How Shadow Banks Rule the World

[No Elephants]

By Martin Hesse and Anne Seith, SPIEGEL
Nov. 18, 2012

Beyond the banking world, a parallel universe of shadow banks has grown in the form of hedge funds and money market funds. They're outside the reach of conventional financial regulation, prompting authorities to plan introducing new rules to prevent the obscure sector from triggering a new financial crisis. But in doing so they risk drying up an important source of funding to banks and firms.

In the financial world, there is a narrow divide between heaven and hell. Frenchman Loïc Féry realized this when he was 33. He was a rising star in the banking world, managing the trade in complex loan packages for an investment bank. According to his business card, he was the bank's "global head of credit markets." But then one of his employees gambled away about €250 million ($317 million), and suddenly Féry was without a job.

That was in 2007. A number of investment bankers experienced a similarly precipitous fall in the turbulent years of the financial crisis. But, like Féry, many reappeared before long and became more successful than ever, in the world of the so-called shadow banks. These are companies that engage in business similar to that of ordinary banks, but without being subject to the same strict regulation.

Féry launched a hedge fund in London. These notorious investment firms collect money from customers and speculate with a wide range of securities. Today Féry makes the kinds of investments that are too risky for his former colleagues. He lends the money of his customers to companies whose creditworthiness isn't good enough to qualify for loans from ordinary banks, and he also buys especially risky loan packages from lenders. As a result, he is able to achieve double-digit returns in the midst of a crisis.

Much more at: http://abcnews.go.com/International/shadow-banks-rule-world/story?id=17720123#.UKj8sIYhTrc

[formercia]

1. There will always be Dark Money

One just has to take the risk of having Knee Caps shattered or worse.

The Shadow Banks that can be identified need regulation to protect their customers.

I'm too poor for it to affect me directly, but the Banking Crisis made just about everything more expensive for everyone with fancy names like 'Quantitative Easing, another name for printing funny money.

[Enthusiast]

2. Oh, we must not disturb the precious money market funds

and private equity groups through responsible regulation.

What a load!

Bring back Glass-Steagal and a world equivalent. Force the "banks" to make money the old fashioned way. Fuck this systemic entrenched criminality that destroyed the world economy. All around the world the thieving fucks are blaming pensioners and poor people for debt while the debt is the result of investing with the fraudsters and their ethereal financial instruments.

"The world would be a very, very dark place without money market funds," says Alice Joe of the US Chamber of Commerce.

Right, Alice. We can't live without them. :rofl: :patriot: :spray: :banghead:

[formercia]

3. "Alice Joe of the US Chamber of Commerce."

The CoC is the heart of the beast.