Category Archives: Bankruptcy treatment

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Unfinished business: Banking in the shadows

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Paul Volcker gets it. Will anyone listen? Here’s what he wants Americans to know: The main danger in the financial markets is not banks getting too big. The main danger in the financial markets is non-banks borrowing short to lend … Continue reading

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Repos make the news

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The big news about the repurchase market in 2015 was that it made the news. After decades when the largest financial market in the world rarely appeared in public, in 2015 repos finally hit the big time. At least 140 … Continue reading

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Lenders drove the boom and the bust

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In the years leading up to the 2008 financial crisis, trillions of new dollars flooded into housing.  Why? Was it coaxed into the housing market by borrowers who convinced bankers they could pay back the loans? No. It gushed into … Continue reading

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Bankruptcy act of 2005 worsened boom and bust

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One puzzle about the 2008 financial crisis is what caused the financial markets to bubble and burst at that particular time. One reason was The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.  Its provisions encouraged lenders to lend into … Continue reading

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Economists who best understand repo are still working to stabilize it: 2014 in review

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A series of conferences and reports in the second half of 2014 show that the economists who best understand the repo phenomenon are still worried about it and working to stabilize it. This is welcome news, after months of concern … Continue reading

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Runs still threaten the repurchase market: 2014 in review

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As 2014 comes to a close,  it’s tempting to try to assess how much systemic risk has been wrung out of the repurchase market by six years of reforms. A fair summary would be: Much proposed but little imposed. In … Continue reading

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Leading crisis experts are trying to get our attention

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When three of the economists most knowledgeable about the financial crisis of 2007-2008 start jumping up and down, waving their arms and shouting “fire!” … maybe we should listen? That’s happening now. Three prominent economists are calling for a solution to … Continue reading

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Lenders, not borrowers, were the driving force behind the financial crisis

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Editor’s note: RepoWatch would like to recognize Financial Times editor Gillian Tett, whose August 11 column about the Pozsar report proves once again that she is far ahead of other journalists in her understanding of the core issues facing financial … Continue reading

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The repurchase market has become Too Big To Fail

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Commentary From the editor: Have the U.S. and Europe reached the point where borrowers can not be allowed to default on their debt, and their lenders or investors can’t be forced to eat any losses, if financial institutions are widely using the debt as collateral … Continue reading

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London conference: More calls to fix bankruptcy exemption for mortgage-backed repos

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The special bankruptcy treatment extended to repurchase agreements in 2005 played a critical role in the financial crisis of 2007-2008, and changes must be made, experts cautioned at a financial conference in London June 1.   The warnings came just … Continue reading

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Hoenig says nix the bankruptcy exemption for mortgage-backed repo

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Thomas M. Hoenig, the president of the Federal Reserve Bank of Kansas City, says in a May report that the special bankruptcy treatment extended to mortgage-backed repos in 2005 must be reversed to prevent future financial crises. In 2005 Congress said repo lenders … Continue reading

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How will the FDIC unwind repos?

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The Dodd-Frank Act gave the FDIC the job of resolving systemically important financial institutions when they are in financial trouble.  How will the FDIC handle that company’s repos? An FDIC report April 18 gives the answer. It will sell them … Continue reading

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NYU: Most of the leverage was in repos

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“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

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Dutch economist: tax repos’ bankruptcy exemption

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Writing for a leading network of economic researchers in Europe, a Dutch economist is calling for a tax on the exemption that repurchase agreements enjoy in bankruptcy court. The exemption means that when a repo borrower goes bankrupt, the repo … Continue reading

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Proposal: Limit securitized banking to special banks

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Securitized banking is worth saving, and that can best be done by creating special banks to buy the securities, say Yale professors Gary Gorton and Andrew Metrick, early proponents of the view that the financial crisis of 2007-2008 was a … Continue reading

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Commentary: Repos must be reformed

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The repurchase market must be reformed, say two New York University professors and leading analysts of the financial crisis of 2007-2008. “Although one of the main concerns of the Dodd-Frank Wall Street Reform and Consumer Protection Act soon to be signed by … Continue reading

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ECB director: Collateralized financing with repos is the future

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The key developments in banking in the past 30 years are the rise of securitization and collateralized finance, primarily repurchase agreements, according to Lorenzo Bini Smaghi, a member of the executive board of the European Central Bank, speaking at the … Continue reading

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2005 Bankruptcy Act impacted repos and housing bubble

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The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 had a profound impact on the repurchase market, the housing bubble and the financial crisis of 2007 and 2008, several bankruptcy experts have concluded. Regarding repo, the act added mortgages … Continue reading

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Tett: ‘Trouble for the mighty repo’

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Bankers are worried Congress will require them in the future to absorb losses of up to 20 percent on repo loans they make to borrowers that later fail. This issue could have big consequences and deserves watching, writes Financial Times … Continue reading

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Putting repo lenders’ skin in the game

A congressional proposal to force lenders to have more “skin in the game” could make repo lenders less willing to lend, writes Reuters columnist Agnes T. Crane November 23. Representatives Brad Miller of North Carolina and Dennis Moore of Kansas … Continue reading