Part 5/9:
The recent release by the FDIC underscores ongoing concerns about industry protections. Lawyers and regulators acknowledge that, when buyers are numerous and protections are weak, systemic risks can persist unnoticed until they manifest catastrophically. Observers like Simon Johnson and Raghuram Rajan have long warned about the vulnerabilities created by underregulated or opaque sectors of the financial system.
The narrative suggests that many participants are chasing higher yields—perhaps another echo of the pre-crisis era—striving for 200 basis points or more in returns. This chase, driven by low-interest-rate policies and abundant liquidity, incentivizes risk-taking that can undermine stability.