Even experts who disagree and think there is a deepening climate-driven insurance problem don’t say this will automatically lead to the abrupt meltdowns of the 2008 crisis. Here’s how former California insurance commissioner Dave Jones, a Democrat, put it to me. “Over time you’ll see even more insurance company insolvencies, more insurance price increases and less insurance availability, more mortgage defaults, and falls in asset values and credit freezes; as opposed to a single catastrophic event or events where a bunch of financial institutions nationally go down at once.” Although, he added, “There is some risk of that as well.”
There is, however, wider agreement on one daunting point. Climate-driven financial havoc, even if it happens in slow motion, could be more menacing than past financial chaos. That’s because it would not be caused by financial failures that are typically followed by a recovery, but by global carbon emissions that the world has spent more than 30 years struggling to cut. From The Financial Times. The next Crash 6/26/25.
The scenario from the FT is ongoing and occurring now. Yesterday, the Federal Reserve Board decided to loosen Large Bank asset requirements. Risk on.
It was agreed after the 2008 Crash, Banks could avoid unnecessary Regulation, if they held 25% of their portfolio in safe assets. Enough to cover the loan losses anticipated with the industry.
Greenspan, Paulson and Peter Orsag agreed , a 25% cushion was necessary. Now, yesterday, the Federal Reserve Board announced it was reducing the Bank’s safety net requirements.
Risk on. Coupled with secondary lenders, the Banking industry is less safe. When the next crash comes, multiple forces will have contributed to mortgage defaults, credit card defaults and people stranded without jobs and homes.
It’s never too late to reverse course. Be aware and rebel against the instability poor government policy choices have left US. It’s a miracle if we only experience a Recession!