Foundations of the Rise of Shadow Banking in the US in the 1950s and 1960s: Acts of Commission and Acts of Omission by the Fed and the Treasury

Podcast 29. April 2025
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Matthias Thiemann | Sciences Po

Scholar in Residence Lecture Series: Technocrats, State Agency, and the Rise and Continued Expansion of the Shadow Banking System - Part 2

The second lecture pursues the theme of agency of state actors in an attempt to explain the rise of the shadow banking system in the US by focusing on the establishment of the core market for liquidity provision to the shadow banking system, namely the repo-market in the US after WWII. It introduces the crucial concept of the liquidity triangle between the fiscal agent, the central bank, and private market-makers in order to develop the reasons that drove state actors to lay the foundations for the expansion of the shadow banking system. It documents how the Federal Reserve consciously and against prevalent legal interpretations started to enter into the provision of liquidity to broker dealers via the repo-market.

 

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