News: Shadow Banking System

Credit conditions are improving for speculators and bubblemakers, but they continue to worsen for households, consumers and small businesses. An article in the Wall Street Journal confirms that the Fed's efforts to revive the so-called shadow banking system is showing signs of progress.

Uh... shadow banking never died, it's far larger than normal banking. The subprime crisis may have started the fall, but the financial crisis was precipitated by a run on shadow banks. As this paper shows, there is an inherent weakness in the shadow banking system that makes it vulnerable to future bank runs.

The EU is moving forward with a raft of regulatory reforms on everything from hedge funds to naked shorts, from corporate governance to a financial transaction tax, from tighter oversight on CDS to revamping the ratings agencies. So far, however, the shadow banking system has escaped their attention, which is unfortunate. The system is...unstable

WASHINGTON — The two leading architects of the financial bailout made the case Thursday that Congress must give regulators more power to curb risk-taking on Wall Street. Treasury Secretary Timothy Geithner told a special panel investigating the financial crisis that the government should have acted more aggressively ahead of the crisis.

By Glenn Somerville||WASHINGTON (Reuters) - Failure to give regulators enough legal power and the rapid growth of a shadow banking system were behind the eruption of the financial crisis, Treasury Secretary Timothy Geithner will tell an official...

learn about how shadow banking, the hidden banking system that grew up since the 1980s, played a role in our financial collapse.

There were bank panics — systemic crises — in 1873, 1884, 1890, 1893, 1896, 1907, and 1914. On the other hand, there were no systemic crises from 1934 to 2007.The Quiet Period reflected a combination of deposit insurance and strong regulation — undermined by the rise of shadow banking. Restore effective regulation or go back to the bad old days

The Volcker Rule must be expanded to significantly help reduce systemic danger. Most important is to expand restrictions to investment banks, as well as to the "shadow" banking and financial world.