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Who Ran on Repo?

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  • Gary B. Gorton
  • Andrew Metrick
  • Chase P. Ross

Abstract

The sale and repurchase (repo) market played a central role in the recent financial crisis. From the second quarter of 2007 to the first quarter of 2009, net repo financing provided to US banks and broker-dealers fell by about $900 billion—more than half of its pre-crisis total. Significant details of this "run on repo" remain shrouded because many of the providers of repo finance are lightly regulated or unregulated cash pools. Our analysis highlights the danger of relying exclusively on data from regulated institutions, which would miss the most important parts of the run.

Suggested Citation

  • Gary B. Gorton & Andrew Metrick & Chase P. Ross, 2020. "Who Ran on Repo?," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 487-492, May.
    • Handle: RePEc:aea:apandp:v:110:y:2020:p:487-92
    DOI: 10.1257/pandp.20201100
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    References listed on IDEAS

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    1. Peter Hördahl & Michael R King, 2008. "Developments in repo markets during the financial turmoil," BIS Quarterly Review, Bank for International Settlements, December.
    2. Tobias Adrian & Adam B. Ashcraft & Hayley Boesky & Zoltan Pozsar, 2013. "Shadow banking," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-16.
      • Tobias Adrian & Adam B. Ashcraft & Hayley Boesky & Zoltan Pozsar, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
    3. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow Banking Regulation," Annual Review of Financial Economics, Annual Reviews, vol. 4(1), pages 99-140, October.
    4. Adam Copeland & Antoine Martin & Michael Walker, 2014. "Repo Runs: Evidence from the Tri-Party Repo Market," Journal of Finance, American Finance Association, vol. 69(6), pages 2343-2380, December.
    5. Adam Copeland & Antoine Martin & Michael Walker, 2010. "The tri-party repo market before the 2010 reforms," Staff Reports 477, Federal Reserve Bank of New York.
    6. Mr. Zoltan Pozsar, 2011. "Institutional Cash Pools and the Triffin Dilemma of the U.S. Banking System," IMF Working Papers 2011/190, International Monetary Fund.
    7. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    8. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153, Decembrie.
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    Cited by:

    1. Leonard Nakamura, 2014. "Durable Financial Regulation: Monitoring Financial Instruments as a Counterpart to Regulating Financial Institutions," NBER Chapters, in: Measuring Wealth and Financial Intermediation and Their Links to the Real Economy, pages 67-88, National Bureau of Economic Research, Inc.
    2. Amini, Hamed & Minca, Andreea & Sulem, Agnès, 2017. "Optimal equity infusions in interbank networks," Journal of Financial Stability, Elsevier, vol. 31(C), pages 1-17.
    3. Jean Barthélémy & Vincent Bignon & Benoît Nguyen, 2017. "Illiquid Collateral and Bank Lending during the European Sovereign Debt Crisis," EconomiX Working Papers 2017-21, University of Paris Nanterre, EconomiX.
    4. Adam Copeland & Antoine Martin, 2025. "Repo over the Financial Crisis," Journal of Finance, American Finance Association, vol. 80(2), pages 911-936, April.
    5. Claudio Bassi & Michael Grill & Felix Hermes & Harun Mirza & Charles O’Donnell & Michael Wedow, 2025. "Enhancing Repo Market Transparency: The EU Securities Financing Transactions Regulation," Journal of Financial Regulation, Oxford University Press, vol. 11(1), pages 98-118.
    6. Cyree, Ken B. & Griffiths, Mark D. & Winters, Drew B., 2013. "Federal Reserve financial crisis lending programs and bank stock returns," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3819-3829.
    7. Chase P. Ross, 2022. "The Collateral Premium and Levered Safe-Asset Production," Finance and Economics Discussion Series 2022-046, Board of Governors of the Federal Reserve System (U.S.).
    8. Natalia Tente & Natalja Von Westernhagen & Ulf Slopek, 2019. "M‐PRESS‐CreditRisk: Microprudential and Macroprudential Capital Requirements for Credit Risk under Systemic Stress," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(7), pages 1923-1961, October.
    9. Gorton, Gary & Laarits, Toomas & Metrick, Andrew, 2020. "The run on repo and the Fed’s response," Journal of Financial Stability, Elsevier, vol. 48(C).
    10. Gertler, M. & Kiyotaki, N. & Prestipino, A., 2016. "Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1345-1425, Elsevier.
    11. Arvind Krishnamurthy & Stefan Nagel, 2013. "Interpreting Repo Statistics in the Flow of Funds Accounts," NBER Working Papers 19389, National Bureau of Economic Research, Inc.
    12. repec:fip:fedpwp:13-2 is not listed on IDEAS
    13. Jean Barthélémy & Vincent Bignon & Benoît Nguyen, 2017. "Monetary policy, illiquid collateral and bank lending during the European sovereign debt crisis," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 494-495-4, pages 111-130.
    14. Toshiaki Ogawa, 2020. "Liquidity Management of Heterogeneous Banks during the Great Recession," IMES Discussion Paper Series 20-E-05, Institute for Monetary and Economic Studies, Bank of Japan.
    15. Benjamin Munyan, 2015. "Regulatory Arbitrage in Repo Markets," Working Papers 15-22, Office of Financial Research, US Department of the Treasury.
    16. Kurmaş AKDOĞAN & Burcu Deniz YILDIRIM, 2014. "Non-core Liabilities as an Indicator of Systemic Risk and a Liquidity Stress Test Application on Turkish Banking System," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 29(338), pages 39-66.
    17. Gary Gorton & Guillermo Ordo?ez, 2014. "Collateral Crises," American Economic Review, American Economic Association, vol. 104(2), pages 343-378, February.
    18. Tente, Natalia & von Westernhagen, Natalja & Slopek, Ulf, 2017. "M-PRESS-CreditRisk: A holistic micro- and macroprudential approach to capital requirements," Discussion Papers 15/2017, Deutsche Bundesbank.
    19. Patty Duijm & Peter Wierts, 2016. "The Effects of Liquidity Regulation on Bank Assets and Liabilities," International Journal of Central Banking, International Journal of Central Banking, vol. 12(2), pages 385-411, June.
    20. Kato, Ryo & Tsuruga, Takayuki, 2016. "The safer, the riskier: A model of financial instability and bank leverage," Economic Modelling, Elsevier, vol. 52(PA), pages 71-77.
    21. Narayan Bulusu & Sermin Gungor, 2018. "Government of Canada Securities in the Cash, Repo and Securities Lending Markets," Discussion Papers 18-4, Bank of Canada.
    22. Fukai, Hiroki, 2021. "Optimal interventions on strategic fails in repo markets," MPRA Paper 106090, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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