Category Archives: Too big to fail

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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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Commentary: The big banks, not the shadow banks, are the problem

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Shadow banks do not pose a threat to the future. It’s the giant traditional banks that are the threat, and new regulations may have them cornered. That seems to be the view of Roy C Smith, professor of international business … 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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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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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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RepoWatch roundup of too-big-to-fail institutions

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RepoWatch’s quarterly roundup of too-big-to-fail financial institutions shows who are the biggest and who are the riskiest. RepoWatch tracks these banking giants because repo is a major way they finance their growth, and when there’s a run on repo it’s … Continue reading

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Geithner supports mega-banks

Simon Johnson, Massachusetts Institute of Technology economist and author of “13 Bankers,” fears Treasury Secretary Timothy Geithner will let U.S. mega-banks grow as large as they want, in hopes they can capture much of the new financial business abroad, and ignore the potential for risk to … 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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Much bank business is with other banks

A big part of bank business these days is just banks doing repo, derivative, hedging and trading deals with each other. This is a point reporter David Reilly makes in the Wall Street Journal’s Heard on The Street column today, … 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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Can trusts be trusted?

In the repo world, the most serious allegations against mortgage servicers may be that during the housing boom servicers did not correctly transfer mortgage documents to the trusts that created the mortgage-backed securities that became collateral for repurchase loans. This … Continue reading

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Bernanke emphasizes run on repo and too big to fail

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The biggest threat to the financial system during the crisis was the run on the repurchase market, especially the tri-party operation, Federal Reserve Chairman Ben Bernanke told the Financial Crisis Inquiry Commission in Nov. 17, 2009, testimony just released by … Continue reading

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Johnson: Mega-banks can’t move offshore

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Ignore threats from mega-banks that they will move to another country if regulation in the U.S. gets too harsh, says economist Simon Johnson, professor at MIT, blogger at BaselineScenario.com  and co-author of “13 Bankers.” They can’t move, he says, because … Continue reading

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Shadow banking funded by repos, securities lending

The shadow banking system in the U.S. is interconnected by a short-term funding chain of repurchase agreements and securities lending that needs more effective supervision, an International Monetary Fund economist says in a report released today. Shadow banking lenders often are lax in … 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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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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Fitch: Money market funds increase repo lending

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U.S. money market funds are increasing their investment in repurchase agreements, and that’s a trend unlikely to change anytime soon, according to a October 4 report by Fitch Ratings, the credit rating service. Repo activities by U.S. prime money market funds … Continue reading