This is the Cato Daily Podcast for Monday, June 1st, 2009.

I'm Caleb Brown. Banking regulation and the agencies that conducted are likely to face a shakeup soon.

Though many people lay blame for current financial woes at the feet of so-called shadow banking,

is it really beyond existing regulation?

And does it really matter if we regulated it directly?

Mark Calabria, Director of Financial

Regulation Studies at the Cato Institute, comments.

Systemic risk is, it's like obscenity.

You know, everybody has a different take on what it is. Everybody will tell you they see it, you know, when they see it, but can't necessarily tell you ahead of time. And there's actually a considerable amount of scholarship in academics and who say, you know, there isn't really systemic risk that there's no institutions that are too big to fail.

It's how you unwind them.

Ultimately, part of the question is always about,

there are losses.

Who will take those losses?

You know, will it be creditors because there's always

an assumption that equity holders you're going to get you know if that tripwire

goes you know it's it's all right for equity holders to get wiped out.

The question becomes, who's going to take the losses

in terms of creditors?

If it's a commercial bank, would we let depositors take losses?

And certainly, FDIC is there to make sure insured depositors don't take losses.

But Shadow Banking is by definition beyond existing regulatory structures.

Is it? I mean that that's that's the open question. We know that some

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