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Fallout: The Financial Crisis

Study: Faith rising in banks, markets

Alisa Roth Jul 13, 2009
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Fallout: The Financial Crisis

Study: Faith rising in banks, markets

Alisa Roth Jul 13, 2009
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KAI RYSSDAL: By this time tomorrow we’ll have the quarterly earnings announcement from Goldman Sachs in hand. And unless a whole pile of Wall Street analysts have it totally wrong, the number’s going to be a really big one. In Goldman’s favor, too. Estimates are that the bank is going to have cleared as much as $2 billion last quarter, just like the good old days. Goldman shares rose more than 5 percent this afternoon on the expectation that the banks are back.

And according to a study out today, traders aren’t the only ones who seem to have renewed faith in financials.

Marketplace’s Alisa Roth reports from New York.


ALISA ROTH: The Financial Trust Index gauges how much faith people have in the market, financial institutions and the government.

This quarter, the researchers behind the Index found that people’s trust of banks and bankers is improving. Even though it’s been less than a year since problems at a handful of banks essentially shut the system down.

Darrell Duffie is a finance professor at Stanford. He says it’s all about perception:

Darrell Duffie: It’s been awhile since a major financial institution collapsed. And as that time since the catastrophe gets longer and longer, the danger that’s present in peoples minds of being hurt by the financial system tends to get lower.

He says it’s kind of like life in an earthquake zone. Right after every tremor, people get nervous and make all kinds of emergency plans. Then after a while they kind of forget about it and stop worrying.

John Nofsinger studies finance at Washington State University. He says it also has to do with the stock market:

John Nofsinger: It’s pretty clear that people trust the stock market a lot more after it’s already gone up. Irregardless of regulations and supervisions and what politicians are doing. It’s sort of all about, you know, what the performance has been recently.

This is only the third time the Financial Trust Index has been calculated. And the number of people who say they trust financial institutions has only gone up by 5 percent. So a bad run on the market or another bank failure could erase that.

The researchers say they’re nervous about Americans’ lack of trust, because trust in the market is key to economic development.

In New York, I’m Alisa Roth for Marketplace.

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