April 7, 2011 (last updated July 10, 2014)
Welcome to RepoWatch.
The purpose of this site is to make “repo” a household word, to help and inspire professional and citizen journalists to cover the repurchase market so thoroughly that it becomes familiar to all Americans.
RepoWatch needs your help to do this – your eyes, your ears, and your ideas. I’m no expert myself, but I’m learning, and I know a great story when I see one.
Three markets were the main sites of the systemic panic that frightened regulators in the financial crisis of 2007 and 2008: Derivatives (mainly credit default swaps), securitization (mainly asset-backed commercial paper) and repos (including securities lending). The press writes frequently about derivatives and securitization, and the Dodd-Frank Act regulates them. But repos have been largely ignored.
My goal is to help change that, by bringing together many repo resources in one place and making it easier for beginners to get up to speed.
Hopefully, then, Americans who ultimately bore the losses in the last financial crisis, and will bear them again in the next, will begin to consider the most important – and most ignored – issue of the financial crisis: Does the repurchase market need safeguards like the safety net that protects conventional banking? If not, how should it be reformed?
RepoWatch is not a blog, where I express my opinions. RepoWatch is a news site. Commentary is clearly labeled.
I welcome your tips, story ideas, suggestions, criticisms, corrections, musings and reports. If you see something that RepoWatch readers should know, or if you yourself produce something, please tell me so I can consider posting it at RepoWatch. I am indebted to all the people whose work appears here.
Mindful that the next crisis won’t be like the last one, I also welcome insights that take us from repo to the next financial frontier.
Best in Business 2011
On February 17, 2012, the Society of American Business Editors and Writers chose RepoWatch to receive its Best in Business 2011 award for digital blogs. From the judges:
With passion for her subject and attention to detail, Mary Fricker has created an impressive and important blog devoted to an esoteric and overlooked risk factor in the modern economy: the institutional repo loan market. RepoWatch is hardly light reading, but it is invigorated by Fricker’s shout-from-the-rooftops fervor that the public, and journalists, need to understand how the post-crisis financial landscape remains fraught with perils. Among them: the little understood market in which large financial institutions borrow trillions of dollars from each other and from central banks every day, using securities as collateral. Things went bad in 2008 in this market, and Fricker points out another disaster, last year’s collapse of MF Global, was also hastened by repo loans. Fricker’s blog deserves plaudits for committed reporting and analysis of a crucial component of the financial system.
RepoWatch lead art:
Manhattan Skyline from Staten Island Ferry
Photographer: Jim Liu
RepoWatch lead chart:
This chart tracks outstanding repo volume reported weekly by the Federal Reserve’s Primary Dealers. The low point is $709.457 billion on Jan. 4, 1995, and the high point is $4.567 trillion on March 12, 2008. The Primary Dealers are 22 dealers approved to conduct repurchase transactions with the Federal Reserve Bank of New York. According to a July 9, 2014, study by New York Fed analysts, Primary Dealers represent a little less than 80 percent of the U.S. repo market, but actually no one knows the size of the repo market. In April 2013 the Fed slightly changed its methodology for reporting Primary Dealer repo volume and added two small categories of collateral.
Documentation for estimating the repo market at $7 trillion:
A survey of the European repo market, which is an integral partner with the U.S., set the volume at $7.5 trillion at December 2013. This counted many loans twice – those reported by both the borrower and lender – so RepoWatch estimates that the European market was $3.8 trillion at year-end 2013.
At the same time, the Primary Dealers in the U.S. reported $2.6 trillion in repo borrowing. This did not include double counting. A July 9, 2014, study by New York Fed analysts calculated that primary dealers do a little less than 80 percent of the repo borrowing, so RepoWatch estimates that the U.S. repo market was $3.3 trillion at year-end 2013.
This site went live April 7, 2011. Many of the writings and news prior to that date are published on the date they appeared, even though that was before this site existed, to create a more accurate chronological record.
* Who’s Mary Fricker?
Mary Fricker is an independent journalist who retired after 20 years as a business reporter for The Santa Rosa (Calif.) Press Democrat. She lives in Sebastopol, Calif. In 2010 she was awarded the McGill Medal for Journalistic Courage from the University of Georgia for her work with the Chauncey Bailey Project in Oakland, Calif. She has won three Investigative Reporters and Editors awards, the UCLA Gerald Loeb Award, the George Polk award, the National Headliner Award, several New York Times Company Chairman’s Awards and an Associated Press award for best business reporting. She was co-author of the New York Times best-selling book “Inside Job - The Looting of America’s Savings and Loans” published by McGraw-Hill (1989) and HarperCollins (1990).