Despite being recognized as a primary culprit of the financial
crisis, shadow banking has continued to flourish. According to
the Financial Stability Board (FSB), shadow banking has grown
since the onset of the crisis from $62 trillion in 2007 to $67
trillion[i]. Fortunately, the FSB plans to release regulatory
recommendations by the end of the year. This article will
summarize the risks inherent with shadow banking, the effects of
the Dodd-Frank Act, and possible reforms designed to mitigate
these risks and any inadequacies of Dodd-Frank. Shadow banking
refers to largely unregulated bank-like activities performed
outside of the traditional banking sector by non-bank financial
institutions (NBFI). NBFI include: hedge funds, investment
banks, money market funds, and other devices that aggregate and
hold financial assets. Banks engage in financial intermediation
between savers and lenders by using deposits to finance long-
term assets, including loans and mortgages. This conversion of
short-term liabilities into