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The shadow banking is fine. The taxpayer isn't responsible if a PE fund engaged in direct lending to the middle market loses all their money.

But shadow banking can and should be scrutinized, and potentially regulated, if there are systemic risks that will lead to the taxpayer being on the hook once again. If it's just isolated private actors losing money it doesn't matter.

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The “private actors” are not always so private: CalPERS is doing a lot of PE, for example.

And I think this hits the nail on the head for where the problems are going to come from. Low interest rates have made it very hard for pension funds to keep up with their (overgenerous) past promises with safe assets, and a frothy stock market seems like it’s been keeping them solvent.

the article claims that the banks (the same ones that were bailed out in 2008) are the source of the capital that the shadow banks lending to companies

so the taxpayer is on the line (at least, as much as they were in 2008)

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