Wall Street regulators just got a powerful reminder of one of the first rules of finance

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June 1, 2017 12:54 AM

Risk doesn't disappear, it just moves around.

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Wall Street regulators decided four years ago to try and dampen leveraged lending by big banks.
According to a staff report from the Federal Reserve Bank of New York, big banks did cut back their leveraged lending, and nonbank lenders stepped in.
The problem: the nonbanks were funded by the big banks, meaning the risks remained.

The regulators issued guidelines on everything from underwriting standards to how the risks of these loans should be rated. The guidelines applied to the biggest banks — those institutions

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