Monthly Archives: March 2011

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NYT: FDIC to meet Tuesday on ‘skin in the game’

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The board of the Federal Deposit Insurance Corporation will meet Tuesday to discuss when trusts that sell asset-backed securities will have to retain some of the risk themselves, according to a March 27 column by Gretchen Morgenson in The New York … Continue reading

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Covered bonds could be the next U.S. repo collateral

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Covered bonds appear to be a candidate to replace asset-backed securities and asset-backed commercial paper as collateral for repo loans on the U.S. repurchase market, because they may be more acceptable to post-crisis investors. But covered bonds will not prevent … Continue reading

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Do repo and other risks still threaten the world economy?

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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

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Repo and derivative clearing houses concentrate the risk

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A critical look at post-crisis efforts by regulators to move privately negotiated, or over-the-counter, derivatives to clearinghouses to reduce systemic risk has unspoken lessons for the tri-party repo market as well. A March 2011 International Monetary Fund paper, “Making OTC Derivatives … Continue reading

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Could restricting short sales hurt repo market?

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European Union discussions to limit short selling, especially naked short selling, are meeting with objections from some of its member nations who fear the move would make it harder for them to raise money by selling debt on the repurchase … Continue reading

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FSA: Hedge funds rely on repos for funding

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A UK survey in September of just over 100 hedge funds shows the funds continued to rely more on repurchase agreements for funding than any other type of borrowing, but their total repo borrowing was down slightly from six months earlier. … Continue reading

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FDIC to charge higher premiums for repo use

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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

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New capital requirements possible for tri-party clearing banks

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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

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Study on crisis leverage barely mentions repos

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Most of the leverage in the shadow banking system comes from repurchase transactions, but a new study of the build-up of bank leverage 2000-2009 barely mentions it because of the difficulty of getting repo data. The study shows that commercial … Continue reading

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SEC files civil fraud charges against Colonial Bank exec

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The former operations chief at the failed Colonial Bank “enabled the (repo) sale of fictitious and impaired mortgage loans and securities” to Colonial Bank by its largest warehouse borrower, Taylor, Bean & Whitaker Mortgage Corp., according to a National Mortgage … Continue reading

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Admati: Banks will be stronger with more equity

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  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

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Let borrowers assume more of the risk

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Here’s an idea: Instead of requiring banks to have more capital, or equity, how about requiring borrowers to have more capital? For example, instead of letting banks make 10-percent-down home loans, only allow them to make 20-percent-down home loans.  Instead of repo … Continue reading

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Repo continues long-term growth track in Europe

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The European repurchase market declined 15.3 percent in December, as compared to the prior June, because of the unwinding of some “very large and somewhat specialized transactions,” the European Repo Council reported March 10. The council did not identify the … Continue reading

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Did bankers ignore warnings about faulty loans?

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“You can’t get losses of this magnitude without massive fraud,” said Bill Black, a professor at the University of Missouri in Kansas City and an expert on bank fraud. Black should know, he played a key role in uncovering S&L fraud … Continue reading

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Taylor, Bean president pleads guilty to repo fraud

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The former president of Taylor, Bean and Whitaker Mortgage Corp. has pleaded guilty to bank fraud in a $1.9 billion repo conspiracy that contributed to the collapse in 2009 of Colonial Bank, based in Montgomery, Alabama. Raymond Bowman of Atlanta … Continue reading

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Bloomberg: Lehman used repos to look healthy when it wasn’t

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Lehman Brothers used repurchase agreements to make $3 billion in loans to itself and make itself look healthy when it was not, said a March 10 Bloomberg News story by Christine Richard and Bob Ivry.  But the transaction, as described … Continue reading

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Repo-bits: Quick peeks at repo’s role in the crisis

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The repo market lies hidden under so much of what happened in the financial crisis in 2007 and 2008. Only now and then does the public get a glimpse of repo’s role. Consider these isolated repo-bits: (1) “(John) Merriwether, who … Continue reading

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Central banker sees little progress toward financial reform

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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

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Coming out of the shadows

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There are two ways to regulate shadow banking and the repurchase market to prevent a repeat of the credit crisis in 2007 and 2008, says economist Viral Acharya in a March 8 article in The Banker, “Coming out of the … Continue reading

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Bloomberg: New PIMCO fund will not be a repo lender

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In the new version of his Pimco Total Return Fund, fixed-income mutual fund giant Bill Gross will no longer be a repo lender, according to a Bloomberg News story March 10. The new fund, Pimco Total Return Fund IV, is … Continue reading