|
Repurchase
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two parties, buys them back shortly afterwards, usually the following day, at a slightly higher price. The repo market is an important source of funds for large financial institutions in the non-depository banking sector, which has grown to rival the traditional depository banking sector in size. Large institutional investors such as money market mutual funds lend money to financial institutions such as investment banks, either in exchange for (or secured by) collateral, such as Treasury bonds and mortgage-backed securities held by the borrower financial institutions. An estimated $1 trillion per day in collateral value is transacted in the U.S. repo markets. In 2007–2008, a run on the repo market, in which funding for investment banks was e ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Repo Transaction Components
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two parties, buys them back shortly afterwards, usually the following day, at a slightly higher price. The repo market is an important source of funds for large financial institutions in the non-depository banking sector, which has grown to rival the traditional depository banking sector in size. Large institutional investors such as money market mutual funds lend money to financial institutions such as investment banks, either in exchange for (or secured by) collateral, such as Treasury bonds and mortgage-backed securities held by the borrower financial institutions. An estimated $1 trillion per day in collateral value is transacted in the U.S. repo markets. In 2007–2008, a run on the repo market, in which funding for investment banks was e ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Reverse Repo
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two parties, buys them back shortly afterwards, usually the following day, at a slightly higher price. The repo market is an important source of funds for large financial institutions in the non-depository banking sector, which has grown to rival the traditional depository banking sector in size. Large institutional investors such as money market mutual funds lend money to financial institutions such as investment banks, either in exchange for (or secured by) collateral, such as Treasury bonds and mortgage-backed securities held by the borrower financial institutions. An estimated $1 trillion per day in collateral value is transacted in the U.S. repo markets. In 2007–2008, a run on the repo market, in which funding for investment banks was ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System. U.S. Congress, Congress established three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates. The first two objectives are sometimes referred to as the Federal Reserve's dual mandate. Its duties have expanded over the years, and currently also include supervising and bank regulation, regulating ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a series of financial panics (particularly the panic of 1907) led to the desire for central control of the monetary system in order to alleviate financial crises. Over the years, events such as the Great Depression in the 1930s and the Great Recession during the 2000s have led to the expansion of the roles and responsibilities of the Federal Reserve System. Congress established three key objectives for monetary policy in the Federal Reserve Act: maximizing employment, stabilizing prices, and moderating long-term interest rates. The first two objectives are sometimes referred to as the Federal Reserve's dual mandate. Its duties have expanded over the years, and currently also include supervising and regulating banks, maintaining the stabili ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Money Market
The money market is a component of the economy that provides short-term funds. The money market deals in short-term loans, generally for a period of a year or less. As short-term securities became a commodity, the money market became a component of the financial market for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Trading in money markets is done over the counter and is wholesale. There are several money market instruments in most Western countries, including treasury bills, commercial paper, banker's acceptances, deposits, certificates of deposit, bills of exchange, repurchase agreements, federal funds, and short-lived mortgage- and asset-backed securities. The instruments bear differing maturities, currencies, credit risks, and structures. A market can be described as a money market if it is composed of highly liquid, short-term assets. Money market funds typically invest in government securities, ce ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Shadow Banking System
The shadow banking system is a term for the collection of non-bank financial intermediaries (NBFIs) that provide services similar to traditional commercial banks but outside normal banking regulations. Examples of NBFIs include hedge funds, insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. The phrase "shadow banking" is regarded by some as pejorative, and the term "market-based finance" has been proposed as an alternative. Former US Federal Reserve Chair Ben Bernanke provided the following definition in November 2013: Shadow banking has grown in importance to rival traditional depository banking, and was a factor in the subprime mortgage crisis of 2007–2008 and the global recession that followed. Overview Paul McCulley of investment management firm PIMCO coined the term "shadow banking". Shadow banking is sometimes said to include entities such as hedge funds, money market fund ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
ESM Government Securities
