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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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Commentary: Movies ‘Inside Job’ and ‘Too Big To Fail’ entertain but don’t explain the panic

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From the editor: The new financial-crisis movies “Inside Job” and “Too Big To Fail” are riveting tales of Wall Street and its giant banks, but don’t expect to find out why taxpayers were forced to bail out those big banks … Continue reading

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European repo leader wary of transparency

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The European repo community appears to be worried that regulators will require the repurchase market to become more transparent, based on a top repo official’s comments in a Financial News column June 13. Godfried De Vidts, chairman of the European Repo Council, … 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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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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Banks prepare to fight Basel’s repo-related ratios

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The only rules that have been proposed specifically to lessen the systemic risk caused by the repurchase market will force the largest banks to do business in a more cautious way, and the banks are gearing up to fight them, … Continue reading

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Banks’ over-reliance on overnight repo is “absurd”

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Enrico Perotti, professor of international finance at the Amsterdam Business School, wants to tax banks that repo, to discourage “the current absurd over reliance on overnight repo markets.” He is highlighting the following papers on his web site. From The Governance … 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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Repos seem secret because U.S. reporters rarely cover them

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Reporter Bob Ivry at Bloomberg told his readers May 26 that leading bank companies borrowed $80 billion at sweetheart rates during the financial crisis from an emergency Federal Reserve lending program that has not been fully disclosed. Not so fast, … 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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Something about the financial crisis doesn’t add up

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 Last updated June 26, 2012 From the editor, I have written the following short article to explain in simple terms, for the average American, why repo matters. If you find that parts are hard to understand, I hope you will … 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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U.S. debt default could freeze repo market

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Geithner Last updated June 26, 2012 When Treasury Secretary Tim Geithner says a U.S. default on its debt “would inflict catastrophic, far-reaching damage on our Nation’s economy,” one of his key worries is the repurchase market. That’s because if repo … Continue reading

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Commentary: Let’s get going on the real story of the financial crisis

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From the editor: RepoWatch’s main purpose is to help professional and citizen journalists start covering the U.S. repurchase market, by bringing together many repo resources in one place and making it easier for beginners to get started. To that end, … Continue reading

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Money market funds, top repo lenders, may need more reform

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 Three years after the financial crisis, officials are still trying to figure out how to fix money market funds. The Securities and Exchange Commission conducted a round table in Washington, D.C., on “Money Market Funds and Systemic Risk” May 10, to see … Continue reading

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Securitized banking in Europe still stressed

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Securitized banking continues to be under stress in Europe, as can be seen in two unrelated news reports from Financial News on May 6 that show it is getting harder for some financial institutions to raise cash in Europe. In … 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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Black: Why CEOs haven’t been busted

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“Unless you imprison the fraudsters, sophisticated financial scams grow ever more destructive. It seems as if we have forgotten this lesson,” writes William K. Black for Bloomberg News May 10 in an article headlined “Why CEOs avoided getting busted in … Continue reading