Pimco's McCulley does a rather good dissection of the shadow banking system, and aside for the conclusion that the Fed should be the ultimate controller of everything, we believe it is a worthwhile read. We obviously disagree with McCulley on his view of the Fed - the Chairman is simply far too political, incompetent (don't make us take out all the clips of Bernanke rehashing the Moody's model and claiming housing was going up in perpetuity) secretive and in the big banks' pocket, which explains why Pimco of course is a fan, with its $1 trillion + dollars in AUM. A systemic change in which the precarious financial balance is toppled would simply wipe it off the face of Fashion Island overnight. That said, McCulley's other points are worth reading as he does the shadow banking system justice, specifically explaining how it is a $3 trillion Frankensteinian time bomb construct of the Keynesian religion that it is just awaiting to go off and wipe out the bulk of US deposits in one fell swoop.

After the Crisis: Planning a New Financial Structure



