The pace of emerging market companies and sovereign entities tapping our capital markets was slowed temporarily by the financial crisis which afflicted these markets in 1997-1998, but is expected to surge again this year, at least with respect to China.
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Bailouts have worked so far in this crisis, and capital markets continue to act as if they are the solution.
With startup companies struggling to raise funds and the capital markets still reeling from the banking crisis of 2008, the advent of crowd funding may well find a welcome home in business plans throughout the U.S. This new capital formation pathway needs to be balanced with safeguards to prevent fraud and protect the investing public.
The urgency in the credit markets spilled into Friday as the credit crisis chokes off lending not only in the capital markets but in the main economy.
Layoffs would slow and consumption resume if the Fed sped its asset purchases and Washington stopped imposing arbitrarily low prices on equity holders and regulatory capital in the blind assumption that crisis markets are accurately priced.
The financial crisis all but closed the capital markets to companies that desperately needed cash for survival--instantly moving them into the low-hanging-fruit category.
Gillian Tett, capital markets editor at the Financial Times, predicted the crisis because she was a trained anthropologist and knew how to recognize a cult when she saw one.
And what about Wells Fargo, which is among the top five banks and has doubled its deposit market share since the financial crisis but does not have significant capital markets exposure?
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One reason Canadian and Spanish banks have succeeded in moving into the U.S. in recent years is that they haven't put too much pressure on their U.S. subsidiaries to grow, says Gerard Cassidy, a banking analyst with RBC Capital Markets, so they weren't overextended when the financial crisis hit.
Malaysia's Mahathir Mohamad appeared to get away with a form of it during the Asian financial crisis of the late 1990s when he divorced his currency from the capital markets. ("Hot money" is a particular bane of contemporary go-it-aloners.) Now Thailand's Thaksin Shinawatra is getting credited, even in sophisticated circles, with galvanizing his country's recovery through internal demand.
In the aftermath of Asia's crisis, Bank guarantees helped to speed up countries' return to the capital markets.
First, we have a growing crisis in our housing market that is threatening our families and unsettling the capital markets.
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It's another example of how the current debt crisis is affecting all corners of the financial markets, including the niche world of venture capital.
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