Systemic Risk - Discussion

Discussion

Systemic risk evaluates the likelihood and degree of negative consequences to the larger body. The term "systemic risk" is frequently used in recent discussions related to the economic crisis, such as the Subprime mortgage crisis. The systemic risk of a financial institution is the likelihood and the degree that the institution's activities will negatively affect the larger economy such that unusual and extreme federal intervention would be required to ameliorate the effects. The failing of financial firms in 2008 caused systemic risk to the larger economy. Chairman Barney Frank has expressed concerns regarding the vulnerability of highly-leveraged financial systems to systemic risk and the US government has debated how to address financial services regulatory reform and systemic risk.

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