Five years after the financial crisis former Treasury Secretary Henry Paulson says “the world shouold prepare for a new financial crisis” in tomorrow’s Handelsblatt newspaper. His view, based on the “unacceptable” nature of too-big-to-fail banks and the lack of reform of the GSEs and the shadow-banking industry, stands in direct opposition to the leader of one of those TBTF banks. James ‘not Jim’ Gorman, CEO of Morgan Stanley, told Charlie Rose last week that “the probability of [it] happening again in our lifetime is as close to zero as I could imagine.”
Gorman’s reasoning is consensus:
“The way these firms are managed, the amount of capital that they have, the amount of liquidity that they have, the changes in their business mix — it’s dramatic.”
5 yrs after the financial crisis, the Fannie Mae, Freddie Mac reform has made no progress and the market of shadow banks hasn’t been addressed, Paulson writes, according to a preview of the commentary
Paulson calls the too-big-to-fail phenomenon “unacceptable” and proposes more stringent capital and liquidity requirements in order to minimize the advantages enjoyed by larger financial institutions: Handelsblatt
Who would you trust?