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The shadow banking system is a key component of the U.S. economy, but the financial crisis has frozen it solid. Senior Editor Paddy Hirsch explains what shadow banking is and why it's important enough to warrant its own bailout, called the Term Asset-Backed Securities Loan Facility, or TALF. More coverage of the financial crisis is at marketplace.org/financialcrisis

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  • tendo 2 years ago
    This completely neglects to mention the fractional reserve banking system that the real banks are using to loan out 10 times more money than they actually have. Very misleading to say that the banks are making loans on money that people have deposited, in fact they are making 10 times the loans of the deposits they have on the books.
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  • r f 2 years ago
    that may be true, but one video at a time. the nice thing about these is their length makes each more palatable to watch/listen, especially while at work or doing various tasks.
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  • Michael DeFilippis 2 years ago
    You're referring to the conspiracy theory from the Zeitgeist movie? I thought it was true too until I realized the gaping flaw in it. The idea is that, at a Reserve Ratio (Capital Adequacy) of 10%, a bank can take a deposit of $100 and loan out $900, resulting in $1000 on the books with the required $100 (10% of 1000) in the vault. The problem is that banks can't make loans with money they don't already have. The money does not come out of thin air. The reality is the a bank can loan $90 of a $100 deposit. In fact, this still creates a Money Multiplier approaching 10x, so I can't even imagine what the money supply would look like if the conspiracy were true.
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