VANCOUVER (NEWS1130) – The largest bankruptcy in American history, the collapse of Wall Street investment house Lehman Brothers, happened exactly five years ago, triggering a global financial crisis.
Is the world in a less vulnerable place than it was in 2008?
According to some economists, American banks are more secure than they were back in the late 2000s.
Financial institutions are better regulated than they were five years ago, says UBC financial economist Mauricio Drelichman, although they’re still able to buy hedge funds, which are considered risky investments.
But he doesn’t think we’re headed for another meltdown.
“It’s very unusual for lightning to strike twice in the same place. If we get hit again, it won’t be for the same reasons. The problem with financial crises is that, by definition they’re very unpredictable.”
While there is lingering unemployment in the US, Drelichman says it’s still too soon to appreciate the entire impact of the 2008 global recession, much like economists are still studying the impacts of the Great Depression.
“We still don’t understand the full effects on, for example, employment and on economic growth. We’re still recovering from this crisis.”
He says one of the lessons learned is that it could have been a lot worse, and credits Federal Reserve Chairman Ben Bernanke for steering the central bank in the right direction during turbulent times.
And although many claim the crisis wouldn’t have occurred if there had been tighter bank regulations, Drelichman stresses the collapse of the economy occurred because of many interconnected factors, including the crash of the real estate market, the use of subprime mortgages, the overextension of consumer credit and weak government regulations.