Category Archives: Shadow banking

Gallery

Fear in today’s markets shows failure of Dodd-Frank

This gallery contains 1 photos.

If the financial crisis in 2007-2008 was fundamentally about mortgages, as many believe, why are we facing a similar financial crisis today? Here’s the answer: The fundamental problem three years ago was not mortgages. It was the repurchase market and credit default swaps. … Continue reading

Gallery

Proposal: Central clearing for repos

This gallery contains 1 photos.

Central clearing for repurchase transactions could prevent the kind of runs on the repo market that triggered the financial crisis in 2007-2008,  writes Jeff Penney, senior advisor to McKinsey & Company, managing member of financial services consulting firm High Line Advisors, and … Continue reading

Gallery

UK regulators warn of dangers in repo mutations

This gallery contains 1 photos.

Repurchase transactions are morphing into riskier forms of collateralized lending, the Bank of England warned in its June 2011 Financial Stability Report. With interest rates continuing at record lows, financial institutions and other investors are looking for ways to juice … Continue reading

Gallery

Financial reforms have not fixed the problems

This gallery contains 1 photos.

The recent financial reforms are focused on making commercial and investment banks stronger, but they ignore the real problem in the financial crisis of 2007 and 2008, which was runs on the shadow banking system, banker Michael Pomerleano wrote in the Financial Times’ … Continue reading

Gallery

Repos and money market funds may need a public safety net

This gallery contains 1 photos.

If future credit needs will be met in part by shadow banking, as they were prior to the financial crisis, then we may need to bring repurchase agreements and money market funds, which provide much of the funding for the … Continue reading

Gallery

Is insurance moving more into the shadows?

This gallery contains 1 photos.

Insurance companies are taking advantage of new laws in roughly 30 states that help them hide risks, reduce costs, cut back on reserves and find friendlier regulators, according to a story in the New York Times. From the story, by Mary Williams … Continue reading

Gallery

Thoma: “Critical vulnerabilities remain”

This gallery contains 1 photos.

Get ready for the next financial crisis, cautions University of Oregon economist Mark Thoma in his April 23 blog Economist’s View. That’s because we have not taken, and are not likely to take, the needed steps to prevent runs on … Continue reading

Gallery

Repos and shadow banking system still need reform

This gallery contains 1 photos.

While the new Financial Stability Oversight Council tries to identify and then supervise systemically important financial institutions, as required by the Dodd-Frank Act, two other important issues still need attention, said Federal Reserve Board member Daniel K. Tarullo in a … Continue reading

Gallery

Commentary: The big banks, not the shadow banks, are the problem

This gallery contains 1 photos.

Shadow banks do not pose a threat to the future. It’s the giant traditional banks that are the threat, and new regulations may have them cornered. That seems to be the view of Roy C Smith, professor of international business … Continue reading

Gallery

Do repo and other risks still threaten the world economy?

This gallery contains 1 photos.

As regulators try to force commercial and investment banks to have more equity and less debt, by raising their capital requirements, the banks continue to find ways to evade the rules as they did leading up to the financial crisis … Continue reading

Gallery

FDIC to charge higher premiums for repo use

This gallery contains 1 photos.

On April 1 banks will have to start paying Federal Deposit Insurance Corp. premiums on all types of debt including repurchase agreements, not just on domestic deposits. The switch “will be seismic at the nation’s largest banks, which in some … Continue reading

Gallery

New capital requirements possible for tri-party clearing banks

This gallery contains 1 photos.

The New York finance lawyer who blogs at Economics of Contempt is predicting the Fed will require the tri-party repo clearing banks, JP Morgan Chase and Bank of New York Mellon, to have enough equity, and enough ready cash or … Continue reading

Gallery

Admati: Banks will be stronger with more equity

This gallery contains 1 photos.

  Expanding on an August 27 study that urged regulators to require banks to fund themselves with much more equity and less debt, four economists said today that in the real world banks have both equity and debt, and moving to … Continue reading

Gallery

Central banker sees little progress toward financial reform

This gallery contains 1 photos.

It’s sobering to be reminded of how little we’ve accomplished toward preventing another financial crisis. In a London speech March 10, Axel Weber, the president of German’s central bank, ticked off three areas that need to be fixed: (1) Require banks … Continue reading

Gallery

Bernanke emphasizes run on repo and too big to fail

This gallery contains 2 photos.

The biggest threat to the financial system during the crisis was the run on the repurchase market, especially the tri-party operation, Federal Reserve Chairman Ben Bernanke told the Financial Crisis Inquiry Commission in Nov. 17, 2009, testimony just released by … Continue reading

Gallery

Bank panic called key to understanding crisis

Understanding what happened in September and October 2008, when the repurchase and other credit markets were overcome with panic, is the “indispensable beginning” to understanding the new form that financial markets have taken in recent decades – what some call … Continue reading

Gallery

Shadow banking funded by repos, securities lending

The shadow banking system in the U.S. is interconnected by a short-term funding chain of repurchase agreements and securities lending that needs more effective supervision, an International Monetary Fund economist says in a report released today. Shadow banking lenders often are lax in … Continue reading

Gallery

PennyMac and Citigroup: A mutual admiration society

This gallery contains 2 photos.

Citibank has agreed to make repo loans to PennyMac Mortgage Investment Trust, collateralized by $125 million in “distressed” residential mortgage loans. Check out the December 9, 2010, press release. It’s interesting to see one of these deals in action. This … Continue reading

Gallery

NYU: Most of the leverage was in repos

This gallery contains 1 photos.

“Repo financing was the basis of most of the leveraged positions of the shadow banks.” From RepoWatch’s view, that’s the key sentence in “Regulating Wall Street,” a November 2010 book authored by New York University Stern School of Business professors Viral … Continue reading

Gallery

NYFed publishes road map for shadow banking

This gallery contains 1 photos.

“The rapid growth of the market-based financial system since the mid-1980s changed the nature of financial intermediation in the United States profoundly,” begins the July 2010 study of shadow banking by four economists at the Federal Reserve Bank of New … Continue reading