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He's not advocating new regulations. The point of the article was that the Fed has knowingly allowed the shadow banking system to take over banks role in provid
by bdt 19y ago
He's not advocating new regulations. The point of the article was that the Fed has knowingly allowed the shadow banking system to take over banks role in providing credit without requiring those organizations to bear the regulatory burdens of traditional banks.
The shadow banking system is exactly like the unregulated banks of the 1930s. And as we're now seeing, the result is another financial catastrophe.
http://en.wikipedia.org/wiki/Shadow_banking_system http://en.wikipedia.org/wiki/Shadow_banking_system
- ctkrohn 19y agoSo how do you want to regulate the "shadow banking system" and the world of derivatives? What kind of reserve requirements should there be for traditionally off-balance-sheet derivatives? What kind of reporting requirements? If I come up with a new kind of funding structure -- something like a CDO, a SIV, whatever -- do I need to explain everything to the Fed first before going ahead with it? Who gets regulated: just the large non-depository investment banks? Smaller derivatives dealers and hedge funds? I'm definitely sympathetic to the idea that regulators were asleep at the wheel. I just haven't yet seen any regulatory proposals that, if implemented, could have prevented the current crisis.