elizabeth warren Markets steve mnuchin

Steve Mnuchin Wants All Of The Smoke From Elizabeth Warren In Repo Debate

"Have we gone too far?"

"Have we gone too far?"
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6 comments on “Steve Mnuchin Wants All Of The Smoke From Elizabeth Warren In Repo Debate

  1. Someone should ask Mnuchin whether, in the event of another bank-driven financial crisis, he will insist that Jaime and the other bank CEOs and VPs pay for the bailout. Joe Taxpayer is tired of that sh*t.

  2. vicissitude

    This is the first time I’ve actually seen a reference to my delusional thinking on the debt ceiling and repo crap … whew, I almost had to increase my meds! The bottom line seems to be that regulations, liquidity and the deficit all matter.

    GLOBAL ECONOMICS
    SCOTIABANK’S GLOBAL OUTLOOK
    October 10, 2019

    Despite the brave face the Fed presents regarding the matter, it’s highly likely that the deterioration in short-term funding markets over September into October caught the central bank flat-footed. Inadequate market liquidity struggled to deal with demand for cash in order to meet corporate tax payments and large Treasury auction settlements, given rising
    deficits and Treasury issuance after the debt ceiling was lifted following a half-year binding freeze on net issuance. The result was that the Fed was losing control over rising short-term market rates that were rippling through other markets and impacting confidence.

    https://www.scotiabank.com/content/dam/scotiabank/sub-brands/scotiabank-economics/english/documents/global-outlook/globaloutlook_4Q2019.pdf

    Also see: Recent developments
    in the US repo market:
    a cause for concern?

    Fourth Quarter 2019

    Further pressure on reserves appears to have come from $54 billion
    of new Treasury issuance also settling on 16 September. It is
    estimated that at the same time money funds saw outflows of
    around $30-35 billion (due to corporate drawdowns to meet
    tax liabilities). All of this seems to have culminated to catch the
    market, and the Federal Reserve, off guard.

    Excess reserves have been declining in line with the post-
    QE contraction of the Fed’s balance sheet. However, at $1.4
    trillion going into the week of 16 September (see chart), the
    expectation may have been that banks were still holding a
    healthy buffer of cash that could easily absorb the outflows
    from the system. Based on survey data, it would seem that
    the estimated tipping point at which reserves become “sticky”
    (known as the “steep part of the curve”) was around $1.2
    trillion, comfortably below the current levels. But what is more
    difficult to estimate is the capacity for banks to recycle reserves
    through the repo market due to regulatory constraints (such
    as leverage ratio and G-SIB buffers). Separating out these two
    considerations is fiendishly tricky.

    While perhaps the press has made too much of the episode, it
    nonetheless highlights two serious concerns for central bankers,
    both in the US and elsewhere. First, while executing QE has its
    challenges, unwinding QE is a far more difficult balancing act.
    Second, estimating the impact of regulation on banks’ capacity to
    intermediate in the repo market is a guessing game. We should
    expect a lot more repo market volatility ahead.

    https://www.icmagroup.org/assets/documents/Regulatory/Quarterly_Reports/ICMA-Quarterly-Report-Fourth-Quarter-2019.pdf

  3. It is contained now, so never mind…

  4. Banks shouldn’t be allowed to do repo or lend vs financial assets in the first place.

  5. vicissitude

    So, is it that Dimon had no idea what was really going on during 2018 at his own bank, and has therefore come around to thinking some version of the SLR is to blame for getting 2019 all wrong? Or, is it because he had and has no real idea of the liquidity system that after being caught totally off-guard by pretty much everything he is cynically seeking to settle a longstanding score about the one thing he does know well?

    When I came up with the zoo analogy to try to describe what’s going on, I didn’t realize just how well it would fit the times. What’s worse, the financial media will now be filled with stories about how it must be that Dimon is right! A real zoo.

    https://www.alhambrapartners.com/2019/10/29/theres-no-s-l-r-in-r-e-p-o/

  6. Great post….tough to really grasp ..A gut feeling is Warren may know a little more about this stuff than she is credited for knowing.. It is a battle for determining the direction for American culture and a commentary on the last 50 years in disguise.. H.. ..has touched on this some…More please!!!!

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