Week InReview

Friday | Jul 21, 2023

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Slow-burning Minsky moments.

"We seem to live in an era of rolling financial crisis. I suspect this is the result of a massive build-up of private-sector debt. Sometimes these build-ups are accompanied by very high rates of credit growth, giving rise to a credit bubble. On other occasions, these build-ups sit simmering in the background, largely unnoticed until the proverbial s**t hits the fan, when they suddenly act as an amplifier causing a much steeper decline than would otherwise have been the case. I call these systemic vulnerabilities 'slow burn Minsky moments.' Sadly, most markets appear to carry the fingerprints of these moments today."


— Financial Times

let's recap...

Photo: Getty Images

Fed makes up for lost decades with real-time payments system

The Federal Reserve launched a new real-time payments system, the biggest advance since the 70s for the antiquated US money transfer network. FedNow will enable Americans to move money electronically in seconds. How fraud is handled on FedNow will be a crucial determinant of its wider adoption. But other countries around the world have solved the fraud issue with respect to real-time payments. (Financial Times | Jul 20)

Commercial real estate may not recover until 2040

Office occupancy rates today in many cities are at about 50% of their pre-pandemic levels. And interest rates are up substantially, which means the capital cost of acquiring real estate has gone up sharply, while demand has gone down. You can read an analysis here. One thing to watch out for: a second wave of bank problems. (Fortune | Jul 18)

New threats, same rules for finance-generative AI

The potential for generative artificial intelligence — AI that responds to input by creating something new — to further automate customer service has been embraced by the financial sector. With new technology comes new risk. An article in MIT Technology Review described large language model (LLM) AI chatbots as “a security disaster.” (Bloomberg Law | Jul 18)

US companies score partial reprieve from global minimum tax deal

US-based companies won relief from two pieces of the global minimum tax deal, and the changes will delay or reduce the taxes they are set to pay to foreign countries. Under the updated agreement negotiated by the Treasury Department, companies will have an extra year — until 2026 — before foreign countries can start imposing new taxes on any US companies deemed to pay too little tax in the US. The Organization for Economic Cooperation and Development, which is leading the talks, detailed the changes Monday in technical guidance after negotiations among countries. (The Wall Street Journal | Jul 17)

US banks face stiffer mortgage capital rule than global standard

US bank regulators are set to release their plans next week for a sweeping overhaul of capital rules, with the latest draft including requirements for large lenders’ residential mortgages that go beyond international standards. The changes would be part of the US version of a global accord known as Basel III that followed the financial crisis. The plans are poised to be unveiled July 27 by the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency. (Bloomberg Wealth - Finance | Jul 17)

the cyber cafe

Malicious AI bot dubbed WormGPT

Hackers are using the harmful tool to conduct business email compromise attacks, according to cybersecurity company SlashNext. WormGPT uses generative AI capabilities to write convincing phishing email aimed at getting recipients to click on bad links or reveal credentials. "It’s similar to ChatGPT but has no ethical boundaries or limitations," SlashNext said.

— SlashNext

CISA weighs in on cloud security

The Cybersecurity and Infrastructure Security Agency rounded up open-source tools for protecting cloud infrastructure, data, and applications. CISA said it doesn’t endorse the tools but encouraged network defenders “to reduce the likelihood of a damaging cyber incident, detect malicious activity, respond to confirmed incidents, and strengthen resilience.” CISA explains the resources available here, including a tool to assess where cloud security gaps may lie. 

— The Wall Street Journal

Ransomware attacks cost financial organizations US$32.3 billion in downtime since 2018

Ransomware attacks on the global finance sector have cost US$32.3 billion in downtime alone since 2018. That's according to new research from Comparitech, whose research is based on its ransomware attack tracker, which is updated daily. Comparitech found that 225 financial organizations are confirmed to have been hit by a ransomware attack in the last five years, exposing at least 32.3 million individual records.


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Contact CISA: https://www.cisa.gov/about/contact-us

binge reading disorder

Photo caption

There are now four 'heat domes' around the world

The heat dome across northern Mexico and the southern US is one of four spread around the world. Another is focused on the North Atlantic. A third in North Africa is causing southern Europe and the Mediterranean to bake. The fourth is in southern Asia.

— Bloomberg Green | Weather & Science

Is a recession coming? Better check men's underwear sales.

Champagne flows, lipstick sales, dining out trends, library activity, men’s underwear, and French fry sales each provide a little insight.

— Barron's

How to set up a home office that can survive a power outage

If you've got deadlines stacked up and tasks to complete, then you don't want a blackout to put you out of action. There are ways to guard against this. It may require spending some money, but if you find yourself without power for a day or two, you'll be glad that you were prepared.

— Wired

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