What You Need to Know About the Shadow Banking System Now
The term "shadow banking" often elicits thoughts of shady back-alley dealings and loan sharks waiting to take drastic measures against debtors who can't pay. While that makes for an interesting story, it couldn't be further from the truth.
Most consumers may not pay much attention to shadow banking because they don't feel like it affects them personally. The problem is that the industry has grown so large that many people have loans originated through shadow banking, and they don't even realize it.
Quicken Loans surpassed Wells Fargo recently to become the largest mortgage lender in the country, according to a 2018 press release. Quicken has approximately 17,000 employees and closed nearly a half-trillion dollars of mortgage loans from 2013 through 2018. The most interesting fact of all? Quicken isn't a bank. It's a prime example of the vastness that shadow banking represents in the economy.
Even Jim Cramer of CNBC's warns that non-bank lenders like Quicken Loans are "the biggest risk to that non-bank lending companies, including Quicken Loans, PennyMac and LoanDepot, could cause a financial crisis if the Federal Reserve doesn't regulate them.
