Poorly named "Shadow banking" is still hotly debated
At the communications levels, the financial services industry has failed when it comes to the widely used monikers of various services.
The best example may be "dark pools," a term that evokes all sorts of Darth Vader-like images. These dark pools provide valuable liquidity services, and the industry understands that. But public and congressional perceptions matter a lot too, and a better name would have been in order.
So it goes with the term "shadow banking." It once again rings of something that happens outside of the public eye and that should be regarded with skepticism. But frankly, it would be hard to conceive off a robust global financial system without shadow banking.
JPMorgan Chase CEO Jamie Dimon defended shadow banking at Davos.
He was quoted by Bloomberg noting that, "It's a free market. You're entitled to build a business and I agree that there are a lot of needs out there and people should find ways to fill them."
Dimon's comments were made in response to a questioner who called him a shadow banker, which might have come off as an epithet in certain contexts.
The bottom line is securitized products of all stripes, money market funds and the like have all had their issues, especially in the financial crisis. And there has been a big push to better regulator some of the activity.
Done well, that's a good thing, but the trick is to provide reasonable regulations without choking off a critical source of liquidity for the entire economy. Shadow banking has been controversial for as long as I can remember, and this will likely continue.
- here's the article