Monday, April 09, 2012

Watch Out for "Shadow" Banking

The apparent emergence of a "shadow" banking system in the US should frighten investors. The news clip below produced by the Wall Street Journal brings to light some of details and concerns about that system.

The schematic referred to in the above reporting appears below:

Schematic of the "Shadow" Banking System according to the Federal Reserve Bank of New York [click to expand]

The report from which the above schematic was drawn is linked below:

Shadow Banking

Of course, "shadow" banking sysem is only a concern if the result is another Wall Street catastrophe. Given Wall Street's recent record, I suppose investors have every right to worry...

Source: Pozsar, Z; Adrian, T; Ashcraft, A; & Boesky, H (2010; revised, 2012, February), Shadow Banking, Federal Reserve Bank of New York.

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Dr William J McKibbin said...

Considering recent events at MF Global where $1.6 billion in client funds are "missing," one has to begin to ponder the full extent of the risk contained in the "shadow" banking system, especially for clearing...

Anonymous said...

OK no wonder my grandparents kept their cash under the mattress!

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