WHEN FINANCIERS and governments redesigned the financial system in order to make it safer after the debacle of 2007-09, most of them imagined that a shock as bad as the subprime fiasco would be a generation away. In fact it arrived only a decade or so later. Lockdowns have led to a savage recession that is expected to produce huge loan losses as firms and households suffer.
Happily, the Fed concludes, in this u-shape scenario the banking system’s total core-capital ratio would fall from the present 12% to a still-passable 8%. Some banks might have to limit the dividends they pay their shareholders in order to bolster their capital positions—indeed, on June 29th Wells Fargo said it would have to cut its payout. But this is a small price to pay.
Instead, the banking system’s new resilience means that customers and investors did not rush to withdraw funds as in 2007-09. Banks were seen as safe. Lenders in turn have had the resources to extend overdrafts to firms in need.
😂😂😂😂😂😂
Very. They bank on the state.
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