Repo, Baby, Repo

[Crewleader]

October 23, 2013

How Unregulated Banking Triggered the Crash of '08
Repo, Baby, Repo

by MIKE WHITNEY

“Repo has a flaw: It is vulnerable to panic, that is, ‘depositors’ may ‘withdraw’ their money at any time, forcing the system into massive deleveraging. We saw this over and over again with demand deposits in all of U.S. history prior to deposit insurance. This problem has not been addressed by the Dodd-Frank legislation. So, it could happen again.”–Gary B. Gorton, Professor of Management and Finance, Yale School of Management (lifted from Repowatch)

Subprime mortgages did not cause the financial crisis, nor did the housing bubble or Lehman Brothers. The financial crisis originated in a corner of the shadow banking system called the repo market. That’s where the bank run occurred that froze the secondary market, sent prices on mortgage-backed assets plunging, and pushed the financial system into a death spiral. In the Great Crash of 2008, repo was ground zero, the epicenter of the global catastrophe. As analyst David Weidner noted in the Wall Street Journal, “The repo market wasn’t just a part of the meltdown. It was the meltdown.”

http://www.counterpunch.org/2013/10/23/repo-baby-repo/

[Demeter]

1. Amen!

[pscot]

2. How does the little guy

with maybe 50 or 100k in an IRA protect themselves? Are there any options beyond bank CD's?

[Crewleader]

3. Hi pscot

Maybe someone here could answer that question.