I can't think of anyone more knowledgeable about our banking system, past and present, and better suited to cry Wolf when we face a crisis than Boston University law Professor Con Hurley. Con has a wealth of private and government banking regulatory experience including serving as Assistant General Counsel of the Board of Governors of the Federal Reserve System. This episode of Economics Matters -- the Podcast is a checkup on our staggering banking system, which is scarily similar to the run ups to the S&L crisis and the Great Financial Crisis.
In the past half year the U.S. has experienced the 2nd, 3rd, and 4th largest bank failures. Moody's just downgraded U.S. debt raising Treasury rates. A rise in Treasury rates was the main cause of those three massive bank failures. Treasury rates now exceed their values from six months back. S&P just downgraded five major mid-sized banks. Moody's did the same to 10 other banks. And Moody's put under review BYN Mellon, State Street, Northern Trust, U.S. Bancorp, Cullen/Frost Bankers, and Truist Financial. These are huge financial companies. BYN Mellon was founded in 1784 by Alexander Hamilton. BYN and State Street are among our nation's largest financial custodians. On a marked-to-market basis over half of FDIC insured banks are insolvent. Unless a miracle raises their asset values above their liabilities, they are heading down the tubes. The only question is whether they will go out of business slowly or overnight. Small and mid-sized banks have been forced to raise interest rates to retain deposits. And they've been borrowing like crazy from Federal Home Loan Banks, two of which Moody's also just downgraded. (Sound like Fannie and Freddie in August 2008?) Since March, bank stocks have fallen by two fifths.
Professor Cornelius K. Hurley has over 30 years of diversified legal and entrepreneurial management experience in financial services. He is a director of Computershare Trust Company, N.A., and former director of the Federal Home Loan Bank of Boston. Professor Hurley established the Boston office of The Secura Group, Washington, D.C. Formerly, he was general counsel of Shawmut Corporation and assistant general counsel of the Board of Governors of the Federal Reserve System. Active in the American Bar Association, he is a faculty member of Banking Law Basics, Banking Law II, Consumer Financial Services Basics, and Investment Management Basics, all institutes conducted jointly by the Morin Center and the ABA. He teaches Banking Structure and Regulation and the Thesis Seminar in the Graduate Program. Professor Hurley also serves as reporter to the American Bar Association’s Task Force on Financial Markets Regulatory Reform.
Economic Matters - The podcast is hosted by Laurence Kotlikoff and moderated by Alex Kotlikoff.