As for the stability of U.S. banks, the Federal Reserve has required major banks - that’s all I really monitor - to undergo stress tests to demonstrate the ability to withstand various declines à la the Global Financial Crisis. The issue of business stability and regulatory capital is too complicated to explain with a post, but there are good and bad outcomes that appear in the real economy, the financial markets, and even within operations of companies large and small, and that ranges from capital expenditure programs to wider credit spreads to volatility in equities, credit swaps, etc. There is risk in everything. The goal is simply to try to define the risk, and make sure you can handle whatever chunk you invite into your affairs. Small banks that give away rifles, or offer high interest rates on CDs, are doing everything they can to attract deposits to make loans. I know stories of regional banks that had made major loans to developers just before credit crisis and the banks had no idea how much they had lent. These are companies that are listed on the stock exchange. As for Canada’s banks, who cares? It’s an oligopoly atop an economy that is reliant on commodities. The Canadian financial markets have a Wild West reputation. As for regulatory regimes, see if you can find the first edition of Galbraith’s The Great Crash. The final chapter, which if I recall was removed from reprints, talks about the cyclical nature of booms and busts. Moreover, the regulators are always lagging the financial system. Even today, our financial/bank regulations are focused on what has happened. Why? Regulators lack the expertise to see too far into the future, and those that can see ahead are stymied by oversight committees in Senate, House and lobbyists, exchanges, trading firms etc. Buy quality. Focus on dividends. Don’t panic out nor greed in. The markets and economy rise and falls like waves in the ocean. Have a plan. Execute the plan. Stay calm.
Must be a serious shortage of antacids in D.C. these days.
