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What Will Cause The Next Market Crash?
Many Happy Returns
The Fed's Discussion on the Banking Crisis
The Fed's point about the banking crisis more broadly was that it does consider the sector to be, and I quote, resilient with substantial loss absorbing capacity. But that's because they're using the 2008 measure of risk, which is based on bad assets. So if the assets fall in value, how much loss absorbing capital have you got on the liability side? Because you haven't got enough, you go bankrupt. That was never the problem. These banks, which defaulted, had very good capital ratios and lots of loss absorbing equity. The problem was the value of the deposits fell very dramatically as people ran out of the door. Now they'll probably see something to do with concentration of deposits
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