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Federal Reserve Chairman Jerome Powell has warned that cyber threats pose a greater threat to the US economy than the risk of another systemic collapse of the financial system during the 2008 recession.
In an interview with CBS’s ’60 Minutes’ aired Sunday night, Powell said US central bankers believe that cyberattacks on financial institutions that could jeopardize their payments could cause a global market-like onslaught. causing financial crisis.
WHAT HAPPENS DURING A RECEPTION?
‘You could bring a part of the financial system to a standstill, or perhaps even have a broad part. And we spend so much time and energy and money to guard against it, ‘he said. “Every day there are cyberattacks on all major institutions. That’s a big part of the threat in the world today.”
A 2018 International Monetary Fund report found that cyber threats could cost banks 9% of their net income worldwide, or about $ 100 billion annually.
“The world is changing,” Powell said. “The world is evolving. And the risks are changing, too. I would say that the risk we are looking at the most right now is cyber risk. That is really where the risk is now, rather than something that looks like the global financial crisis.”
WHAT MOVES AN ECONOMIC DISTRIBUTION?
The 2008 crisis was caused by overheating in the housing market, when banks and other lenders approved mortgage lending, sometimes to borrowers with a poor credit history, which caused house prices to rise to astronomical levels. Banks then sold the risky mortgage-backed securities to other financial institutions.
Major financial conglomerates such as Bear Stearns, Lehman Brothers, Merrill Lynch and Morgan Stanley have all become mortgage lenders. According to a 2018 paper UBS published by the University of California Berkeley by the summer of 2007, $ 50 billion in high-risk mortgage-backed securities, Citigroup $ 43 billion, Merrill Lynch $ 32 billion and Morgan Stanley $ 11 billion.
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Due to an abundance of new homes on the market, home prices across the country began to fall, meaning that millions of homeowners and their mortgage lenders were suddenly ‘under water’, meaning they owed more on the mortgage than the estimated value of the property. Owners defaulted on their mortgage payments and lost their homes, and banks owning the securities went bankrupt.
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According to Powell, however, there is little chance that a similar event will occur.
“The chances that we would have a breakdown that looks like this – where banks had terrible lending and investment decisions and had low levels of liquidity and weak capital positions and thus needed a government bail, the chances are very, very low,” Powell said. “Very low.”