ECON 319 Chapter Notes - Chapter 4-5: Farm Credit Canada, Global Financial System, Export Development Canada
9 Feb 2017
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Lesson 4: public sector financial institutions prove their worth. Public sector financial institutions play a critical role as a backstop for the global financial system. A key lesson is that once a financial crisis hits, it is too late for governments to create institutional capacity at the global, regional, or national level to provide fall-back credit support-the institutions must already exist. These institutions have proven their collective value as policy tools for shoring up a weakened global financial system. Financial crisis driven by the lethal combo of over-leveraging of capital, over-extension of credit and securitization of these unsound credits around the globe. In response to crisis us treasury nationalized mortgage companies fannie mae and. In years leading up to crisis, there was a growing notion that public financial institutions such as the imf or world bank were no longer necessary. Roles had shrunk and private capital markets had expanded. Neither institution was adapting fast enough to the changing economic landscape.
