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Banks Remain Vulnerable to Another Financial Crisis

Five years after the crisis that vanquished Lehman Brothers, Countrywide Mortgage, Washington Mutual and other financial institutions adequate banking system safeguards are still not in place. Consider this comment from a recent interview published in the Wall Street Journal (June 23), with former FDIC chairwoman Sheila Bair:
[WSJ]: Do you think enough has been done to prevent a banking cataclysm from happening again?
Ms. Bair:No, I don't think so. I think there are a number of outstanding rule makings that haven't been finished yet. At the top of my list would be the proposed rules to strengthen capital requirements. Excessive leverage was the key driver of this crisis. Excessive leverage is almost always a key driver of any financial crisis we've ever had, and the rules themselves allowed a lot of leverage. ... So, those rules need to be fixed.

Many banks remain vulnerable to the next earthquake that will shake the financial landscape.

Now consider an excerpt from a Jan. 8, 2013 Forbes article:

Financial reform didn't work. Banks today are bigger and more opaque than ever, and they continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks.

Read the entire Wall Street Journal article: http://online.wsj.com/news/articles/SB10001424127887323393804578555822627076476.

Read the entire Forbes article: http://www.forbes.com/sites/stevedenning/2013/01/08/five-years-after-the-financial-meltdown-the-water-is-still-full-of-big-sharks/.