(Mis)Understanding a Banking Industry in Transition
Dollars & Sense, No. 273, pp. 14-27, November/December 2007
9 Pages Posted: 11 Mar 2008
The U.S. financial system is, again, in crisis caused by huge numbers of defaults among subprime mortgage borrowers and mortgage derivatives; and, massive losses for the holders of new-fangled investments comprised of bundles of loans of varying risk, including many of those subprime mortgages. The largest financial institutions have followed business practices that were certain to produce massive losses - so imprudent that they have created a worldwise financial crises. To even begin to understand events in the U.S. and global banking industries, you have to look back at the seismic shifts in the industry over the past 30 to 40 years, and at the interplay between those shifts and government policy. The story that continues to unfold is one of progressively worse policies that make financial crises more common and more severe.
Keywords: Bank, Banking, Banking Industry, Control Fraud, Financial System, Defaults, Subprime Mortgage, Financial Institution, Risk Management, Global Banking, Banks, FDIC, Gramm-Leach-Bliley, Federal Reserve, Deposit Insurance, National Banking, Banking Regulation, Offshore Banks
JEL Classification: E2, E44, E52, E62, F2, G18, G21, K42, K2
Suggested Citation: Suggested Citation