Controls on financial transactions will often be required, and eventually, controls over parts of the real side of the economy may be needed to maintain the fixed nominal exchange rate. Authorities who ignore these constraints, or who lack the fiscal discipline required by a fixed exchange rate regime, can end up creating uncertainty and the very volatility that they were trying to avoid.
In the run-up to the crisis, they, in particular, helped fund real estate loans in the United States by investing in asset backed commercial paper issued by special purpose vehicles to finance securitised real estate loans. Hedge funds, too, at least constitute links in the intermediation chain outside of the banking sector.