Wikinvest Wire

The shadow banking system in stick figures

Tuesday, April 14, 2009

Marketplace senior editor Paddy Hirsch explains what the shadow banking system is and why it needs to be bailed out via the TALF (Term Asset-Backed Securities Loan Facility) program.

About halfway through he talks about how the shadow banking system accounted for 60 percent of all lending with traditional (i.e., regulated) banks contributing just 40 percent. Maybe we should just go back to the 40 percent of non-toxic lending...


Anonymous said...

So if the regular banks are so well regulated and thus so secure and well, and the unregulated companies are the problem - how comes these very big and old regulated banks are those that are being bailed out?
And if the regulated banking system proved so inadequate that the economy needs "shadow banking" to continue functioning - what exactly is the benefit of banks being strictly regulated again? Doesn't seem to provide safety, doesn't seem to make them efficient economically - so what exactly does it do?

Tim said...

There are a lot of healthy small banks out there - the ones that didn't over leverage and/or get into the toxic stuff.

Anonymous said...

There is only one way to 'regulate' the shadow banking system. Abolish the central bank and FDIC. Then, repeal legal tender. Whatever is left standing will be the healthy part and the only part we need.

Anonymous said...

This guy has really understated the size of the problem and misrepresented the fraud and chicanery that have created the toxic derivatives that are soon to collapse the dollar and world financial system.

Banks do not have to declare the size of their toxic, fraudulently triple-A-rated, worthless derivatives.

These 'assets' cannot just be wished away. Someone has to take the hit.

The TARP is all about transferring these debts from the banks to us....the taxpayers.

Best solution is to let the banks go bust, completely displace the bubble-creating, thieving bankers and create a system of money whereby money is not created as debt by private corporations (the banks and building societies)but put into the economy by government without interest primarily for wealth created.

The current disaster is bigger than any banker or politician is admitting. Upwards of one thousand trillion of toxic derivatives cannot be fixed by 'adjusting' the system.

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