Since the guarantee is so valuable and pervasive, these giant intermediaries face little market discipline and have a perverse incentive to expand their scope, scale, risk exposure, leverage and financial interconnectedness.
Argentina is currently the smallest of the G20 by GDP; it also ranks lowest by far for financial interconnectedness and second-to-last (a bit better than Russia) for rule of law and control of corruption.
The Federal Reserve tried in the proposals to address one of the central problems of the financial crisis: the interconnectedness of large financial institutions and its effect on bank stability.
The President, or a designee of the President, may coordinate through all available international policy channels, similar policies as those found in United States law relating to limiting the scope, nature, size, scale, concentration, and interconnectedness of financial companies, in order to protect financial stability and the global economy.
stopped short of endorsing them but said that, in principle, such surcharges should "be commensurate with the systemic interconnectedness of financial institutions".
But given the global interconnectedness of financial institutions — and connectedness, not size, is the relevant and threatening factor here — the Fed and Congresss) could easily be back in the bailout business unless proactive steps are taken.
Such a system largely relies on the interconnectedness of various financial entities such as banks, firms, and investors through complex financial relationships such as interbank payment networks, investment relations, or supply chains.
It is the credible possibility of designation that disciplines managerial decisions about the size, scope, leverage, and interconnectedness of a financial firm's activities.
GE Capital has decreased its total assets by over 50percentt, shifted away from short-term funding, and reduced its interconnectedness with large financial institutions.
suggests that a surcharge or levy on large, complex financial institutions, based on their interconnectedness and the degree of risk they pose to the financial system, could help ensure the system's safety.
(Bank failures have the opposite effect; because of the interconnectedness of the financial system, one blow-up makes another more likely, not less).Indeed, Mr Taleb thinks the big mistake is trying too hard to avoid shocks.
