The legacy of the financial crisis

Joan McGuire

It has been 10 years since the collpase of Lehman Brothers. Four experts weigh in on lessons learned from the financial meltdown.  

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A decade ago, on September 15, 2008, the unthinkable happened on Wall Street: banking titan Lehman Brothers filed for bankruptcy, triggering a global financial crisis and the onset of the Great Recession. 

It was the biggest U.S. corporate failure by assets, and resulted in a spiral of bank failures, buyouts and government bailouts of some of the U.S.’s biggest corporations.

The fallout from that event indelibly changed the face of banking and financial services.

Regulators clamped down on fraudulent mortgage lending practices at the source of the financial meltdown. Legislators passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, a set of rules aimed at shoring up the banking and financial services sectors.

Broad-sweeping changes included requiring banks to hold more capital to absorb losses, and preventing banks from trading with their own customer deposits for profit.

Ten years on, is the financial system safer for industry and consumers? Are cracks starting to show in the economy that could lead to a collapse of the same magnitude?

Finance experts point to some black clouds on the horizon. Consumer debt is set to surpass a record $4 trillion by the end of 2018. Student loan debt has ballooned 34% since 2013, and continues to grow.

consumer debt

In the financial system, certain areas of the market are under scrutiny. Trillions of dollars have flowed into exchange-traded funds. Some worry the concentration of money in these securities could create instability in the system.

The access to easy credit has led to a mispricing of securities. Yields in the direct lending market, for one, have plunged to levels some say are not commensurate with the risk.

Click on the following links to read the perspectives of four experts on lessons learned (and not learned) from the biggest financial collapse of modern times:

The Banker: ‘I didn’t see a lot of the bad stuff until the end.’

The Investor: ‘To quote Mark Twain: ‘History doesn’t repeat itself, but it rhymes.’

The Economist: ‘I get the impression everyone thinks another financial crisis is around the corner.’

The Wealth Manager: ‘Less regulated, non-bank lenders are making higher risk corporate loans and mortgage-based loans.’

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