Financial System

The financial system, which had recently shown glimmers of improvement, is unraveling again. After a few weeks in which credit started flowing more freely through banks, giving relief to financial markets, prices continued to plummet yesterday for all but the safest investments, dragged down by fears of a deeper and longer recession than even many pessimists had expected. Investors were so eager to move money into ultra-safe U.S. Treasury debt yesterday that they were effectively paying the government to hold on to their cash.

A government panel voted on Monday to place large non-bank companies that pose risks to the financial system under stricter supervision. The Financial Stability Oversight Council vote, which took place in a closed session, sets the stage for a major shift in the oversight of a broad swath of big companies that play in financial markets, including private equity firms and hedge funds. Firms designated as "systemically important" will come under the thumb of the Federal Reserve and face a new regulatory...

JACKSON HOLE, Wyo., Aug. 22 -- Federal Reserve Chairman Ben S. Bernanke Friday called for a strengthening of the nuts and bolts of the financial system and said the Fed and other regulators should focus more on the stability of the overall system , rather than just the health of individual companies. He also said the recent drops in commodity prices and stabilization of the dollar should reduce inflation later this year and next year, though he noted that the outlook is highly uncertain.

Almost a century ago, Thomas Marshall, Woodrow Wilson's vice president, got tired of listening to senators blather on about the nation's needs and uttered the words that made him immortal: "What this country needs is a good five-cent cigar. " Today, with 24/7 blathering as our national political pastime, let me adapt Marshall's 1917 remark: What this country needs to get its act together is a good five-alarm financial crisis. I mean, look around. Except for the Federal Reserve, which has consistently...

President Obama came into office on the heels of the worst financial crisis since the Great Depression, and he called for reform of "the outdated rules and regulations" that allowed "the recklessness of a few to threaten the entire economy. " While the Dodd-Frank financial reform law he signed gives regulators more authority, as it's currently implemented it will not prevent another massive collapse. Without constricting the economy's growth, the president can do much more to create a safer banking system.

SHANGHAI, Oct. 25 -- Leaders from Asia and Europe on Saturday called for new rules for and stronger regulation of the global monetary and financial system at the close of a two-day summit in Beijing as China assumed a leadership role in the crisis. Chinese Premier Wen Jiabao said the world's economic problems had become so massive that measures beyond the many multibillion-dollar bailout packages announced might be necessary to avert further damage. "We are very glad to see that many...

LOS CABOS, Mexico — Amid growing fears that Europe's debt crisis will further stunt U.S. economic growth, President Obama emerged from two days of talks with world leaders Tuesday expressing cautious optimism that European leaders will take stronger action to rescue their foundering financial system. Obama acted at times as a mediator during a Group of 20 summit that featured moments of frustration, but White House officials said they are hopeful that a greater consensus has...

KABUL — In an attempt to protect Afghanistan's precarious financial system, the country's central bank said Wednesday that it will break Kabul Bank into two parts to isolate hundreds of millions of dollars in bad loans and create a new bank that guarantees customers' deposits. The Afghan Central Bank has so far recouped just $47 million of the more than $900 million in outstanding loans issued by Kabul Bank, the majority to shareholders including relatives of President Hamid...

Treasury Secretary Timothy F. Geithner plans to propose today a sweeping expansion of federal authority over the financial system, breaking from an era in which the government stood back from financial markets and allowed participants to decide how much risk to take in the pursuit of profit. The Obama administration's plan, described by several sources, would extend federal regulation for the first time to all trading in financial derivatives and to companies including large hedge funds...

The next couple of months will be crucial in determining the shape of the financial system for decades to come. And so far, the signs are not encouraging. The Obama administration is trying to refocus our attention on regulation, beginning with the president's speech in New York two weeks ago. The financial system, after all, brought us a near-catastrophic crisis that turned a mild recession into a painfully severe one. And Barney Frank, chairman of the House...