ESM Government Securities, Inc. was a Fort Lauderdale, Florida-based government securities dealer, specializing in repurchase agreements and reverse repurchase agreements. The failure of the company in March 1985 precipitated the collapse of Home State Savings Bank, deposit runs on dozens of other banks in Ohio, and the downfall of the private Ohio Deposit Guarantee Fund. History ESM was started in 1975 by Ronnie Ewton, Robert Seneca and George Mead, taking the name of the company from the first letter of their last names. (Seneca resigned from the company in 1978.) Alan Novick joined soon afterwards and would later become president (but died in November 1984 of a heart attack). Stephen Arky, an attorney, met Ronnie Ewton in his National Guard unit, and introduced him to his father-in-law Marvin Warner, the owner of Home State Savings Bank in Cincinnati, Ohio. Fraud shutdown ESM was shut down on March 4, 1985, by the Securities and Exchange Commission and placed into receivers ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Home State Savings Bank
Home State Savings Bank was a Cincinnati, Ohio based savings and loan. Its failure in March 1985 led to a bank holiday for 70 other savings institutions that were insured by the Ohio Deposit Guarantee Fund, a private organization. Background Home State Savings Bank was the largest savings institution in Ohio, with $1.4 billion in assets. It was owned by Marvin L. Warner, a local real estate developer and investor. He bought the bank in 1958. Warner had been a part owner of the New York Yankees and the Tampa Bay Buccaneers in the 1970s, and was the original owner of the United States Football League Birmingham Stallions. Warner was also a substantial political donor, and had been appointed as the United States ambassador to Switzerland in 1977 by President Jimmy Carter. Downfall ESM Government Securities, Inc. of Fort Lauderdale, Florida, was a securities brokerage firm specializing in term repurchase agreements and reverse repurchase agreements. The company was shut down by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression. One result was a serious disruption of normal international relations. The causes of the Great Recession include a combination of vulnerabilities that developed in the financial system, along with a series of triggering events that began with the bursting of the United States housing bubble in 2005–2012. When housing prices fell and homeowners began to abandon their mortgages, the value of mortgage-backed securities held by investment banks declined in 2007–2008, causing several to collapse or be bailed out in September 2008. This 2007–2008 phase was called the subprime mortgage crisis. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Subprime Mortgage Crisis
The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the Financial crisis of 2007–2008, 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the collapse of a 2000s United States housing bubble, housing bubble, leading to Mortgage loan, mortgage delinquencies, foreclosures, and the devaluation of Mortgage-backed security, housing-related securities. Declines in residential investment preceded the Great Recession and were followed by reductions in household spending and then business investment. Spending reductions were more significant in areas with a combination of high household debt and larger housing price declines. The housing bubble preceding the crisis was financed with Mortgage-backed security, mortgage-backed securities (MBSes) and collateralized debt obligations (CDOs), which initially offered higher interest rates (i.e. better returns) than go ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
SOFR Rate Components
Secured Overnight Financing Rate (SOFR) is a secured interbank overnight interest rate. SOFR is a reference rate (that is, a rate used by parties in commercial contracts that is outside their direct control) established as an alternative to LIBOR. LIBOR has been published in a number of currencies and underpins financial contracts all over the world. Because LIBOR is derived from banks' daily quotes of borrowing costs, banks were able to manipulate the rates through lying in the surveys. Deeming it prone to manipulation, UK regulators decided to discontinue LIBOR in 2021. In 2022, the LIBOR Act passed by the U.S. Congress established SOFR as a default replacement rate for LIBOR contracts that lack mechanisms to deal with LIBOR's cessation. The Act also grants a safe harbor to LIBOR contracts that transition to SOFR. Previously, SOFR was seen as the likely successor of LIBOR in the US since at least 2021. SOFR uses actual costs of transactions in the overnight repo market, calcula ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
SOFR
Secured Overnight Financing Rate (SOFR) is a secured interbank overnight interest rate. SOFR is a reference rate (that is, a rate used by parties in commercial contracts that is outside their direct control) established as an alternative to LIBOR. LIBOR has been published in a number of currencies and underpins financial contracts all over the world. Because LIBOR is derived from banks' daily quotes of borrowing costs, banks were able to manipulate the rates through lying in the surveys. Deeming it prone to manipulation, UK regulators decided to discontinue LIBOR in 2021. In 2022, the LIBOR Act passed by the U.S. Congress established SOFR as a default replacement rate for LIBOR contracts that lack mechanisms to deal with LIBOR's cessation. The Act also grants a safe harbor to LIBOR contracts that transition to SOFR. Previously, SOFR was seen as the likely successor of LIBOR in the US since at least 2021. SOFR uses actual costs of transactions in the overnight repo market, calcula ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
