Antoine Martin

At the New York Fed, we follow the repo market closely and, with some of my colleagues, I’ve tried to keep readers of this blog informed about how the market works, how it’s being reformed, and what risks remain. We’re always encouraged when others share our interest in this market, so we read a recent Fitch report—“Repo Emerges from the ‘Shadow’”—closely (the report is available at www.fitchratings.com). At first glance, the report is a bit worrisome, as it argues that the repo market has recently seen a large increase in riskier types of collateral. So we decided to take a close look at some data to see if we could validate this finding. In this post, I use data made publicly available by the Tri-Party Repo Infrastructure Reform Task Force (the Task Force) to show that there is in fact no evidence of a broad-based increase in riskier types of collateral. The Task Force’s objective in publishing the data was to give a comprehensive view of the market, so the data represent 100 percent of the market’s volume. In contrast, the Fitch study is based on data from a sample of prime funds, representing only 5 percent of the market’s size.

Morten L. Bech, Antoine Martin, and James J. McAndrews

Since October 2008, the Federal Reserve has increased the size of its balance sheet by lending to financial intermediaries and purchasing assets on a large scale. While these actions have increased the amount of reserves in the U.S. banking system and therefore raised concerns about excessive bank lending and inflation, we can document an important and overlooked benefit of the high level of reserves: a significantly earlier settlement of payments on Fedwire, the Federal Reserve’s large-value payment system. Quicker settlement on Fedwire improves liquidity throughout the economy, reducing uncertainty and risk for people and firms that rely on banks. At the same time, the Fed has been extending less intraday credit, which reduces the public’s risk exposure.

Amy Farber, New York Fed Research Library

On November 5-6, 2010, the Federal Reserve Bank of Atlanta and Rutgers University cosponsored a conference titled “A Return to Jekyll Island: The Origins, History, and Future of the Federal Reserve.” It took place at the Jekyll Island Club Hotel on Jekyll Island, Georgia—the same location as the historic meeting that led to the Federal Reserve Act of 1913. A five-minute film called “Jekyll Island and the Creation of the Federal Reserve” tells the story with riveting still images of the participants and setting.

Donald P. Morgan and Kevin J. Pan

Payday lenders make small, short-term loans to millions of households across the country. Though popular with users, the credit is controversial in part because payday lenders are accused of targeting their seemingly high-priced credit at minority households. In this post, we look at whether black and Hispanic households are in fact more likely to use payday credit. We find that, unconditionally, they are, but once we control for financial characteristics—such as past delinquency, debt-to-income ratios, and credit availability, blacks and Hispanics are not significantly more likely than whites to use payday credit.