Sizing Up Repo
62 Pages Posted: 1 Mar 2012
There are 2 versions of this paper
Sizing Up Repo
Date Written: February 2012
Abstract
We measure the repo funding extended by money market funds (MMF) and securities lenders to the shadow banking system, including quantities, haircuts, and repo rates by type of underlying collateral. We find that repo played only a small role in funding private sector assets prior to the crisis, as most repos are backed by Treasury and Agency collateral. Repo with private sector collateral contracts during the crisis, but the magnitude is relatively insignificant compared with the contraction in asset-backed commercial paper (ABCP). While relatively small in aggregate, the contraction in repo particularly affected key dealer banks with large exposures to private sector securities, which then had knock-on effects on security markets, and led these dealer banks to resort to the Fed's emergency lending programs. We also find that haircuts in MMF-to-dealer repo rise less than the dealer-to-dealer or dealer-to-hedge fund repo haircuts reported in earlier papers. This finding suggests that the contraction in repo led dealers to take defensive actions, given their own capital and liquidity problems, raising credit terms to their borrowers. The picture that emerges from these findings looks less like a traditional bank run of depositors and more like a credit crunch among dealer banks.
Keywords: Dealer Banks, Financial Crisis, Repurchase Agreements, Shadow Banking
JEL Classification: E51, G01, G21, G24
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Securitized Banking and the Run on Repo
By Gary B. Gorton and Andrew Metrick
-
Securitization Without Risk Transfer
By Viral V. Acharya, Philipp Schnabl, ...
-
Securitization Without Risk Transfer
By Viral V. Acharya, Philipp Schnabl, ...
-
Securitization Without Risk Transfer
By Viral V. Acharya, Philipp Schnabl, ...
-
Rollover Risk and Market Freezes
By Viral V. Acharya, Douglas M. Gale, ...
-
Rollover Risk and Market Freezes
By Viral V. Acharya, Douglas M. Gale, ...
-
Rollover Risk and Market Freezes
By Viral V. Acharya, Douglas M. Gale, ...
-
Rollover Risk and Market Freezes
By Viral V. Acharya, Douglas M. Gale, ...
-
By Andrei Shleifer and Robert W. Vishny
-
By Andrei Shleifer and Robert W. Vishny