4. Shadow Banking System

Please read the following article for context:

https://newrepublic.com/article/157455/shadow-banks-back-still-big-fail

This article points out fundamental flaws of the 'lightly regulated financial intermediaries' in the mortgage market.

Please answer the following questions on the shadow banking system/shadow banks. You may use any source of information you like to answer the questions but please cite your sources in your answer.

a)(4 points) What role do shadow banks play in the mortgage markets?

b)(6 points) What are the perils of an unregulated shadow banking system? Discuss their part in the 2008 financial crisis and the continuing threat they pose to financial stability of the U.S. economy.