Find it here, with this abstract:
The ‘shadow banking system’ at the heart of the current credit crisis is, in fact, a real banking system – and is vulnerable to a banking panic. Indeed, the events starting in August 2007 are a banking panic. A banking panic is a systemic event because the banking system cannot honor its obligations and is insolvent. Unlike the historical banking panics of the 19th and early 20th centuries, the current banking panic is a wholesale panic, not a retail panic. In the earlier episodes, depositors ran to their banks and demanded cash in exchange for their checking accounts. Unable to meet those demands, the banking system became insolvent. The current panic involved financial firms ‘running’ on other financial firms by not renewing sale and repurchase agreements (repo) or increasing the repo margin (‘haircut’), forcing massive deleveraging, and resulting in the banking system being insolvent. The earlier episodes have many features in common with the current crisis, and examination of history can help understand the current situation and guide thoughts about reform of bank regulation. New regulation can facilitate the functioning of the shadow banking system, making it less vulnerable to panic.
Addendum: Arnold Kling summarizes some of the recommendations:
1. Senior tranches of securitizations of approved asset classes should be insured by the government.
2. The government must supervise and examine “banks,” i.e., securitizations, rather than rely on ratings agencies. That is, the choices of asset class, portfolio, and tranching must be overseen be examiners.
3. Entry into securitization should be limited, and any firm that enters is deemed a “bank” and subject to supervision.