Repurchase agreements and the (de)construction of financial markets

Dados Bibliográficos

ID2159779
AutoresCarolyn Sissoko (0000-0003-3249-3121, Carolyn Sissoko, 10747 Flaxton St. Culver City, CA 90230, United States.)
Ano2019
Volume48
Fascículo3
Páginas315-341
Data de publicação2019-07-03
Peer ReviewedSim
Open AccessNão
TipoARTICLE
PeriódicoEconomy and Society (JOURNAL)
Identificadores do periódicoISSN: 0308-5147 • E-ISSN: 1469-5766
EditoraInforma UK Limited (PUBLISHER • GB)
DOI10.1080/03085147.2018.1525155
OpenAlexW2948990741
IdiomaEN
Citações recebidas20
Referências citadas37

The safety of repurchase agreements (repos) depends on the neoclassical premise that markets are reliable sources of liquidity; repos in practice disprove the theory by generating collateral calls, collateral sales, liquidity events, and liquidity-driven losses for repo-borrowing funds and their end investors. As repo-type lending now dominates money markets, borrowers' self-protective preference for 'safe assets' as collateral has distorted financial markets, disrupting private investment, and economic performance. Using a balance sheet approach this paper explains the liquidity-supporting role of the traditional banking system and contrasts it with the liquidity-demanding repo-based financial system. The paper also argues that contractual structure determines the balance of power in private sector loans, that no private loan is 'safe' for both borrower and lender, and that repo has shifted the balance of safety decisively in favour of lenders

Balance (ability · Balance sheet · Business · Collateral · Economics · Financial market · Financial system · Investment (military · Loan · Market liquidity · Monetary economics · Repurchase agreement · Banking stability, regulation, efficiency · Economic Theory and Policy · Housing, Finance, and Neoliberalism · Finance