Forum Post: The Shadow Banking System: What is it and why does it matter?

I watched this video which someone else posted here:

Inside Job provides a comprehensive analysis of the global financial crisis of 2008, which at a cost over $20 trillion, caused millions of people to lose their jobs and homes in the worst recession since the Great Depression, and nearly resulted in a global financial collapse.

Through exhaustive research and extensive interviews with key financial insiders, politicians, journalists, and academics, the film traces the rise of a rogue industry which has corrupted politics, regulation, and academia. It was made on location in the United States, Iceland, England, France, Singapore, and China.

Released 2010. Director: Charles Ferguson. Documentary film.

http://documentarystorm.com/inside-job/

I don't believe it actually talked about something called the Shadow Banking System, but it seems to be relevant to the discussion.

I recall coming across the term Shadow Banking System while watching economics lectures online. I'm not finding them right now. All I'm finding are videos by a guy named Max Keiser who seems intelligent, but goes off into Mayan Calenders, 2012, solar flares, etc.

This video talks about the "Shadow Budget", and seems enlightening.

MSNBC Host Cenk Uygur speaks with Rolling Stone Contributing Editor Matt Taibbi on a government "Shadow Budget" that benefited Wall Street

http://www.youtube.com/watch?v=j5Qkbk76-QY

Still trying to get a handle on what this Shadow Banking thing really is, and why it matters. The part I recall is that these are non-bank financial institutions which, unlike banks, are not constrained in the amount of ready reserves they maintain. So basically these "non-banks" are unregulated fractional reserve lenders leveraged at many times the amount permitted by the Fed. But these institutions are on the books of the major banks as assets. Or something like that.