FAST FIVE: A Clueless New York Fed Is Examining Why Banks With Excess Cash Failed To Halt Repo Panic
As noted earlier today, following several days of oversubscribed overnight repo operations to ease liquidity pressure in the market, on Friday the Fed announced it would also offer up to $90bn in two-week long loans to further reduce funding pressures during the notorious quarter-end period when liquidity tends to collapse.
Logan pointed to the concentration of excess cash at a small number of banks as one potential issue.
“Reserves are concentrated, the excess reserves relative to the minimum level each bank is demanding is concentrated,” she said.
As it monitored short-term lending markets, the New York Fed paid particular attention to the amount of reserves available.
One person who may have an answer is Citi's Matt King, whose latest presentation – a bear market in trust – explains everything that is wrong with the current financial system.