How prepared is the US for the next disaster? According to crack business columnist Gretchen Morgenson, whose book Reckless Endangerment lays out the detailed downfall of US banking in 2008–the “pipes are still broken”–and we have a lot to worry about:
When markets are operating smoothly, most wholesale funding trades are not unwound the next day. Instead, they are rolled over, with both parties agreeing to renew the transaction. But if a participant decides not to renew because of concerns about a trading partner’s potential failure, trouble can arise.
In other words, this is a $4.6 trillion arena operating on trust, which can disappear in an instant.