Securitized banking and the run on repo pdf download

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. 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. Gorton and metrick 2009 characterized the global financial crisis as a systemwide run in the securitized banking systemmore precisely a run on the repo marketsimilar to the banking. 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. On the repo markets, see securities industry and financial markets. The panic of 20072008 was a run on the sale and repurchase market the a. 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. Securitized banking and the run on repo ideasrepec. G1,g19 abstract the panic of 20072008 was a run on the sale and repurchase market the repo market, which is. Repo transactions are collateralized, frequently with securitized bonds.

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. With declining asset values and increasing haircuts, the u. Securitized banking and the run on repo american economic. The purpose of this paper is to propose a mechanism for this new. The purpose of this paper is to propose a mechanism for this new kind of bank run, and to. A traditionalbanking run is driven by the withdrawal of deposits, while a securitizedbanking run is driven by the withdrawal of repurchase repo agreements.