, Columnist
Banks Transfer Risk to Themselves
SRT repo, no Paramount deal, Pioneer capital discipline and fake family offices.
Here is a trend in modern finance:
So we have talked about how banks’ trading divisions are increasingly in the business of lending money to hedge funds and proprietary trading firms, who then do the market-making and trading functions that the banks used to do themselves. And we have talked a few times about how private credit funds sometimes lever up their own investors’ money by getting financing from banks. The risky business itself — proprietary trading, financing leveraged buyouts — is shifted from the banks to other firms, but the other firms turn around and borrow money from the banks to help fund it.