Comments on: Sound Banking or Shadow Banking?

By: Andrew'

Andrew' — Fri, 13 May 2016 10:38:41 +0000

If firms don’t care if they go out of business that throws off a lot of assumptions. You are left with diversification, which might not always help in a panic as proliferated frictions may slow adjustments. However, one fringe benefit of small and diversified providers may be that it is logistically difficult to bail them all out as well as added friction to the regulatory capture processes.

By: Ryan

Ryan — Thu, 12 May 2016 10:28:04 +0000

I recently refinanced my student loans with one of SoFi’s competitors that has a similar business model. They gave me a rate that was a full percentage point lower than the cheapest traditional back I tried, and almost 5 percentage points lower than the government.

By: Jeff R.

Jeff R. — Wed, 11 May 2016 17:21:31 +0000

I guess maybe a rejoinder to your argument would be that a TBTF bank isn’t likely to make commercial paper a big part of its balance sheet, is it? Traditional banks need to exploit the difference between short and long term interest rates in order to generate any profits, so they probably won’t be holding tons of commercial paper, outside of providing some liquidity and mitigating interest rate risk. Who primarily buys commercial paper these days? Isn’t it mostly money market funds? I could be wrong about that. My banking days are long gone, at this point.