Access to Safe Assets and Financial Stability

Courtesy of Marco Macchiavelli In September 2013, the Federal Reserve (Fed) introduced the Overnight Reverse Repurchase (ONRRP) facility to improve its control over short-term interest rates (Frost et al. 2015). To achieve this goal, the Fed offers safe assets in the form of overnight reverse repos to a broad range of market participants, including money […]

The Impact of Liquidity Regulation on Broker-Dealer Stability

Courtesy of Marco Macchiavelli and Luke Pettit At the peak of the cycle in 2006, broker-dealers (dealers hereafter) were involved in originating, distributing and financing mortgage-related instruments, which exposed them to significant risks at the turn of the housing cycle in early 2007. To make things worse, they were financing a significant portion of these […]