In a sign of growing instability, loans to US shadow banks pass $1 trillion
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Loans to US shadow banks have surpassed $1 trillion, with lending up 12% in the past year. The rapid rise in lending by banks to shadow banks is causing concern among financial regulators, as little is known about the connections between them. The European Union regulators are also seeking to probe the connections between banks and non-bank financial institutions (NBFIs). The worry is that if operations by a shadow bank go sour, it can pass into the broader banking and financial system. The lack of knowledge about these connections is concerning given that NBFIs hold almost half of the world's financial assets. Attempts at control and regulation of the financial system have historically floundered due to the anarchy of the market and the drive for private profit. The Dodd-Frank Act, implemented after the 2008 financial crisis, has been circumvented by finance capital, leading to the rise of NBFIs. The potential problems in the NBFI sector are not just a question of the quantum of debt but also the increasingly complicated nature of modern-day leverage. The economy has become reliant on speculation to generate activity and paper wealth, backstopped by governments and central banks. It is difficult to limit leverage in a world where everyone is incentivized to get rich quickly using other people's money.

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https://www.wsws.org/en/articles/2024/02/13/yhge-f13.html