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Is the Financial System Safer Today Than It Was in 2007?

Morgan Housel
March 13, 2013

It's been more than four years since Wall Street collapsed. What's happened since then?

Banks have raised tens of billions of dollars in capital. They're less leveraged and have more liquidity than before.

Consumers have far less debt. Total debt-to-GDP has been declining for four years. 

New regulations dictate what should happen if a huge bank faces collapse, ostensibly ending bailouts (in theory, anyway).

We've made big strides in the right direction. But so much can still go wrong, and so much still is wrong. Is the financial system actually safer than it was five years ago?

I recently asked that question to former AIG (NYSE: AIG) CEO Hank Greenberg. Here's what he had to say (transcript follows):

Morgan Housel: Do you think the global financial system is safer today than it was in 2007?

Hank Greenberg: It's now so tight you can't do anything.

Morgan Housel: That's an interesting point of view. It might be as dangerous, but there's not much we can do about it?

Hank Greenberg: I think that, if you look at the regulators that we have, and had at the time, how did all this start in housing? It started with the government.