The 2008 financial crisis—which brought on a devastating recession and painful recovery—was in large part a failure of shadow banking credit markets. These credit markets—also referred to as market-based finance—are large and sometimes ill-defined parts of the financial system that connect borrowers and savers and support real economy credit, similar to a classic bank. But instead of classic banks, with their underwriting practices and Federal Deposit Insurance Corporation-insured deposits, credit markets extend credit through trading markets such as reposession, commercial paper, and securitizations; are supported by nonbank financial institutions such as asset managers, hedge funds, and insurance companies; and are evaluated by gatekeepers such as credit rating agencies.
While the Dodd-Frank Wall Street Reform and Consumer Protection Act has put in place important reforms to strengthen these markets and the financial system as a whole, significant risks remain in shadow banking. Because reliable and sound credit extension is critical to the overall U.S. economy, the healthy functioning of shadow banking credit markets is a central focus of policymakers today.
Please join the Center for American Progress and Americans for Financial Reform, or AFR, for a discussion on shadow banking, the role it plays in the economy, and how to better address the risks it creates. Daniel Tarullo, board member of the U.S. Federal Reserve, will open the discussion with brief remarks, followed by a discussion with Sen. Sherrod Brown (D-OH), ranking member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs. An expert panel will follow, exploring the nature of shadow banking; how it has evolved since the financial crisis; the steps taken since the financial crisis to mitigate risks; and the need for additional action to address continuing issues.
Daniel K. Tarullo, board member, Board of Governors of the Federal Reserve System
Adam Ashcraft, Senior Vice President, Federal Reserve Bank of New York
Bill Harrington, journalist, DebtWire
Carolyn Sissoko, Fellow, University of Southern California Center for Law and Social Science
Daniel Schwarcz, Julius E. Davis Professor of Law, University of Minnesota Law School
Jennifer Taub, Author, Other People’s Houses
Marcus Stanley, Policy Director, Americans for Financial Reform
A light breakfast will be served at 8:30 a.m.