Repo Agreement Mortgage

Escrito por: Redacción    11 abril 2021     2 minutos

In the case of Lehman Brothers, deposits were used as Tobashi systems to temporarily mask significant losses due to intentional semi-finished trades during the reference period. This misuse of deposits resembles Goldman Sachs` swaps in the «Greek debt mask»[20], used as the Tobashi regime to legally circumvent the Deficit Rules of the Maastricht Treaty for active members of the European Union, and which allowed Greece to «hide» more than 2.3 billion euros of debt. [21] Beginning in late 2008, the Fed and other regulators adopted new rules to address these and other concerns. One consequence of these rules was to increase pressure on banks to maintain their safest assets, such as Treasuries. They are encouraged not to borrow them through boarding agreements. According to Bloomberg, the impact of the regulation was significant: at the end of 2008, the estimated value of the world securities borrowed was nearly $4 trillion. But since then, that number has been close to $2 trillion. In addition, the Fed has increasingly entered into pension (or self-repurchase) agreements to compensate for temporary fluctuations in bank reserves. The longer the life of the pension, the more likely it is that the value of the security will fluctuate prior to the buyback and that economic activity will affect the supplier`s ability to execute the contract. In fact, counterparty credit risk is the main risk associated with rest.

As with any loan, the creditor bears the risk that the debtor will not be able to repay the investor. Rest acts as a guaranteed debt, which reduces overall risk. And because the price of the pension exceeds the value of the guarantees, these agreements remain mutually beneficial to buyers and sellers. Although the transaction is similar to a loan and its economic effect is similar to a loan, the terminology is different from that of the loans: the seller legally buys the securities from the buyer at the end of the loan period. However, an essential aspect of rest is that they are legally recognized as a single transaction (important in the event of a counterparty`s insolvency) and not as a transfer and redemption for tax purposes. By structuring the transaction as a sale, a repo offers lenders considerable protection against the normal functioning of the United States.


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