Stability in financial institutions and in financial markets are closely intertwined. Banks and other financial institutions need liquid markets through which to conduct risk management. And markets need the back-up liquidity lines provided by financial institutions. Ma... View more
1 Remarks at the Federal Reserve Bank of Philadelphia, October 17th 2007. The link to the text of the speech and charts is at http://www.ny.frb.org/newsevents/ speeches/2007/dud071017.html. Subprime exposures are small relative to other measures, too. Total US chartered commercial bank assets are 7.74 trillion dollars as of June 2007, while total outstanding mortgages are almost 14 trillion dollars according to the Federal Reserve Board's flow of funds. Asset-backed security (ABS) issuers held 2.8 trillion dollars, commercial banks and savings and credit unions held 4.9 trillion dollars, and Agency and Government Sponsored Enterprise (GSE) backed mortgage pools held 4.1 trillion dollars.
2 FSA Guidance Note 4 (2002): “Resilience test for insurers”. See also FSA Press Release, June 28th 2002, No. FSA/PN/071/2002: “FSA introduces new element to life insurers' resilience tests”.
3 Adrian and Shin (2007): “Liquidity and leverage” working paper, FRB New York and Princeton University, http://www.princeton.edu/~hsshin/working.htm 2001 2002 2003 2004 2005 2006 2007 Asset backed commercial paper (ABCP) Financial commercial paper Repo O/N Repo Term
Source: Federal Reserve Bank of New York, Board of Governors of the Federal Reserve 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Asset backed commercial paper Uncollateralized financial commercial paper Total financial commercial paper Source: Board of Governors of the Federal Reserve