Powell says cyber attacks pose a bigger threat to the U.S. economy than the 2008 recession

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Powell says cyber attacks pose a bigger threat to the U.S. economy than the 2008 recession

Jerome Powell reiterated on Wednesday that systemic threats to the U.S. economy are a bigger threat than the risk of another cyber collapse in the financial system seen during the 2008 recession.

In an interview with David Rubenstein at the Economic Club of Washington D.C. on Wednesday, Powell said that cyber is the new frontier and financial institutions are devoting resources to thwart attacks.

The comments echo remarks he made during a CBS 60 Minutes interview on Sunday night when Powell said that policymakers at the U.S. central bank believe cyberattacks on financial institutions that halt their ability to track payments could trigger a market collapse similar in magnitude to the global financial crisis.

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You would have a part of the financial system come to a halt, or maybe a broad part even. And so we spend so much time and money, he said. There are cyber attacks every day on all major institutions now. That's a big part of the threat picture in today's world.

In a 2018 report by the International Monetary Fund, cyber threats could cost banks 9% of their net income globally or around$ 100 billion annually.

The world evolves, Powell said. And the risks change as well; I would say that cyber risk is the most risk we keep our eyes on now. The risk, I would say, is actually in now, rather than something that looks like the global financial crisis. The 2008 crisis was triggered by overheating in the housing markets, when banks and other lenders approved mortgages sometimes to borrowers with poor credit histories, driving up home prices to astronomical levels. The bank then sold the risky mortgage-backed securities to other financial institutions.

Large financial conglomerates like Bear Stearns, Lehman Brothers, Merrill Lynch and Morgan Stanley were all lenders of mortgages. According to a 2018 published by the University of California Berkeley, Morgan Stanley held$ 50 billion in high-risk mortgage-backed securities by the summer of 2007, Citigroup$ 43 billion, Merrill Lynch$ 32 billion and UBS$ 11 billion.

CLICK HERE TO READ MORE ON FOX BUSINESS! As a result of a glut of new homes on the market, housing prices started to fall across the country, meaning that millions of homeowners and mortgage lenders were suddenly underwater, which means they owed more on the mortgage than the estimated value of the property.

Owners lost on their mortgage payments and owed their homes, and banks that held the securities were pushed toward bankruptcy.

GET FOX BUSINESS ON THE GO BY CLICKING HERE According to Powell, the odds of a similar occurrence are low. The chance of going through a breakdown that looked anything like that were banks making very weak loans and investment decisions and having terrible levels of liquidity and weak capital positions and thus needing government bail the chances of that are very, very low, Powell said.

Very low.

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