{"id":110767,"date":"2009-12-22T18:27:57","date_gmt":"2009-12-22T23:27:57","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2009\/12\/22\/ny-fed-looks-to-toughen-funding-bubble\/"},"modified":"2009-12-22T18:27:57","modified_gmt":"2009-12-22T23:27:57","slug":"ny-fed-looks-to-toughen-funding-standards-to-fend-off-next-bubble","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/110767","title":{"rendered":"NY Fed Looks to Toughen Funding Standards to Fend off Next Bubble"},"content":{"rendered":"

The Federal Reserve<\/strong> today took a step toward improving the plumbing of the short-term funding markets for banks and securities dealers that locked up during the heat of the financial crisis. The Federal Reserve Bank of New York<\/strong> has set up a task force<\/a>\u00a0of Wall Street banks to figure out how to make this market less vulnerable to shocks, and the group issued a status report today.<\/p>\n

The market in question is the tri-party repo market, in which banks and dealers use their securities holdings as collateral for short-term funding from cash-rich investors and other banks.<\/p>\n

Borrowing in this market soared during the credit boom. It also made Wall Street extremely vulnerable to modern-day runs on a bank; as the crisis worsened, lenders in the tri-party repo market pulled their cash back amidst worries that borrowers would fail or that the securities they used as collateral would fall in value.<\/p>\n

In 2008, more than $2.8 trillion <\/em>in securities holdings by banks were being financed with short-term money in this market. At the center of it all are two clearing banks \u0096 J.P. Morgan<\/strong> and Bank of New York Mellon<\/strong> \u0096 which manage the transactions and collateral.<\/p>\n

The new group could push for tougher collateral requirements on these loans, the equivalent of demanding that a homeowner put down more\u00a0equity\u00a0on a mortgage. They\u0092re also narrowing the kinds of securities that can be used as collateral.<\/p>\n

The group hopes\u00a0to complete its work by the end of March 2010 and hopes to\u00a0make banks less vulnerable to another shock, as\u00a0tougher rules in the tri-party repo market would make it harder for banks and securities dealers to go on another drunken borrowing binge when the next asset boom emerges.<\/p>\n

The participating firms and associations in the “Reform Task Force” are: Bank of America Securities, The Bank of New York Mellon, Barclays Capital, Citadel Investment Group, Citigroup Global Markets, Credit Suisse Securities, The Depository Trust & Clearing Co., Deutsche Bank Securities, Federated Investors, Fidelity Management & Research Co., Goldman Sachs Group Inc., Investment Company Institute, Invesco Ltd., J.P. Morgan Chase, Managed Funds Association, Morgan Stanley & Co., SIFMA, State Street Global Advisors and UBS Investment Bank.<\/p>\n

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The Federal Reserve today took a step toward improving the plumbing of the short-term funding markets for banks and securities dealers that locked up during the heat of the financial crisis. The Federal Reserve Bank of New York has set up a task force\u00a0of Wall Street banks to figure out how to make this market […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-110767","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/110767","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=110767"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/110767\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=110767"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=110767"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=110767"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}