Declining stock values, a teetering financial system, and difficulties in obtaining credit triggered a remarkably rapid and deep contraction in global economic activity and employment, a contraction that has persisted through the first months of 2009. Both the ongoing financial crisis and economic contraction have posed major challenges to economic policymakers. What is the Fed doing to address the situation?
The framework should take into account: (a) the size of the bank (based on simple indicators such as total assets and the bank’s reliance on specific sectors, like the real estate sector and the GREs and counter parties), (b) the interconnectedness between banks (as indicated by deposits from and loans to), and (d) the degree of complexity, even though this does not play a significant role in the UAE, as banks do not trade or invest in sophisticated financial products.