Professor Edward Kane:

We are always going to have a border problem between the regulated sector and the substitute unregulated firms. There is no question if something is almost a bank but does not have a bank charter we have to ask is it going to be protected if a crisis occurs. If these shadow banking institutions get into trouble the question is what authority and what pressure points do they have to be rescued. If they do not have that we could generally just monitor them without putting rules on them as long as it is understood that we will not absolutely rescue them.

The problem is that when the money market fund industry in the United States got into trouble during the crisis it received guarantees that covered it only for the period of the crisis and as that ebbed they tried to argue that it cost nobody anything, it did not cost taxpayers anything to provide these guarantees. Part of it is cutting through and seeing if there is a taxpayer value in the firm that one protects. As a minimum one has to at least collect information from these firms, make them register, so that it is possible to collect the information and make the calculations.