Monthly Archives: October 2009

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FT: Fed plans revamp of tri-party repo

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The Federal Reserve Bank of New York has recently created a task force to try to build a better plumbing system for the financial markets, the Financial Times reported October 23. The focus of the task force’s work will be … Continue reading

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Gorton: Real reform must be based on understanding

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Hysteria, witch hunts, show trials and finger-pointing aren’t going to prevent the next financial crisis, says Yale economist Gary Gorton in a New York Times column October 8, 2009. Americans tried that 100 years ago, too, when stock market scandals … Continue reading

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2005 Bankruptcy Act increases systemic risk

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When a repo borrower files bankruptcy, the repo lender has no worries. His collateral is exempt from the bankruptcy, thanks to a 1984 law that said bankrupt borrowers must immediately repay their repo loans in full. The purpose of the … Continue reading

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FDIC remarks about repos are “really, really important”

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FDIC chairman Sheila Bair recently said secured lenders should have to carry more of the cost of bank failures. Joseph Mason, banking professor at Louisiana State University, saw that news reported by Bloomberg October 5, 2009, and he doesn’t think … Continue reading

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Banks weakened by gaming their capital requirements

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Securitized banking, which is economist Gary Gorton’s term for securitization financed by repos, has been around a long time. Why did it balloon and then collapse between 2001 and 2008? In the seven steps that RepoWatch has identified as the answer … Continue reading