- Pondering the Collapse of the Entire Shadow Banking System
What’s behind the ever-increasing need for emergency repos? A couple of correspondents have an eye on shadow banking.
- The shadow banking system consists of lenders, brokers, and other credit intermediaries who fall outside the realm of traditional regulated banking.
- It is generally unregulated and not subject to the same kinds of risk, liquidity, and capital restrictions as traditional banks are.
- The shadow banking system played a major role in the expansion of housing credit in the run up to the 2008 financial crisis, but has grown in size and largely escaped government oversight since then.
The above from Investopedia.
Image courtesy of my friend Chris Temple.
Hey It’s Not QE, Not Even Monetary
Yesterday, I commented Fed to Increase Emergency Repos to $120 Billion, But Hey, It’s Not Monetary. Let’s recap before reviewing excellent comments from a couple of valued sources. The Fed keeps increasing the size and duration of “overnight” funding. It’s now up $120 billion a day, every day, extended for weeks. That is on top of new additions.