Key Takeaway for Banking from Hakuna Matata
The recession is no stranger to the US economy. Currently, it’s like the old saying, “Once bitten, twice shy.” For instance, during the Great Recession, the Federal Reserve needed six months to slash the interest rates to zero. The window of opportunity to bail out borrowers was used efficiently this time, when the interest rates dropped to the floor right after the national emergency was declared.
The ambiguities of past recessions have resulted in larger transformations in the US economy. In Lion King the movie, Rafiki explains how the past can hurt, but there’s a choice to learn from it. Similarly, the US economy has learned from past mistakes to bounce back stronger and make alternative investments to capitalize for a rainy day. The Great Recession was a result of the financial meltdown in the US economy. Whereas, now a pandemic is the culprit, not the financial pillars.
The current situation might have temporarily halted the wheels of economy and businesses in all sectors have taken a hit. What is happening is beyond our control, but as the wise Rafiki reminds us, we must face the trauma to lose hurt and fear.
On the brighter side, banks are now designed to endure the losses of a calamity since they are not in the tight clasp of risks or leverage. Recovery is a quicker process. Smaller/ younger businesses might be at stake, but the banks and policymakers are at a better place to salvage the situation. The Fed, banks, and other institutions are in a better position to roll out financial facilities for businesses to help them survive and recover. And before long, the GDP should start to see a rise.