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"asset" Who values what the asset is worth? That was the key issue with the 2008 crash. Banks were making up what the assets were worth and rating agencies wer
by MichaelApproved 7y ago
"asset"
Who values what the asset is worth? That was the key issue with the 2008 crash. Banks were making up what the assets were worth and rating agencies were rubber stamping them. When the music stopped, people realized those assets were garbage.
- quickthrowman 7y agoRepo loans are secured with US Treasuries and Agency Debt, which are priced by market participants as “risk-free” assets due to the creditworthiness of the US Government. Treasuries are the most highly liquid securities in the world. There are no toxic assets involved in the repo market.
- NovemberWhiskey 7y agoThe only things that are eligible for the Fed repo operations are Treasury securities, agency direct obligations (i.e. other US Govt debt that's not in the form of a Treasury) and mortgage-backed securities issued by Fannie Mae/Freddie Mac/etc.
- aguyfromnb 7y ago>When the music stopped, people realized those assets were garbage. They weren't "garbage"; they were worth less than expected at the time they needed to be liquidated. This caused major problems (obviously), and it's precisely why the Fed stepped in to provide liquidity. Many of those so-called garbage assets turned out to be great investments.
- MichaelApproved 7y ago> Many of those so-called garbage assets turned out to be great investments. Because they were sold at garbage prices. People buy recycled trash and make money doing it but that trash is still garbage.