A Beginners Guide to Shadow Banking
So, when did the crisis actually begin?
Well, most people would point to September 15, 2008, the day that Lehman Brothers defaulted and markets went into freefall. But that's not when the trouble actually started. The trouble began a full year earlier on August 9, 2007, as Pimco's Paul McCulley recalls in his comments at the 19th Annual Hyman Minsky Conference. Here's an excerpt from the speech:
"On August 9, 2007, game over. If you have to pick a day for the Minsky Moment, it was August 9. And, actually, it didn’t happen here in the United States. It happened in France, when Paribas Bank (BNP) said that it could not value the toxic mortgage assets in three of its off-balance sheet vehicles, and that, therefore, the liability holders, who thought they could get out at any time, were frozen. I remember the day like my son’s birthday.
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