What Warren Buffett once called "financial weapons of mass destruction" are firing again, with securitization and shadow banking at post-financial crisis highs.
The twin powers of bank funding that helped propel the nation into turmoil have regained ground swiftly, and analysts say it's both a challenge for regulators and a sign that the economy is recovering.
Securitization, or the channels through which banks repackage loans and farm them off to investors, has hit volume of $225.6 billion by way of 365 deals this year, according to Dealogic.
That's a 14 percent increase over 2012 but still miles away from the heady days of 2007, which saw a staggering $777 billion in volume at the same point—right before securitization, and the rest of the mortgage market, came crashing down.
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At the same time, shadow banking, which refers to lending apart from traditional banks, has amassed assets of $16 trillion, according to financial services firm Keefe, Bruyette & Woods.
The total now surpasses the $15 trillion in total assets at private depository institutions and more than double the $6 trillion or so in corporate bonds.
"The re-emergence of shadow banking may trouble regulators, but likely will boost near-term economic growth and expand growth opportunities in many non-bank financial service sectors," KBW analysts said in a note to clients. "In addition, the growth in non-bank financial sectors is, in part, related to the increased regulation and litigation since the financial crisis."
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Rather than seeing the re-emergence of shadow banking as a threat, KBW said it should be considered a sign of healing.
Corporate debt has swelled since the crisis and traditional lending turned around in mid-2011, which signaled the end of the decline for banks.
"The missing pieces to the story of private sector debt are financial assets outside the bank and corporate balance sheets," KBW said. "This is an area we believe has been lacking in growth since the financial crisis and likely has been a factor keeping overall economic growth limited."
The firm expects the shadow banking industry to keep growing apace with or slightly ahead of nominal gross domestic product, helping cushion the soft recovery.
"This is because of increased market acceptance of debt and improving credit quality statistics in the economy as a whole," KBW said. "If that trend does hold, it will likely support improved economic growth in the near term."
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The move back to some of the less traditional forms of banking comes as regulators and lawmakers push for greater regulation and higher capital requirements.
Bank earnings continue to rise and profits were $34.7 billion in the fourth quarter, but analysts say the institutions will continue to need ways to innovate to grow.
"The shadow banking market is coming back relatively strongly and it will be a dominating force in the financial markets a couple years from now," said Dick Bove, vice president of equity research at Rafferty Capital Markets.
Bove said he expects the market to grow for collateralized debt obligations and collateralized loan obligations as well.
"The government is forcing it to rise again by making the situation for banks so onerous that they cannot do some of the transactions they used to do," he said. "That's forcing some of this money into the shadow banking market, where this is getting done."
_By CNBC's Jeff Cox. Follow him on Twitter at JeffCoxCNBCcom.