Report
The Value of Internal Sources of Funding Liquidity: U.S. Broker-Dealers and the Financial Crisis
Abstract: We use confidential and novel data to measure the benefit to broker-dealers of being affiliated with a bank holding company and the resulting access to internal sources of funding. We accomplish this by comparing the balance sheets of broker-dealers that are associated with bank holding companies to those that are not and we find that the latter dramatically re-structured their balance sheets during the 2007-09 financial crisis, pivoting away from trading illiquid assets and toward more liquid government securities. Specifically, we estimate that broker-dealers that are not associated with bank holding companies both increased repo as a share of total assets by 10 percentage points and also increased the share of long inventory devoted to government securities by 15 percentage points, relative to broker-dealers associated with bank holding companies.
JEL Classification: G2; G21; G23;
Access Documents
File(s):
File format is application/pdf
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr969.pdf
Description: Full text
File(s):
File format is text/html
https://www.newyorkfed.org/research/staff_reports/sr969.html
Description: Summary
Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2021-05-01
Number: 969