It's been five years since the onset of the financial crisis — the rescue of Bear Stearns in March 2008 — and we still don't know whether the financial system is safe. In a recent speech, Daniel Tarullo, the Federal Reserve's point man on regulation, contended that substantial, though incomplete, progress has been made. As an example, he cited the doubling of equity capital for the 18 largest bank holding companies from $393 billion in late 2008 to $792 billion at the end of 2012.

Federal Reserve Chairman Ben S. Bernanke on Friday defended the central bank's ability to shield the economy from another financial crisis but warned that risks remained in the lightly regulated "shadow banking" system. The Fed is responsible for overseeing individual banks to ensure their safety and soundness, but in recent years it has ramped up its monitoring of an increasingly complex web of financial services. Bernanke said it is now conducting regular stress tests on banks,...

The Federal Reserve's point man on bank regulation, Daniel Tarullo, is calling for big banks who rely on the debt markets for financing to hold more capital, adding to the growing pressure to rein in megabanks. Tarullo's proposal comes a week after Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) introduced legislation to impose higher capital requirements on megabanks to make them safer and less dependent on government bailouts. The ultimate goal of both proposals is the same, but Tarullo is...

Here's an experiment not to try: Drive down a country road on a moonless night and kill the headlights. Try to navigate only by the dials on your dashboard. How far do you think you'd go without crashing? Depends, right? On how fast you're driving, on how sharply the road twists, on whether there are guardrails lining the shoulder. It makes a huge difference what you've got on your dashboard. Ideally you'd want a GPS and an array of infrared cameras....

Correction: The name of Rep. Spencer Bachus (R-Ala.) was misspelled in earlier versions of this article. After the 2008 credit crisis nearly wrecked the nation's financial system, few panels in Congress were more instrumental in putting the pieces back together than the House Financial Services Committee. The committee was led then by Rep. Barney Frank (Mass.) , a Democrat who worked with then-ranking Republican Spencer Bachus (Ala.) , as well as the...

Adapted from "The Alchemists: Three Central Bankers and a World on Fire," by Neil Irwin (The Penguin Press, available April 4). The BlackBerrys all started buzzing, just before dinner was to begin at the Palacio da Bacalhoa, a 15th-century estate outside Lisbon. The 21 men and one woman charged with charting the course of Europe's economy looked down to find startling news that evening of May 6, 2010. Across the Atlantic, the U.S. stock market had plummeted. In only 15 minutes, the Dow Jones...

Britain unveiled extraordinary plans Thursday to inject billions of dollars of cash into its banks to try to protect its financial system from the economic turmoil spreading across the euro zone. The announcement came the same day that Spain and Italy — two of the continent's largest economies — saw their borrowing costs soar, with Spain's reaching record levels. While Britain uses the pound, not the common currency, and the country's banks are strong, the rest of the European Union is...

It's hard to believe but it's been five years since the U.S. financial system's problems surfaced, and we're still not even remotely close to being able to feel good about the economy. My admittedly arbitrary start date is June 12, 2007, the day the Wall Street Journal reported that two Bear Stearns hedge funds that owned mortgage securities were in big trouble. At the time, things didn't seem all that grim — in fact, U.S. stocks hit an all-time high four months...

Federal spending cuts have the Washington region reeling with alarming job-loss projections. But there is a growth area where the government will actually need more qualified professionals: Financial regulation. The 2010 Dodd-Frank Wall Street Reform Act has altered the responsibilities of the federal government, creating a new demand for talent in the region's financial regulatory centers. Here's a snapshot of the newly mandated agencies established to execute the legislation's 2,300...

The economic crises in the United States and Europe wiped out decades of progress in expanding the world financial system, depressing the flow of investments and loans across borders and potentially setting the stage for an epoch of entrenched low growth, according to a new study on global finance patterns. The McKinsey Global Institute report combines databases from the International Monetary Fund, global central banks and other sources to try to sum up what has been lost in the aftermath of...