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February 24, 2016

NPR Politics: Risky Shadow Banks Become Campaign Fodder For Democrats

“Too-big-to-fail banks are generating plenty of anger from the public, but former Secretary of State Hillary Clinton says the real risks to the financial system lie in the vast, lightly regulated corners of the economy called shadow banks.”

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“Unlike commercial banks, the holdings in such entities aren’t insured by the federal government, which means that in a crisis, they may be susceptible to runs. They also don’t have access to a key source of liquidity for banks, the Federal Reserve’s discount window, according to a report from the Federal Reserve Bank of New York.

“They’re sold and marketed as incredibly stable funds where you put in a dollar, you get a dollar out. But there’s no guarantee of that, and there’s no deposit insurance of that, as there is in a regulated bank,” says Dennis Kelleher, president and CEO of Better Markets, a nonprofit group that advocates for reform in the financial sector.”

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Read and listen to the full NPR story by Jim Zarroli here.

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