."
 
Thursday, September 13, 2018
Mohamed A. El-Erian

"In commercial banking, the five largest participants in America are the same today as they were 11 years ago."

Thursday, September 6, 2018
The Economist

"To be sure, the financial system is safer. Banks have thicker and better capital cushions to absorb losses, and they are now better able to convert assets into cash in times of stress. Countries also use stress tests to check the health of the biggest banks and have set up oversight authorities to monitor risks to the financial system."

Wednesday, October 3, 2018
Adolfo Barajas, Claudio Raddatz and James P. Walsh

"Stocks not only recovered; they soared. Unemployment plunged from 10 percent to the current 3.9 percent, near a 50-year low."

Thursday, January 3, 2019
The Associated Press

"Despite the effects of counterproductive policies, the U.S. economy looks poised once again to embark on an innovation surge of historic proportions, one that will disrupt established players, generate substantial returns for investors, and improve the lives of working Americans."

Monday, January 29, 2018
John Michaelson

"Although the global expansion has plateaued, easy monetary policies continue to support growth."

Wednesday, October 10, 2018
Tobias Adrian
Against the Motion

"Ten years after the financial crisis, what have we learned? The most disquieting lesson is how complacent politicians, policymakers, and bankers had grown before the crisis and how much they had forgotten about the past. It shouldn’t have taken them as long as it did to relearn what they should have already known."
 

Thursday, September 13, 2018
Carmen M. Reinhart and Vincent R. Reinhart

"Ten years on from the crash what should worry us isn’t the risk of market failure. That, like death and taxes, we can assume. What should keep us up at night is that the debt that magnifies those risks hasn’t gone way – and nor has the false confidence of the risk managers."

Tuesday, September 18, 2018
Peter Franklin

"The global financial crisis is fading into history. But the roots of the next one might already be taking hold."

Wednesday, September 12, 2018
Matt Phillips and Karl Russell

"The more investors keep harking back to 2007-2008, the less chance there is of a repeat. My worry is that, this 10th anniversary notwithstanding, memories are fading."

Thursday, September 6, 2018
James Mackintosh

"The current global expansion will likely continue into next year, given that the U.S. is running large fiscal deficits, China is pursuing loose fiscal and credit policies, and Europe remains on a recovery path. But by 2020, the conditions will be ripe for a financial crisis, followed by a global recession."
 

Friday, September 14, 2018
Nouriel Roubini
"So what happened after the global financial crisis? Have politicians and policymakers tried to get us back to the past or go into a different future? The answer is clear: it is the former."
Monday, September 3, 2018
Martin Wolf

"Given what has since emerged about the scale of its actions, the shift in the political climate in the United States, and the likelihood that the next crisis will be in the emerging markets, and quite possibly in China, it may take more than a guardian angel to save the global economy next time."

Sunday, September 30, 2018
Adam Tooze
Dodd-Frank Act

"The Dodd-Frank Wall Street Reform and Consumer Protection Act is a massive piece of financial reform legislation passed by the Obama administration in 2010 as a response to the financial crisis of 2008."

Wednesday, May 23, 2018
Will Kenton
"Two experts debate whether the Dodd-Frank reforms should be reined in."
 
Thursday, March 1, 2018
Hal Scott & Lisa Donner

"A decade after the global financial crisis tipped the United States into a recession, Congress agreed on Tuesday to free thousands of small and medium-sized banks from strict rules that had been enacted as part of the 2010 Dodd-Frank law to prevent another meltdown."

Tuesday, May 22, 2018
Alan Rappeport and Emily Flitter
"Congress has taken away some of the tools that were crucial to us during the 2008 panic. It’s time to bring them back."
 
Friday, September 7, 2018
Ben S. Bernanke, Timothy F. Geithner and Henry M. Paulson, Jr.

"Judging from their latest effort to roll back the Dodd-Frank Act, congressional Republicans think that regulators shouldn’t worry so much about the country’s next-to-largest banks — the ones with between $50 billion and $250 billion in assets."

Monday, March 5, 2018
Mark Whitehouse

"The Case Against Dodd–Frank: How the “Consumer Protection” Law Endangers Americans grew from a shared concern among the contributing authors about the direction that financial regulation in this country has taken since the 2007–2009 financial crisis due to the regulations of the 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act."

