Mutual Funds, ETFs at Risk of a Run Warns David Stockman
by Mark O’Byrne, Gold Core:
In one of his starkest warnings yet, Former White House Budget Director (Office of Management and Budget, OMB), David Stockman has warned that banks and the global financial system remain vulnerable and there is likely to be another global financial crisis which will be worse than the first involving “a run on mutual funds and ETFs.”
Stockman warns in a Bloomberg interview that Deutsche Bank
“has a $2 trillion balance sheet and they have a net tangible equity of $66 billion. So that is 3% – “they are leveraged 30 to 1 in terms of net tangible equity.”
“What is whirling around in that $2 trillion nobody knows but I do think that the banks have unloaded the worst of their stuff and today it is in mutual funds and ETFs, today it is in non bank financial institutions, like all these companies that have come up over night to make auto loans by selling junk bonds as a form of capital.”
This is reminiscent of the first financial crisis and the financial collapse wrought on the world with the subprime mortgage fraud as beautifully illustrated in the must see movie ‘The Big Short’.
Regarding how ‘mom and pop’ investors and pension owners are vulnerable, Stockman says
“The dangers of a run are far more serious now than it was with banks then. Back then, main street banks did not have to mark to market most of their assets and there never was a run on mainstreet banks, it was only on a few hedge funds …
