Shadow Banking System

Dogs Dealing Unregulated Securities, after C.M. Coolidge (Mike Licht).

The financial crisis wasn’t caused by mortgages — or mortgage-backed securities, Fannie Mae, or space aliens. It wasn’t trading in CDOs (Collateralized Debt Obligations) but the market in REPOs (repurchase agreements ) which produced a plain old panic in the new-fangled nonbank shadow financial sector. Old fashioned investment banks had morphed into broker-dealer banks and could not survive a “run on the bank” any more than conventional banks.