St. Louis Fed Pres. James Bullard on Economy
Last Thursday evening I had the honor of witnessing an intriguing lecture by St. Louis Federal Reserve Bank President James Bullard who received his PhD is Economics from Indiana University.
Bullard spoke specifically on the topic of the recent financial crisis focusing on systemic risk, which he defined as “the possibility that the failure of one firm will lead to the failure of other firms.” However, Bullard said the difficulty lies in defining when there is adequate systemic risk to call for government intervention.
Three Pillars of Systemic Risk
Interconnectedness – Recent examples of systemic risk has focused on investment banks interconnecting themselves with complex financial instruments. For example’s sake, suppose Bank A purchases an option from Bank B to hedge risk, if …
Tags: economy, fannie mae, fannie mae and freddie mac, federal reserve bank, financial, government intervention, interconnectedness, investment banks, james bullard, mortgage backed securities, president, systemic risk, tution
