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

On Wednesday, President Jerome Powell reiterated that the systemic threats pose a bigger threat to the United States economy than the threat of another cyber breakdown in the financial system that was seen during the 2008 recession.

In an interview with David Rubenstein in 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 that aired 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 perhaps even a broad part. And so we spend so much time and money as a tyrant in these things, he said. There are now cyberattacks on all major institutions every day. That's a big part of the threat picture in the world today.

A 2018 report from the International Monetary Fund found that cyber threats could cost banks 9% of their net income globally, or around$ 100 billion annually.

Powell said the world evolves and changes. And the risks change as well, I would say that cyber risk is now the most important in our life. What's the risk, I would say, is 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, and drove up home prices to astronomical levels. The banks then sold the risky mortgage-backed securities to other financial institutions.

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

CLICK HERE TO READ MORE ON FOX BUSINESS. As a result of the high demand for new homes on the market, housing prices across the country began to fall, meaning that millions of homeowners and their mortgage lenders suddenly owed more on the mortgage than the estimated value of the property.

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

FOLLOW FOX BUSINESS GO ON THE GO BY CLICKING HERE According to Powell, the odds of a similar event taking place are low. The chances that we would have a breakdown that looked anything like that, where banks had weak lending and investment decisions and having very low levels of liquidity and bad capital positions and thus needing government bail out the chances of that are very, very low, Powell said.

Very low.

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