Monthly Archives: January 2011

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NYFed adds more money market funds as repo partners

The Federal Reserve Bank of New York today released the names of 32 more money market funds that have been approved to buy securities from the New York Fed, if and when the Federal Open Market Committee decides to start … Continue reading

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Why did financial institutions believe the AAA ratings?

Yves Smith, author of “Econned” and the Naked Capitalism blog, offered this explanation this morning when she was asked why financial institutions “blithely accepted the AAA ratings or otherwise took the word of the ratings agencies and the demand of the … Continue reading

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Accounting Onion faults FCIC report

Accounting Onion, Tom Selling’s blog, today criticizes the Financial Crisis Inquiry Commission report for failing to hold the accounting profession accountable for its role in the crisis. We are left to conclude that either: (a) the commission couldn’t bring itself … Continue reading

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Naked Capitalism critical of FCIC report

Naked Capitalism, Yves Smith’s blog, today criticizes the Financial Crisis Inquiry Commission report for noting that mortgage underwriting standards were abandoned, allowing many more loans to be made, but failing to ask the key questions: Why were standards abandoned? Who … Continue reading

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Where were the securities?

An American Banker story today, about bank regulators’ current efforts to make sure they and the banks fully understand their exposure to various risks, notes how little regulators knew before the financial crisis. Not long before the subprime mortgage crisis metastasized into a … Continue reading

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Will the next run on repo be in Asia?

RepoWatch Commentary: Reading the following commentaries in the Wall Street Journal, knowing that bankers are developing repurchase markets in many countries, and realizing that our mega-banks are expanding internationally, does it seem that Asian bonds may be the next repo … Continue reading

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FCIC report both vivid and silent on repo

 The Financial Crisis Inquiry Commissions’ long-awaited report describes the run on repo with some vivid detail, but it barely mentions repo in its conclusion, which is all that most people will read. Instead, it focuses on mortgages, credit default swaps … Continue reading

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Mega-banks regain control of bond trading

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The giant Wall Street banks are tightening their control of the profitable bond trading market, Bloomberg reported January 20. The boutique bond trading firms that sprang up when the financial crisis weakened the mega-banks are losing ground to the giants, … Continue reading

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Accountants spar over Repo 105

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CPA Tom Selling at Accounting Onion does not think much of the Financial Accounting Standards Board’s proposal to solve the Repo 105 sleight of hand. Lehman Brothers made Repo 105 famous when the bankruptcy receiver discovered Lehman was using a … Continue reading

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One way to spot a bubble

One way to spot a developing financial bubble would be to track the non-deposit liabilities of banks, including repos, says Princeton University professor Hyun Song Shin in a November 22, 2010, study, “Macroprudential policies beyond Basel III.” Financial Times columnist … Continue reading

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Repo’s role in Citigroup’s 2008 implosion

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In this January 2011 accounting of the Citigroup implosion in late 2008 by the Office of the Special Inspector General of the Troubled Asset Relief Program (SIGTARP), authors stress that the too-big-to-fail problem is still with us. They also write … Continue reading

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FT: European repo market showing signs of strain

The Financial Times reports that last week’s jump in bond yields was caused by traders’ fears that the eurozone repurchase market, “the plumbing of the global financial system,” was coming under strain. Last week the Swiss National Bank was reported … Continue reading

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Trouble in European repo land?

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European markets are worried about the state of the eurozone repurchase market, “which provides the flow of money that is the lifeblood of the financial system,” writes the Financial Times in a January 10, 2011, story. Banks are relying heavily … Continue reading

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Economists: Another disaster is on the way

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Economists gathered at the annual meeting of the American Economic Association in Denver say global financial reforms aren’t nearly enough to avert another disaster, according to  a January 9, 2011, story by The Wall Street Journal. One issue is bank … Continue reading

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Who has the best narrative to explain the crisis?

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Economic journalist and writer David Warsh says Yale University professor Gary Gorton may have the best explanation of the financial crisis of 2007 and 2008. Writing in The Commentary, a report from The Investment Fund for Foundations, Warsh remembers Peter … Continue reading

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Report: Financial institutions need a lot more capital

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Three economists from the Bank of England have concluded financial institutions need much more capital than they’ve had in the recent past or than Basel III proposes. David Miles, Jing Yang and Gilberto Marcheggiano say banks need to raise more … Continue reading