Tuesday, April 26, 2016
Norbert Michel
 
"The prospect of deregulation helps explain why, since Donald Trump’s election, no bit of the American stockmarket has done better than financial firms."
Wednesday, February 22, 2017
Interest Rates
"Rate futures last week for the first time began pricing the possibility of the Fed reversing course on its rate hike regime starting in 2020. At that time, however, the market also still reflected a modest probability of the Fed getting in one more increase in 2019. That prospect now appears all but gone."
Monday, December 24, 2018
Reuters

"The Federal Reserve on Wednesday raised its benchmark interest rate by 0.25 percent in keeping with expectations, despite President Trump’s repeated insistence that doing so would threaten the bull market he’s enjoyed since taking office."

Wednesday, December 19, 2018
Jack Crowe

"When central banks set interest rates and hold them at low levels in order to create an economic boom after a recession (as our Federal Reserve does), they interfere with the organic functioning of the economy and financial markets, which has serious consequences including the creation of distortions and imbalances."

Wednesday, September 12, 2018
Jesse Colombo
"But for all the stock market palpitations and risks to particular interest-rate sensitive industries, the message to take from the recent rise in interest rates is an unambiguously good one: This expansion may have some life in it yet."
Thursday, October 11, 2018
Neil Irwin
Risky Loans & Debt
"The C.L.O., a cousin of the mortgage-related product that malfunctioned a decade ago, has become one of the hottest investments on Wall Street."
Friday, October 19, 2018
Matt Phillips
"Risk-taking never disappears, it just changes shape, often to slip past the institutional and psychological defenses erected after the last crisis."
Monday, September 10, 2018
George Ip

"Economic recovery has been weak because of a massive growth in leverage."

Tuesday, September 11, 2018
Adair Turner
Yield Curve

"A yield curve is a line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates. The most frequently reported yield curve compares the three-month, two-year, five-year, 10-year and 30-year U.S. Treasury debt. This yield curve is used as a benchmark for other debt in the market, such as mortgage rates or bank lending rates, and it is used to predict changes in economic output and growth."

Tuesday, August 28, 2018
James Chen

"In other words, the probability of a recession right now because of the shape of the yield curve is actually less than what you’d predict based on random chance."

Monday, December 24, 2018
Mark Hulbert
"If the Fed is persuaded to rein in the interest rate hikes, this could take the steam out of the dollar. Emerging markets would be pleased about that."
Tuesday, December 4, 2018
Marcus Ashworth
Too Big to Fail
"Although 'too big to fail' (TBTF) has been a long-standing policy issue, it was highlighted by the financial crisis, when the government intervened to prevent the near-collapse of several large financial firms in 2008. Financial firms are said to be TBTF when policymakers judge that their failure would cause unacceptable disruptions to the overall financial system."
Monday, September 24, 2018
Marc Labonte

"The Federal Reserve unveiled a fresh proposal Wednesday for regulating more than a dozen US banks that takes advantage of greater oversight authority recently granted by Congress -- and marks a step back from the tight controls imposed after the 2008 financial crisis."

Wednesday, October 31, 2018
Donna Borak

"Chinese authorities said they will designate more financial institutions as systemically important, a sign that policy makers are stepping up crisis-prevention efforts as the nation’s debt burden and financial risks swell to unprecedented levels."

Tuesday, November 27, 2018
Around the World

"China has incurred the largest debt buildup in recorded economic history—and the prognosis is not good. The International Monetary Fund surveyed five-year credit booms near the size of China’s and found that essentially all such cases ended in major growth slowdowns and half also collapsed into financial crises."

Friday, November 16, 2018
Josh Rudolph
"Which is to say that China’s biggest problem isn’t the trade war. It’s the growing debt problem, which finances bubbles at home and abroad."
Saturday, November 24, 2018
Panos Mourdoukoutas
"Study looked at possible scenarios where the US could try to constrain, or even attempt to destroy, China’s financial markets, financial assets and its currency."
Saturday, November 24, 2018
Amanda Lee
"History suggests that the world is about due for another financial crisis. One of the places it might start, according to a growing number of indicators, is Italy."
Friday, October 12, 2018
Jack Ewing and Jason Horowitz
"Erdogan’s growth model was fueled above all by cheap money. In 2018, it finally ran out of road."
Sunday, December 9, 2018
Cagan Koc and Ercan Ersoy