The run on repo and the feds response stanford gsb. A traditional banking run is driven by the withdrawal of deposits, while a securitized banking run is driven by the withdrawal of repurchase repo agreements. We refer to the combination of securitization plus repo finance as securitized banking, and argue that these activities were at the nexus of the crisis. The run on repo and the feds response gary gortony toomas laaritsz andrew metrickx november 8, 2017 abstract we document that the financial crisis of 20072008 was a repo run in two directions. The purpose of this paper is to propose a mechanism for this new kind of bank run, and to. The purpose of this paper is to propose a mechanism for this new kind of bank run and to provide supporting evidence for this mechanism through analysis of two novel. The panic of 20072008 was a run on the sale and repurchase market the repo market, which is a very large, shortterm market that provides financing for a wide range of securitization activities and financial institutions. These facilities allowed banks to bring collateral to the fed in exchange for cash or.
If no error occurs, the progress bar will grow until. Securitized banking and the run on repo sciencedirect. With each level of securitization, the spv will often combine many lowerrated bbb. Soda pdf merge tool allows you to combine two or more documents into a single pdf file for free. Repo transactions are collateralized, frequently with securitized bonds. The panic of 20072008 was a run on the sale and repurchase market the a. We refer to the combination of securitization plus repo finance as a. Securitized banking and the run on repo ideasrepec. Securitized banking and the run on repo american economic. Asset pricing program, corporate finance program, economic fluctuations and growth program, monetary economics program the panic of 20072008 was a run on the sale and repurchase market the repo market, which is a very large, shortterm market that. G1,g19 abstract the panic of 20072008 was a run on the sale and repurchase market the repo market, which is. Once all the options are properly set, click run to start the execution. The purpose of this paper is to propose a mechanism for this new kind of bank run, and to provide supporting evidence for this mechanism through analysis of a novel data set. We document that the financial crisis of 20072008 was a repo run in two directions.