After a Financial Flood, Pipes Are Still Broken – NYTimes.com

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.

via After a Financial Flood, Pipes Are Still Broken – NYTimes.com.

Who was to blame in 2009?  Catch up on the full story at CNBC.

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2 thoughts on “After a Financial Flood, Pipes Are Still Broken – NYTimes.com

  1. *I already commented on this post, but my comment seems to have disappeared…

    85% of US GDP is represented by its GDP’s Consumption and Investment components (basically its private sector, whose actions are subject to market speculation). 76% of the US GDP is Consumption alone. Although these are relatively normal numbers in any Western economy, they cause susceptibility to rumors of financial dangers and subsequent fear to buy. Because the US are a consumerist country, they may at any time fall victim to consumers’ fear to purchase and companies’ fear to invest… That being the case, I agree that economic danger is still imminent. The only way to avoid future recessions would be if we: (1) indicted major bank officials responsible for risky behavior; and (2) plugged our ears and blindfolded ourselves away from any bad news.

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