Busted: Bankers and The Global Economy

September 29, 2007

Fed Addresses Banking Risks

Governor Mishkin speaks out of both sides of his mouth as he addresses the vulnerable market and systemic risk to the banking system. He speaks of disruption of information flows. Why is there a communication problem between bankers in international banking? He stresses the risk management role as central banks cannot be a “lender of last resort” in third-world countries.

“After the calm of the past several years, the events of this summer are a strong reminder that our increasingly globalized and sophisticated markets are still vulnerable to systemic risk. When we speak of systemic risk, we mean the risk of a sudden, usually unexpected, disruption of information flows in financial markets that prevents them from channeling funds to those who have the most productive profit opportunities.”
~ Governor Frederic Mishkin at the Tenth Annual International Banking Conference, Federal Reserve Bank of Chicago, Chicago, Illinois on September 28, 2007

Systemic Risk and the International Lender of Last Resort


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