So who regulates the shadow banking system? No one right now, but the FSB (Financial Stability Board) is in the process of creating regulations and transparency for the shadow banking system.
Mark Carney, the Governor of the Bank of Canada, who will soon be the Governor of the Bank of England, is the chair of the FSB. He is a former Goldman Sachs guy.
We should feel some security in knowing that there is work being done to make more transparent the workings of the shadow banking system which now has about $67 trillion floating around in it. Use of the shadow banks was instrumental in bringing down the financial system in 2008.
But, who feels comfortable knowing that another Goldman Sachs guy is going to facilitate the regulation of that black hole called the shadow banking system?
From all we know about how Goldman Sachs goes through the revolving door from government into banking and from banking into government, how can the knowledge that Mark Carney, formerly of Goldman Sachs, make us feel that everything is going to be all right? Why should we hope that the outcome will be any better given the same players and the same revolving door? You could look at the CFTC chaired by Gary Gensler and note that regulations there have been watered down by lobbying from the banks and few of the deadlines have been met.
How can a financial system be reformed if the players who brought it down are now in positions to regulate that same system? The optics are appalling.
Shadow Banking Grows To Incredible $67 Trillion Industry
By Ben Moshinsky, Jim Brunsden - Bloomberg
(Bloomberg) -- The shadow banking industry has grown to about $67 trillion, $6 trillion bigger than previously thought, leading global regulators to seek more oversight of financial transactions that fall outside traditional oversight.
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