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"The share of zombie firms has been increasing over time," said Bruno Albuquerque, an economist at the International Monetary Fund. "This has detrimental effects on healthy firms who compete in the same sector." Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. Watch the video above to learn more about the Fed's battle with unviable zombie firms in the U.S.
Persons: Bruno Albuquerque, Banks, Kathryn Judge, Lotfi Karoui, Goldman Sachs, Jerome Powell Organizations: International Monetary Fund, Columbia University, Economists, Reserve, Economic, of New Locations: U.S, of New York
Signature Bank's failure took only marginally longer. "The number 36 has just been, you know, branded in my brain," Atlanta Fed President Raphael Bostic told Reuters earlier this month. "I think that any time you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed," Barr told U.S. lawmakers in a hearing in March. "It's how do we allow a bank whose failure threatened the financial system to persist without being subject to more aggressive intervention?" "One thing for certain ... this was a very significant supervisory failure," Tarullo said at the Peterson Institute for International Economics event on Wednesday.
On Friday the banks' regulators - the Federal Reserve and the Federal Deposit Insurance Corporation - will publish their accounts of what happened at both institutions, and propose fixes to prevent a repeat. The FDIC will also publish a separate report on deposit insurance by Monday. Barr has said the Fed's report will include confidential supervisory information, including citations and exam material not typically disclosed. DEPOSIT INSURANCEThe second FDIC report could provide insight into how officials are thinking about the role of deposit insurance, currently capped at $250,000 per depositor, in financial stability. "The most interesting thing I expect to see is what the FDIC recommends about the deposit insurance cap," Phillips said.
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