What the banks said at their hearing before Congress

Leaders of the largest US banks in the US have sent a message to Congress: look closely at the booming market for student and corporate loans.

Republican Jim Himes asked for a panel of seven CEOs, who together with the House Financial Services Committee had a hearing about what financial products or markets would be a threat to the US financial system.

"Student loans are rapidly growing in the same country and are getting worse," said JPMorgan Chase CEO Jamie Dimon.

During the peak hour of the meeting, the bankers were targeted by the congressmen who held them responsible for causing the financial collapse of 2008. They said the financial system is now much safer than 10 years ago. Then irresponsible lending and lack of supervision led to the crisis.

But at a time of pressure from Congress, bank leaders have identified risks that lie outside the "walls" of their institutions. According to them, risk-taking is currently derived from the so-called " "shadow banking".

Goldman David Solomon said: "People talking about lending attribute it to the back of big institutions, but there is more and more direct lending, which is done by individual companies that are not regulated and to which there is no investigation. it's a systemic risk, but it's growing in the shadows. "

However, both markets remain under the influence of interest rates as well as other central bank actions implemented since the financial crisis.

Loans to companies with high levels of debt have increased because investors are looking for higher-yielding assets. The total volume of these loans exceeded $ 1.2 trillion in the junk bond market, according to Moody's. Since these risks have been identified by the Fed and the Bank of England, investors have begun to withdraw their money from the mutual funds that follow the debt.

Student credits have risen to record levels this year. More than 44 million Americans have loans worth $ 1.6 trillion, according to the Fed.

Car loans and mortgages have also grown outside the regulated banking system, according to Citigroup CEO Michael Corbat.

Source: CNBC

Photo: Unsplash

Read more:

• Risk off after the escalation in the Middle East, markets are recovering in a period of calm
• The macroeconomic events for today’s trading calendar
• The US government has confirmed the attacks, Trump is calling an emergency staff meeting
• Has the war between Iran and the US started?
• US markets remain under pressure, traders await Iran’s response