Contagion Effect Quotes

Where does contagion end and art begin?

An idea is like a cold germ: sooner or later someone always catches it.

Bailing out every bank that fails makes the system riskier, not safer.

Typically in a panic, corporate bonds sell off as investors fear weaker growth, tighter financial conditions, or need liquidity.

The very nature of finance is that it cannot be profitable unless it is significantly leveraged... and as long as there is debt, there can be failure and contagion.

Most of the time, your risk management works. With a systemic event such as the recent shocks following the collapse of Lehman Brothers, obviously the risk-management system of any one bank appears, after the fact, to be incomplete. We ended up where banks couldn't liquidate their risk, and the system tended to freeze up.

Given the extent of the exposures of major banks around the world to A.I.G., and in light of the extreme fragility of the system, there was a significant risk that A.I.G.'s failure could have sparked a global banking panic.

Banks are employing risky derivatives strategies to goose up returns….the interbank market could freeze up, and one could well have a full blown financial crisis.

Today, even small entities that trade complex instruments or are granted sufficient leverage can threaten the global financial system.

If investors avoid the Treasury market, we could be unable to pay off maturing securities, which would mean an immediate default. Market participants generally agree that even a brief default would create potentially catastrophic risks to the financial system, like the meltdown of 2008.

Economic and financial crisis are getting much more usual, and they are not confined to a given country but they immediately spread all over the world, and you have to be prepared for that.

In the 1987 stock market crash, according to the conclusions of the official Brady report, colossal sales of stock index futures by so-called portfolio insurers - whose investment strategies depended entirely on these derivatives - greatly exacerbated the 500-point market decline.

Like a bank run, a decline in stock prices creates its own momentum.

Blaming speculators as a response to financial crisis goes back at least to the Greeks. It's almost always the wrong response.

I felt terrified as the chief regulator that I would start a run on my own industry

both doubt and certainty are as contagious as the common cold

The failure of one regional bank, assuming it is following a traditional model, will not threaten the entire system.

When herding behaviour among investors ramps up, a stock's or index's growth rate can increase faster than exponentially, leading to more herding. This positive feedback brings the system to a tipping point. About two-thirds of the time, a crash results.

We judged that a sudden, disorderly failure of Bear would have brought with it unpredictable but severe consequences for the functioning of the broader financial system and the broader economy, with lower equity prices, further downward pressure on home values, and less access to credit for companies and households.

I am much afraid that we shall have very greatly hastened the decline and ruin of the New World by our contagion, and that we willhave sold it our opinions and our arts very dear.

The moment a large investor doesn't believe a government will pay back its debt when it says it will, a crisis of confidence could develop. Investors have scant patience for the years of good governance - politically fraught fiscal restructuring, austerity and debt rescheduling - it takes to defuse a sovereign-debt crisis.

If banks anticipate government will come to the rescue should the credit market go badly awry, they may make loans that would otherwise be imprudent, e.g. subprime loans with little prospect of repayment.

There isn't a bank in the world that could withstand a run. They all borrow short and lend long, regardless of what they say.

I don't think anybody's too big to fail. I think the - I think if what you've got is sort of a large number of institutions who are going to fail, then that ends up affecting the system.

You shouldn't be trying to create a system where no bank fails, but you should be creating one that catches a bank and allows it to fail without impacting the financial markets.