Wall Street tamedAmerica’s financial firms often acted as engines of instability during past bull markets. But when borrowers defaulted, banks pulled back sharply, making economic slowdowns and stock market crashes all the more severe. The financial excesses of the five-year bull-run that ended in 2007 illustrate the central role banks can play in creating conditions for a bust. In the years since the financial crisis, banks have continued to lend to individuals and companies as well as raise money in the markets for their clients. It appears corporate borrowers did not get a huge break from the Fed: During the latest bull market, the yield on corporate bonds rated BAA by Moody’s (a good and historical proxy for average corporate borrowers) was 3.7 percent on average, after adjusting for inflation.

Source: New York Times August 23, 2018 13:41 UTC