#systemic-risk

#systemic-risk

Now, the Trump Administration wants to reprivatize Fannie Mae and Freddie Mac, indicating that an IPO could occur as early as year's end, yet providing few policy details. This lack of transparency raises concerns that a hasty insider-driven exit from conservatorship will erode the safeguards that have kept the housing market stable, exacerbate systemic risks, and primarily enrich shareholders.

Tech analyst and professor Scott Galloway has issued a stark warning regarding the highly inflated valuations of the Magnificent 10 mega-cap companies, asserting a financial collapse at generative AI leader OpenAI would trigger a systemic shock leaving "nowhere to hide" for investors across the global markets. Galloway, speaking on his Prof G Markets podcast, characterized the current market reliance on AI as precarious, noting AI has been responsible for 80% of the stock market returns since the launch of ChatGPT in late 2022.

We're beginning to see huge rating agency arbitrage in the insurance business," he said. "In 2007, subprime was all about rating agency arbitrage.

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Visualize any system's defenses against failure-a biological immune system, or a healthcare delivery system, or an aircraft control system-as a series of slices of delicious, creamy Emmentaler cheese. Each layer has a couple of holes (vulnerabilities) in it, of varying size, here and there, but as long as the holes are not aligned with each other, no threat to the system can pass all the way through all the layers,

In his blog, posted on Thursday, Broeksmit warned that a Fannie-Freddie merger would harm competition and increase risks in the U.S. housing finance system, noting that a similar idea was put forward by the National Economic Council in September 2016 and received careful review across the industry before ultimately being rejected. Competition between Fannie Mae and Freddie Mac has been central to their success in providing liquidity and stability to the mortgage market, Broeksmit wrote.