Sense on Cents

Many people may not fully appreciate the dynamics of the “shadow banking system.” Credit for consumers, small business, and corporations is still largely a function of bank lending. Many parts of our economy are railing on banks for not providing more credit. The banks do deserve plenty of blame for not allocating more credit and at reasonable rates (primarily consumer credit). That said, the “shadow banking system” (funds generated by securitizing assets) has largely shut down.

The stream of credit from the “shadow banking system” represented approximately 40% of the credit injected into our economy. While plenty of people clearly feel this lack of credit at the individual level, what does it mean at the corporate level?

Let’s review a major real estate transaction. Bloomberg reports, Hancock Tower Sells at About Half Price to Normandy. This tower is a first class office building in a prime Boston location. (more…)