Fed Drawn Into the Shadows

 Pushing risk from banks into what’s often called shadow banks, hasn’t necessarily made the system as a whole safer, nor has it reduced the Fed’s role in lending support when times get tough.

Fed formalized its job as the lender of last resort to the shadow banking system after seeing the problems that emerged during the dash for cash at the start of the Covid-19 pandemic and when money markets seized up in September 2019.

Lorie Logan, now president of the Dallas Fed but previously in charge liquidity operations at the New York Fed, laid out the mechanics of a shadow banking run that the standing facility should help to mitigate in an August 2021 speech.

Liquidity Shocks: Lessons Learned from the Global Financial Crisis and the Pandemic August 11, 2021

https://www.newyorkfed.org/newsevents/speeches/2021/log210811

Paul J. Davies Bloomberg 14 August 2023 

https://www.bloomberg.com/opinion/articles/2023-08-14/how-the-fed-got-drawn-into-the-shadows

Everything from an increasingly volatile T-bill market to a home lending market now dominated by shadow banks

Rana Foroohar FT 25 September 2022

Rana Foroohar is Global Business Columnist and an Associate Editor at the Financial Times

Englund: 15 years on from the great financial crisis, there’s still plenty of risk in the market (englundmacro.blogspot.com)