Crisis exposes flaws in US financial stability regime

Former Fed chair Yellen calls for reform after failure to curb corporate leverage ahead of Covid-19

Bankruptcy
Many US companies could default or file for bankruptcy protection in the coming months

The build-up of record corporate debt and leverage prior to the Covid-19 lockdown means many US companies saddled with additional lockdown-induced debt amid weakened earnings look set either to default or file for bankruptcy protection in the coming months. This expected wave of impaired corporate credit will place a major strain in the US banking and financial system, according to former central bank officials – making a ‘V-shaped’ recovery, predicted by many policymakers in March, far less

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