Category Archives: Shadow banking

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Shadow banking, part 3: Some experts call for FDIC-style safety net for shadow banking

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The financial crisis showed that the safety net for traditional banks can work. Although 436 banks failed from January 2008 through April 2012 – some large, like Washington Mutual, but none the size of Lehman Brothers – the FDIC handled … Continue reading

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Shadow banking, part 2: Lack of shadow master plan means impact of new rules is uncertain

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The shape of shadow banking reform is now clear. Congress and regulators are going to put a bunch of new rules in place, but they’re not going to articulate a coherent vision of what shadow banking should, or should not, … Continue reading

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Shadow banking, part 1: Failure to reform shadows hurts economy, endangers financial markets

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Updated June 18, 2012 One of the failures of the Dodd-Frank Act was in not restructuring shadow banking, with a sturdy repo market at its heart, so it could safely gear back up to boost credit and help the economy … Continue reading

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News round-up: Repo and shadow banking A to Z

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RepoWatch recommends the following reports. Search for the topics that interest you: DataWatch, Financial crisis, Finding a fix, Hedge funds, Regulation, Repurchase market, Securities lending, Securitization, Shadow banking, Too big to fail, and Tri-party repo. Items are arranged chronologically, within … Continue reading

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News round-up: Turmoil in shadow banking

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RepoWatch recommends the following reports. Search for the topics that interest you: Accounting, Collateral, DataWatch, Finding a fix, International repo, Money market funds, Securities lending, Securitization, Shadow banking, and Tri-party repo. Items are arranged chronologically, within topics that are listed alphabetically. … Continue reading

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News roundup: Repo and shadow banking in the crosshairs

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Repo and shadow banking have been getting a lot of attention lately. It’s rewarding that an understanding of their importance is spreading. RepoWatch recommends the following reports, arranged within topics that are listed alphabetically: Financial crisis “Getting up to speed … Continue reading

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Top dealers to Fed: Flow of credit continues to slow

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Credit in key areas of the repurchase market continued to tighten in the fourth quarter, according to the Federal Reserve’s quarterly survey of senior credit managers at 20 leading Wall Street dealers. The finding furthers a trend that the Fed reseachers … Continue reading

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Keep an eye on this quarterly Fed study of repos

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A shortgage of trusted repo collateral is slowing the flow of credit in the U.S. and in Europe, and that trend is showing up in a survey of the repo market now being conducted quarterly by the Federal Reserve. Spotting … Continue reading

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To understand the financial crisis, read this book

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Book Review If you only read one book about the financial crisis, read “The Fall of the House of Credit” by Alistair Milne, a professor of financial economics at Loughborough University in Leicestershire, UK, north of London. This book, which … Continue reading

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Regulators talk tough about tri-party reform

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If the industry task force working to make the tri-party repurchase market more stable in a crisis won’t do the job, regulators may have to do it for them. That tough warning comes from William Dudley, president of the Federal … Continue reading

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If it walks like a bank, it should be regulated like a bank

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Financial institutions that borrow short-term loans and use that money to lend long-term loans – that is, they borrow short and lend long – should be regulated like FDIC-insured banks. That’s the essence of a new paper by Morgan Ricks, a … 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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Fear in today’s markets shows failure of Dodd-Frank

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If the financial crisis in 2007-2008 was fundamentally about mortgages, as many believe, why are we facing a similar financial crisis today? Here’s the answer: The fundamental problem three years ago was not mortgages. It was the repurchase market and credit default swaps. … Continue reading

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Proposal: Central clearing for repos

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Central clearing for repurchase transactions could prevent the kind of runs on the repo market that triggered the financial crisis in 2007-2008,  writes Jeff Penney, senior advisor to McKinsey & Company, managing member of financial services consulting firm High Line Advisors, and … Continue reading

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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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Financial reforms have not fixed the problems

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The recent financial reforms are focused on making commercial and investment banks stronger, but they ignore the real problem in the financial crisis of 2007 and 2008, which was runs on the shadow banking system, banker Michael Pomerleano wrote in the Financial Times’ … Continue reading

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Repos and money market funds may need a public safety net

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If future credit needs will be met in part by shadow banking, as they were prior to the financial crisis, then we may need to bring repurchase agreements and money market funds, which provide much of the funding for the … Continue reading

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Is insurance moving more into the shadows?

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Insurance companies are taking advantage of new laws in roughly 30 states that help them hide risks, reduce costs, cut back on reserves and find friendlier regulators, according to a story in the New York Times. From the story, by Mary Williams … Continue reading

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Thoma: “Critical vulnerabilities remain”

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Get ready for the next financial crisis, cautions University of Oregon economist Mark Thoma in his April 23 blog Economist’s View. That’s because we have not taken, and are not likely to take, the needed steps to prevent runs on … 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