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Who Ran on Repo?

  • Gary B. Gorton
  • Andrew Metrick

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 U.S. banks and broker-dealers fell by about $1.3 trillion - more than half of its pre-crisis total. Significant details of this "run on repo" remain shrouded, however, because many of the providers of repo finance are lightly regulated or unregulated cash pools. In this paper we supplement the best available official data sources with a unique market survey to provide an updated picture of the dynamics of the repo run. We provide evidence that the run was predominantly driven by the flight of foreign financial institutions, domestic and offshore hedge funds, and other 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18455.

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Date of creation: Oct 2012
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Handle: RePEc:nbr:nberwo:18455
Note: AP CF ME
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  1. Gary B. Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," NBER Working Papers 15223, National Bureau of Economic Research, Inc.
  2. 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.
  3. Tobias Adrian & Adam B. Ashcraft, 2012. "Shadow banking regulation," Staff Reports 559, Federal Reserve Bank of New York.
  4. Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
  5. Adam Copeland & Antoine Martin & Michael Walker, 2011. "Repo runs: evidence from the tri-party repo market," Staff Reports 506, Federal Reserve Bank of New York.
  6. Gorton, Gary B., 2010. "Slapped by the Invisible Hand: The Panic of 2007," OUP Catalogue, Oxford University Press, number 9780199734153.
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