Category Archives: Dodd-Frank Act

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UK regulators warn of dangers in repo mutations

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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

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Some experts are comparing Greece to Lehman

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If eurozone officials decide Greece does not have to repay its debt in full, the European Central Bank says it may stop making repo loans to financial institutions that put up Greece’s debt as collateral, according to a June 10 story by the … 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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Fed scholars: A run on the repurchase market caused the financial crisis and will probably happen again

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The financial crisis of 2007-2008 was primarily a run on the repurchase market, when lenders refused to role over their repo loans to large investment banks. This was like bank runs decades ago, when depositors rushed to take their money out … 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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Repos and shadow banking system still need reform

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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

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Commentary: Important new Office of Financial Research is ‘wobbly’

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The Office of Financial Research, considered by some to be the most important provision in the Dodd-Frank Act, is “wobbly,” says Barbara Rehm, American Banker’s editor at large, in her April 14 column. The Office of Financial Research is supposed … Continue reading

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Banks continue to try to game capital requirements

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To see why requiring investment and commercial banks to have more equity is a risky way to prevent the next financial crisis, one need look no further than the April 13 Wall Street Journal story “Deutsche maneuvers around new law.” … Continue reading

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Bernanke discusses clearinghouses but not tri-party repo

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Federal Reserve Chairman Ben Bernanke gave an important speech about systemic risk and the “plumbing” of the financial system April 4 and never mentioned the repurchase market. He especially talked about clearinghouses and clearing systems and their importance in managing … Continue reading

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Systemic risk apparently not a priority for regulators, reporters

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Almost three years after the financial crisis, regulators are still trying to find ways to deal with systemic risk, according to two top regulators who spoke at the annual conference of the Society of American Business Editors and Writers in … Continue reading

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Repo volume falls as FDIC fee kicks in

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The cost of getting a repo loan went up April 1, causing uncertainty in the repurchase market that was reminiscent of the early days of the financial crisis, according to several news reports. As directed by the Dodd-Frank Act, the … Continue reading

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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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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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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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Bloomberg: Repo news briefs

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Recent  briefs from Bloomberg. For more detail, click on links: March 2: Remember when the Federal Reserve was keeping short-term repo rates low after the dot.com and Internet busts and the 9/11 attacks? Some blame those low interest rates for fueling the destructive … Continue reading

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FSOC studies data needed to spot systemic risk

Bloomberg has obtained a copy of a confidential Feb. 3 study by the Financial Stability Oversight Council that discusses data the council needs in order to be able to determine when a financial institution poses systemic risk to the financial … Continue reading

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Stern: Regulators need to name names

Prominent economists at the Stern School of Business, New York University, today criticized Treasury Secretary Timothy Geithner and the new Financial Stability Oversight Council for failing to identify systemically risky firms, which the economists claim is the most important task … Continue reading

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Did Dodd-Frank end too-big-to-fail?

The New York finance attorney who blogs at Economics of Contempt argues that critics who claim the Dodd-Frank Act didn’t end the era of too-big-to-fail financial institutions are premature in their assessment. The Act establishes a resolution authority, to unwind … Continue reading

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Regulators seek repo data

The repurchase market could get more sunlight under a new proposal announced Jan. 25 by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Under the proposal, hedge funds, private equity funds and unregistered money market funds will have … Continue reading