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Keywords:repo market 

Discussion Paper
Internal Liquidity’s Value in a Financial Crisis

A classic question for U.S. financial firms is whether to organize themselves as entities that are affiliated with a bank-holding company (BHC). This affiliation brings benefits, such as access to liquidity from other affiliated entities, as well as costs, particularly a larger regulatory burden. This post highlights the results from a recent Staff Report that sheds light on this tradeoff. This work uses confidential data on the population of broker-dealers to study the benefits of being affiliated with a BHC, with a focus on the global financial crisis (GFC). The analysis reveals that ...
Liberty Street Economics , Paper 20240408

Speech
Facing Quarter-End Pressures: Understanding the Repo Market and Federal Reserve Tools

Remarks at New York University Stern School of Business, New York City.
Speech

Speech
Balance Sheet Normalization: Monitoring Reserve Conditions and Understanding Repo Market Pressures

Remarks at 2024 U.S. Treasury Market Conference, Federal Reserve Bank of New York, New York City.
Speech

Journal Article
Bank Supervisory Goals versus Monetary Policy Implementation

The global financial crisis of 2007–09 revealed substantial weaknesses in large banks' capital adequacy and liquidity. Bank regulators responded with a variety of prudential measures intended to strengthen both. However, these prudential measures resulted in conflicts with the implementation of monetary policy that helped alter the way the Federal Reserve conducts monetary policy. I review three such conflicts: regulation inhibiting interest on excess reserves arbitrage starting in 2008, regulation inhibiting banks' operations in the repo market in 2019, and regulation inhibiting their ...
Policy Hub , Volume 2021 , Issue 3 , Pages 14

Report
The Market Events of Mid-September 2019

This paper studies the mid-September 2019 stress in U.S. money markets: On September 16 and 17, unsecured and secured funding rates spiked up and, on September 17, the effective federal funds rate broke the ceiling of the Federal Open Market Committee (FOMC) target range. We highlight two factors that may have contributed to these events. First, reserves may have become scarce for at least some depository institutions, in the sense that these institutions’ reserve holdings may have been close to, or lower than, their desired level. Moreover, frictions in the interbank market may have ...
Staff Reports , Paper 918

Report
The risk of fire sales in the tri-party repo market

This paper studies the risk of "fire sales" in the tri-party repo market, a large and important market where securities dealers find short-term funding for a substantial portion of their own and their clients' assets. We distinguish between fire sales of assets by a dealer who, facing a run that could lead to default, sells securities to generate liquidity, and fire sales of assets by repo investors after a dealer's default has occurred. While fire sales do cause damage no matter how they arise, the tools available to lessen the harm from the two types of fire sales are different. We find ...
Staff Reports , Paper 616

Discussion Paper
Bank Supervisory Goals versus Monetary Policy Implementation

The global financial crisis of 2007–09 revealed substantial weaknesses in large banks' capital adequacy and liquidity. Bank regulators responded with a variety of prudential measures intended to strengthen both. However, these prudential measures resulted in conflicts with the implementation of monetary policy that helped alter the way the Federal Reserve conducts monetary policy. I review three such conflicts: regulation inhibiting interest on excess reserves arbitrage starting in 2008, regulation inhibiting banks' operations in the repo market in 2019, and regulation inhibiting their ...
Policy Hub , Paper 2021-03

Working Paper
The Scarcity Value of Treasury Collateral: Repo Market Effects of Security-Specific Supply and Demand Factors

In the repo market, forward agreements are security-specific (i.e., there are no deliverable substitutes), which makes it an ideal place to measure the value of fluctuations in a security's available supply. In this study, we quantify the scarcity value of Treasury collateral by estimating the impact of security-specific demand and supply factors on the repo rates of all the outstanding U.S. Treasury securities. Our results indicate the existence of an economically and statistically significant scarcity premium, especially for shorter-term securities. The estimated scarcity effect is quite ...
Working Paper Series , Paper WP-2013-22

Discussion Paper
Bank Supervisory Goals versus Monetary Policy Implementation

The global financial crisis of 2007–09 revealed substantial weaknesses in large banks’capital adequacy and liquidity. Bank regulators responded with a variety of prudentialmeasures intended to strengthen both. However, these prudential measures resultedin conflicts with the implementation of monetary policy that helped alter the way theFederal Reserve conducts monetary policy. I review three such conflicts: regulationinhibiting interest on excess reserves arbitrage starting in 2008, regulation inhibiting banks’operations in the repo market in 2019, and regulation inhibiting their ...
Policy Hub , Paper 2021-03

Discussion Paper
The Federal Reserve’s Large-Scale Repo Program

The repo market faced extraordinary liquidity strains in March amid broader financial market volatility related to the coronavirus pandemic and uncertainty regarding the path of policy. The strains were particularly severe in the term repo market, in which borrowing and lending arrangements are for longer than one business day. In this post, we discuss the causes of the liquidity disruptions that arose in the repo market as well as the Federal Reserve’s actions to address those disruptions.
Liberty Street Economics , Paper 20200803

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