The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
– The Full Layout Of Modern Shadow Banking (ZeroHedge, July 28, 2013):
Following up on yesterday’s essay comparing Walter Bagehot to a modern-day shadow banker, we have received numerous requests for more information on this fundamentally critical financial topic. So without further ado, we present a full and unabridged map of the modern shadow banking system.
– Europe Opens $80 Trillion Shadow Banking Pandora’s Box: Will Seek To Collapse Repo “Collateral Chains” (ZeroHedge, May 24, 2013):
In what may be the most important story of the day, or maybe year, for a world in which there already is an $11 trillion shortfall in high-quality collateral (and declining every day courtesy of Ben’s monetization of Treasury paper) so needed to support the deposit-free liability structures of the shadow banking system (as most recently explained here), Bloomberg has just reported that Europe may begin a crackdown on that most important credit money conduit: the $80 trillion+ global shadow banking system, by effectively collapsing collateral chains, and by making wanton asset rehypothecation a thing of the past, permitted only with express prior permission, which obviously will never come: who in their right mind would allow a bank to repledge an asset which may be lost as part of the counterparty carnage should said bank pull a Lehman. The result of this, should it be taken to completion, would be pervasive liquidations as countless collateral chain margin calls spread, counterparty risk soars all over again, and as the scramble to obtain the true underlying assets finally begins.
From Bloomberg:
Banks and brokers face a clampdown on using assets they hold for clients as collateral for their own trades as part of European Union moves to bolster market stability and rein in shadow banking.