New Fed Report Shows High Leverage Poses Threat to U.S. Financial Stability: From Life Insurance Companies to Hedge Funds

“Excessive leverage within the financial sector increases the risk that financial institutions will not have the ability to absorb even modest losses when hit by adverse shocks. In those situations, institutions will be forced to cut back lending, sell their assets, or, in extreme cases, shut down. Such responses can substantially impair credit access for households and businesses.”

New Fed Report Shows High Leverage Poses Threat to U.S. Financial Stability: From Life Insurance Companies to Hedge Funds (wallstreetonparade.com)

Published by markskidmore

Mark Skidmore is Professor of Economics at Michigan State University where he holds the Morris Chair in State and Local Government Finance and Policy. His research focuses on topics in public finance, regional economics, and the economics of natural disasters. Mark created the Lighthouse Economics website and blog to share economic research and information relevant for navigating tumultuous times.

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