It Begins: Collapse of Shadow Banking (Video)

This is an 18 August 2024 video. 

The insidiousness of the Shadow Banking Shadow banks (non-bank financial intermediaries) are financial intermediaries that conduct maturity, credit, and liquidity transformation without explicit access to central bank liquidity (allegedly) or public sector credit guarantees.

Examples of shadow banks include finance companies, asset-backed commercial paper (ABCP) conduits, structured investment vehicles (SIVs), credit hedge funds, money market mutual funds, securities lenders, limited-purpose finance companies (LPFCs), and the government-sponsored enterprises (GSEs).

Shadow banks intermediate credit through a wide range of securitization and secured funding techniques such as asset-backed commercial paper (ABCP), asset-backed securities (ABS), collateralized debt obligations (CDOs) and repurchase agreements (repos). These securities are used by specialized shadow bank intermediaries that are bound together along an intermediation chain. (AKA Third Party Credit Risk)

Shadow banking institutions are typically intermediaries between investors and borrowers. For example, an institutional investor like a pension fund may be willing to lend money, while a corporation may be searching for funds to borrow. The shadow banking institution will channel funds from the investor(s) to the corporation, profiting either from fees or from the difference in interest rates between what it pays the investor(s) and what it receives from the borrower. This is basically the equivalent of how many lines of socaine can one obtain from 10 Kilos of sock! Either way you are dead. T

ying into the series of videos with Travis Spencer, Mitch Vexler and the recent video with Jeremy Bagott who discussed Freddie Mac, Fannie Mae and HUD appraisal fraud as demanded by the entities, the seeds of the shadow banking system were sown nearly 80 years ago, with the creation the government- sponsored enterprises (GSE), which are comprised of the FHLB (Federal Home Loan Bank) system (1932), Fannie Mae (1938) and Freddie Mac (1970).

The GSEs have dramatically impacted the way in which banks fund, are funded and conduct credit enhancements: the FHLBs were the first providers of term warehousing of loans, and Fannie Mae and Freddie Mac were creators of the originate-to-distribute model of securitized credit intermediation. The vertical and horizontal slicing of credit enhancement is conducted through the application of a range of off-balance sheet securitization and asset management 2 techniques which enable affiliated banks (3rd party credit risk) to conduct lending (highly levered) with less capital than if they had retained loans on their balance sheets.

This process enhances the Return on Equity of the banks and their holding companies. Shadow Banking does not operate under the guidelines of major banks and thus is extremely difficult to determine real asset value versus real liabilities and 3rd party counter risk. With that said S&P Global “estimates” at the end of 2022 shadow banking held about $63 Trillion in financial assets in major jurisdictions around the world. Nobody knows for sure, but I suspect it is well north of this number.

Shadow banking is a direct threat to financial stability as is the fraud created at the Central Appraisal Districts and the required fraud of the appraisers and the fraud of the Property Valuation Study at the hands of the Texas State Comptroller. This is a non partisan issue that affects every single property owner in the U.S. and Canada.

https://youtu.be/cL-wqlqvtEs