NEW: Reed to Chair Hearing On Tri-Party Repo Market
Wednesday, August 01, 2012
On Thursday, August 2, 2012 at 9 a.m., U.S. Senator Jack Reed (D-RI) will chair a Banking Subcommittee hearing entitled “The Tri-Party Repo Market: Remaining Challenges” to address weaknesses in the U.S. tri-party repurchase (repo) market and necessary reforms, which will be aired live on C-SPAN.org.
During the 2008 financial crisis the then $2.8 trillion tri-party repo market froze and dried up a key source of funding for many Wall Street firms. That event helped exacerbate the financial crisis. As a result, the Federal Reserve Bank of New York convened a taskforce of Wall Street banks, investors, and industry representatives to study ways to reduce systemic risk in this market. Although the work of the taskforce led to some operational improvements, it disbanded in February 2012 without completing its work—in particular significantly reducing market reliance on intraday credit extensions by clearing banks to broker-dealers.
In response to the report, the Federal Reserve announced that going forward it would be taking a more direct approach to making the needed changes and improvements. Additionally, in its 2012 annual report to Congress, the Financial Stability Oversight Council, established under the Dodd-Frank Wall Street Reform law and chaired by Treasury Secretary Timothy Geithner, called for greater government oversight of this complex but important financial market.
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