So if anyone asks why the banks are special, I could reply in the same way as John Dillinger, designated by the FBI in the 1930s as public enemy number one, when asked why he robbed banks: “Because that’s where the money is.” At the same time, problems that arise in one bank can easily spread to other banks. This spread can occur in different ways. Firstly, there can be a direct spread, through the exposures the banks have to one another in the payment systems and in connection with foreign exchange and securities trading. Severe chain effects can arise if the customers of a bank suffering problems have their means of payment tied up in the bank. This makes it difficult to make payments to other households and companies. It can lead to liquidity problems that can in turn give rise to loan losses and payment problems for these customers’ banks. Secondly, the banks are often exposed to the same sorts of risk. This increases the probability that, for instance, a macroeconomic shock may affect more than one bank. The spread of problems between banks can thus also arise as an indirect effect, through expectations that other banks may suffer similar problems to the one first affects, or via more well-founded suspicions of the banks' exposures to one another. The contagion risks mean that problems in one bank can easily lead to problems for the entire bank system. The costs to society of a crisis affecting the entire bank system can be substantial.
We have not yet seen the end of the turmoil that characterised the financial markets during the autumn. Unfortunately it cannot be ruled out that the crisis will be both more profound and longer than we previously believed. Perhaps some hedge funds will be hit in this process. But overall I believe that the hedge funds can contribute to resolving the crisis, not aggravating it. The future will show if the hedge funds can meet these expectations. Thank you! 7  See also Hedge funds and private equity firms – The exposure of banks and insurance companies, Finansinspektionen, July 2007. BIS Review 11/2008  5