Tri-Party Repurchase Agreements (Fed)

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The Tri-Party Repurchase Agreements (Fed)

The Federal Reserve bought securities and held them for primary dealers for a specified period. This helped get cash to banks when they were having trouble selling the securities, and the program spiked in 2007-2008 as the mortgage-backed securities market froze up. The program peaked at $124.6 billion in outstanding repos on June 18, 2008.[1]


Wall Street Bailout Accounting
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TRI-PARTY REPURCHASE AGREEMENTS (FED)
Balance Sheet
Disbursed*: $124.6B
Current outstanding: $0
Public Funds
Maximum at-risk: $124.6B[2]
Current at-risk:

* See the methodology and glossary for definitions of "disbursed," etc.

Funding agency and aid type

The funding agency was the Federal Reserve.

Purchase.

Who benefits

Background

SIGTARP: “Tri-Party Repurchase Agreements (“Repo’s”) — Total Potential Support: At Least $124.6 Billion. According to the Federal Reserve, ‘repurchase agreements reflect some of the Federal Reserve’s temporary OMOs. Repurchase agreements are transactions in which securities are purchased from a primary dealer under an agreement to sell them back to the dealer on a specified date in the future. The difference between the purchase price and the repurchase price reflects an interest payment. The Federal Reserve may enter into repurchase agreements for up to 65 business days, but the typical maturity is between one and 14 days. Federal Reserve repurchase agreements supply reserve balances to the banking system for the length of the agreement. The Federal Reserve employs a naming convention for these transactions based on the perspective of the primary dealers: the dealers receive cash while the Federal Reserve receives the collateral.’ In an effort to mitigate problems in certain Repo markets, on September 14, 2008, the Federal Reserve Board announced that it would provide a ‘temporary exception to the limitations in section 23A of the Federal Reserve Act’ (which limits a bank’s credit exposure to its affiliates). This exception ‘allows all insured depository institutions to provide liquidity to their affiliates for assets typically funded in the tri-party repo market.’”[3]

Notes

Prins: “The Fed provided $124.6 billion for this type of repo in 2009.” [4]


Articles and resources

Related SourceWatch articles

References

  1. "Reserve Bank Credit - Repurchase Agreements (WREPO)", Federal Reserve Bank of St. Louis.
  2. Nomi Prins, “”Behind the Real Size of the Bailout, ” [1] Mother Jones, Dec. 21, 2009
  3. SIGTARP July 2010 report.
  4. Prins’ Mother Jones analysis. Dec. 21, 2009. http://motherjones.com/politics/2009/12/behind-real-size-bailout

External resources


External articles

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