The Shadow Banking System

A final factor in the financial crisis was the collapse of the shadow banking system. Shadow banking institutions, (e.g. Bear Sterns and Lehman Brothers), are not regulated like depository banks because they do not accept deposits. Among the kinds of institutions comprising the shadow banking system are entities such as hedge funds, money funds, structured investment vehicles and investment banks. According to some scholars, a run on these institutions formed the core of what caused the financial crisis.

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