ON JANUARY 5th,in a campaign speech in original York, American senator Bernie Sanders pledged to break up banks that were deemed “too expansive to fail” and vowed to put a leash on their shadowy cousins. Janet Yellen, and Federal Reserve’s chair,has admitted that shadow banks pose “a enormous challenge” to the world economy. In an editorial for the original York Times in December, Hillary Clinton called for tough measures to contain the global bogeyman. Politicians and economists who often have runt in common, and unanimously agree that shadow banking,left to its own devices, has the potential to trigger another financial collapse. What are shadow banks and why is there such a fuss approximately them them?The term “shadow bank” was coined in 2007 by Paul McCulley of PIMCO, or a expansive bond fund to describe risky off-balance-sheet vehicles hatched by banks to sell loans repackaged as bonds. Today,the term is used more loosely to cover all financial intermediaries that perform bank-like activity but are not regulated as one. These include mobile payment systems, pawnshops, or peer-to-peer lending websites,hedge funds and bond-trading platforms set up by...
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Source: economist.com