Bank aren’t the problem — this time
The report described the funding risks in the financial sector as relatively low. The banking system has avoided the conditions that caused the 2008 financial crisis. There is low risk that mispricing for one asset class, such as housing, will spill over into the banking sector and causes a run on the banks from panicked investors.
The Fed is walking a tightrope. Its current policy of maintaining low rates induces corporate borrowing because, after a decade of zero-interest rates, many businesses believe rates will remain low.
Yet this stance could easily lead to asset bubbles — a condition the monetary authority expressly wants to avoid.
