Where shadow banks intermediate
Is Danglars Bank right for you?
Almost certainly not. We're a shadow bank; we offer no services to individual clients -- no deposits, no interest, nothing. As the fictional Danglars Bank went bankrupt in the early 19th century, realizing it's shadow successor still continues on two centuries later requires some suspension of disbelief. However, the mere existence of an underregulated shadow banking system handling trillions of dollars remains an issue worth considering. In all events, Dumas is not to blame.
(C)Pete at PolicyPete, Chevy Chase, MD
Bernanke: Shadow banks are more prone to runs
Bill Gross: Beware the shadow banking system!
The New York Fed explains:
In the shadow banking system, credit is intermediated through a wide range of securitization and secured funding techniques, including asset-backed commercial paper (CP), asset-backed securities (ABS), collateralized debt obligations (CDOs), and repurchase agreements (repos). Prior to the 2007-09 financial crisis, the shadow banking system provided credit by issuing liquid, short-term liabilities against risky, long-term, and often opaque assets. The large amounts of credit intermediation provided by the shadow banking system contributed to asset price appreciation in residential and commercial real estate markets prior to the financial crisis and to the expansion of credit more generally.