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Archive for September 25th, 2010

Given all of our discussion about the economic crisis, I thought it worthwhile to mention this excellent report on the shadow banking system. Published on the New York Fed’s webpage, Part I of this staff report by Z. Pozsar et al. on “Shadow Banking” is the best I have seen for a comprehensive summary – you can learn more than you ever wanted to know. This report will be important for going forward and preventing future crisis.
Our monograph “Shadow Banking” documents the origins, evolution and economic role of the shadow banking system. Its aim is to aid regulators and policymakers globally to reform, regulate and supervise the process of securitized credit intermediation in a market-based financial system.
The monograph has four sections. Section one, spanning the first 70 pages is intended as a standalone paper, an “executive summary” of the monograph. We consider this section complete. Sections two to four discuss the institutional details of every type of shadow bank in the shadow banking system: their activities, funding strategies, size and the credit and liquidity backstops that were extended to them during the financial crisis. These sections, spanning pages 70 to 230 remain a work in progress and are unpublished. The full monograph’s table of contents is provided below.
The authors also realize that the shadow banking system has not really changed (as of July 2010 at least), and something needs to be done before we experience deja vu. Also, the poster included in the document is impressive and alone worth checking out.
While the financial crisis of 2007-2009 re-shaped the financial system considerably, most components of the shadow banking system are still functioning today, albeit in a much impaired fashion. As such, we describe the shadow banking system in present tense. We recommend printing the accompanying map of the shadow banking system as a 36’’ by 48’’ poster.
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