Q: What is Systemic Risk?

  • (p45-46) - Secretary Geithner: For two reasons: Because it was systemic and because it was an option for doing so. So if it needed both, okay -- if it wasn’t systemic, we would have been indifferent to it. If it was systemic but we had no option, we wouldn’t have done it.
  • Commissioner Holtz-Eakin Can you give us a metric of systemic?
  • Commissioner Wallison: Yes, what do you mean by “systemic”?
  • Secretary Geithner: “Systemic” is, as you guys know, I’m sure better than anybody, nobody knows what’s systemic. It’s completely –- you can’t say it --
  • Commissioner Wallison: What’s the rest --
  • Secretary Geithner: I know, but you can’t say it -- there’s no objective standard of what is systemic. It’s a --
  • Commissioner Wallison: Well, what specific things did you think would happen, is the big question. What would happen if Bear Stearns had failed? What would have happened?

2009 1117 - FCIC - Hearing - Financial Crisis Inquiry Commission - Timothy Geithner, Secretary of the Treasury - Closed Session  ---  [BonkNote]

  • Chairman Paul KANJORSKI (D-PA).The thing that disturbs me is trying to get my arms around the idea of just what is a ‘‘systemic risk.’
    • ’ ...if people could have rapidly seen systemic risk would have occurred.
    • We certainly have enough regulators who had eyes on the situation.
    • We have all talked about it, I can assure you, and we have heard you.
    • I think when the question came up in 1964, Justice Potter Stewart, in trying to explain what was ‘‘obscene,’’ he said the following,
      • ‘‘I shall not today attempt further to define the kinds of materials I understand to be embraced, but I know it when I see it.’’
      • I think probably with systemic risk, after the fact, we seem to all know it when we see it, but before it arrives, we have no idea.
    • If you make the proper conclusions, we would not be in the crisis we are in today, if people could have rapidly seen systemic risk would have occurred.
      • We certainly have enough regulators who had eyes on the situation.
      • They just were not analyzing or seeing the situation.  (p19)

2009 0305 - GOV (House) - Perspectives on Systemic Risk, Paul Kanjorski (D-PA)  ---  [BonkNote]

  • Paper - Concepts for Successful Regulation of Systemic Risk
  • Section 1: Identification of Systemic Risk
    • 1.1 Definition of Systemic Risk
      • As a working premise, we define systemic risk to be the risk of a failure in a transaction or series of transactions extending beyond the parties directly involved, impacting many or most participants in the marketplace.
      • And the public gains awareness of these systemic effects on the larger group only after the breakdown has occurred.
      • The successful identification of systemic risk needs to include the consideration of the impact of risks that are currently considered highly improbable or not measurable.

2009 0514 - Testimony - AAA - James Rech, Vice President, Risk Management and Financial Reporting Council - of the American Academy of Actuaries - 12p

⇒  2009 0514 - GOV (House) - How Should the Federal Government Oversee Insurance?, Paul Kanjorski (D-PA)  ---  [BonkNote]