Saturday, August 27, 2011

Hurricane Irene Impacts Repo Men?

“Financial crises are almost always and everywhere about short-term debt,” says Douglas Diamond of the Booth School of Business.

Combine this fact with a current disaster, Hurricane Irene.  Bloomberg reported:

Rates for borrowing and lending securities in the repurchase-agreement market rose and investors sought to extend maturities on concern power outages and closings of mass transit will keep traders home after Hurricane Irene strikes.
No traders, no repo refinancings.  A few missing traders isn't anything near the powder keg of 2008.  However, Uncle Sam did his best to refill the gunpowder barrel with $13 trillion in financial interventions.

Hurricane Irene impacted repo financing in the near term.  Combined with other shocks, things could get interesting.  IMF Chief LaGarde said European banks needed to be recapitalized.  Didn't that already happen