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Abstract
Credit intermediation outside the regular banking system, or shadow banking, has increased immensely over the past decade. This paper situates this increase against the backdrop of the structural problem of overaccumulation, and thus the absence of profitable reinvestment opportunities in the production sphere, in addition to the scarcity of high-quality collaterals. Zooming in on Europe’s offshore world and Dutch conduit structures in particular, the paper illustrates, on the basis of the Amsterdam-based Lehman Brothers subsidiary (and others), how shadow banking enables regular banks to increase leverage and take on excessive debt. It will be argued that the continued expansion of debt at the systemic level, inter alia facilitated by shadow banking, heralds the prospect of a crisis far more dramatic than the one we are currently witnessing.
Acknowledgement
We would like to thank Caroline Metz, Ewald Engelen, Thomas Eimer and all members of the research group the Real Estate/Financial Complex at the University of Leuven, in particular, Manuel Aalbers, Jannes van Loon and Mirjam Büdenbender, as well as the anonymous reviewers, for their valuable comments and suggestions on earlier versions.
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No potential conflict of interest was reported by the authors.
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Notes on contributors
Rodrigo Fernandez
Rodrigo Fernandez is a postdoctoral scholar at the University of Leuven and Associate Researcher at the Centre for Research on Multinational Corporations (SOMO) in Amsterdam. At the University of Leuven, he is participating in a project on the Real Estate–Financial Complex, investigating the relationship between finance and real estate developments across different national institutional models. At SOMO he is researching the interface of corporate tax avoidance, tax havens and shadow banking. In addition to books, book chapters and reports, he has published in journals such as Antipode, Competition and Change, Economic Geography and Socio-Economic Review.
Angela Wigger
Angela Wigger is Associate Professor of Global Political Economy and International Relations at the Radboud University, the Netherlands. She is specialized in capitalist competition and its regulation. Her current research focuses on the global economic crisis, crisis responses and power configurations with respect to political resistance. In addition to book chapters, she has co-authored The politics of European competition regulation: A critical political economy perspective (Routledge, 2011), and published such journals as New Political Economy, Review of International Political Economy, Journal of Common Market Studies and Capital and Class.