Small businesses ‘caught in the crossfire’ of MLB All-Star game relocation
Georgia small business owners Darrell Anderson and Andy Erbacher join ‘Fox & Friends Weekend’ to discuss how Major League Baseball’s decision to move the All-Star game out of the Peach State has impacted their businesses.
Federal Reserve Chairman Jerome Powell warned that cyber threats pose a bigger threat to the U.S. economy than the risk of another systemic breakdown in the financial system seen during the 2008 recession.
During an interview with CBS' "60 Minutes" that aired on Sunday night, Powell said that policymakers at the U.S. central bank believe cyberattacks on financial institutions that halt their ability to track payments could trigger a market collapse similar in magnitude to the global financial crisis.
WHAT HAPPENS DURING A RECESSION?
"You would have a part of the financial system come to a halt, or perhaps even a broad part. And so we spend so much time and energy and money guarding against these things," he said. "There are cyberattacks every day on all major institutions now. That's a big part of the threat picture in today's world."
A 2018 report from the International Monetary Fund found that cyber threats could cost banks 9% of their net income globally, or around $100 billion annually.
"The world changes," Powell said. "The world evolves. And the risks change as well. I would say that the risk we keep our eyes on the most now is cyber risk. That's really where the risk, I would say, is now, rather than something that looks like the global financial crisis."
WHAT TRIGGERS AN ECONOMIC RECESSION?
The 2008 crisis was triggered by overheating in the housing markets, when banks and other lenders approved mortgages, sometimes to borrowers with poor credit histories, driving up home prices to astronomical levels. Banks then sold the risky mortgage-backed securities to other financial institutions.
Large financial conglomerates like Bear Stearns, Lehman Brothers, Merrill Lynch and Morgan Stanley all became lenders of mortgages. According to a 2018 paper published by the University of California Berkeley, by the summer of 2007, UBS held onto $50 billion of high-risk mortgage-backed securities, Citigroup $43 billion, Merrill Lynch $32 billion and Morgan Stanley $11 billion.
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As a result of a glut of new homes on the market, housing prices across the country began to plummet, meaning that millions of homeowners and their mortgage lenders were suddenly "underwater," which means they owed more on the mortgage than the estimated value of the property. Owners defaulted on their mortgage payments and lost their homes, and banks that held the securities were pushed toward bankruptcy.
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But the odds of a similar occurrence taking place, according to Powell, are low.
"The chances that we would have a breakdown that looked anything like that – where you had banks making terrible loans and investment decisions and having low levels of liquidity and weak capital positions and thus needing government bail – the chances of that are very, very low," Powell said. "Very low."
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