Category Archives: Too interconnected to fail

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Fed releases names of tri-party repo borrowers at height of crisis

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Bloomberg and Fox News began reporting March 31 the names of the financial institutions that got emergency repurchase loans from the Federal Reserve during the financial crisis. The names became public when the Fed released to the two news groups the reports … 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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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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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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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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One way to spot a bubble

One way to spot a developing financial bubble would be to track the non-deposit liabilities of banks, including repos, says Princeton University professor Hyun Song Shin in a November 22, 2010, study, “Macroprudential policies beyond Basel III.” Financial Times columnist … Continue reading

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PennyMac and Citigroup: A mutual admiration society

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Citibank has agreed to make repo loans to PennyMac Mortgage Investment Trust, collateralized by $125 million in “distressed” residential mortgage loans. Check out the December 9, 2010, press release. It’s interesting to see one of these deals in action. This … 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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Re-use of collateral is major tool for leveraged finance

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Rehypothecation helps explain rapid bank growth in the years leading up to the financial crsis of 2007-2008 and even faster bank deflation since, according to a July 2010 study by International Monetary Fund senior economist Manmohan Singh. Specifics are hard … Continue reading