Some researchers disagree. A Stanford Business School study found that 90% of deposits were supported by ultra-secure U.S. treasures. In addition, deposits accounted for only $400 billion of the $2.3 trillion in money fund assets. The researchers concluded that the ”Cash Crunch” occurred in the commercial guarantee market. When the underlying assets lost value, the banks retained securities that no one wanted. It emptied of its capital and caused the financial crisis. A pension contract (repo) is a short-term guaranteed credit: one party sells securities to another and agrees to buy them back at a higher price at a later price. The securities serve as collateral. The difference between the initial price of the securities and their redemption price is that of the interest paid on the loan called the pension rate. An inverted repository is replaced by a repo with the A and B rolls. Rests are popular because they are simple and safe.
Financial institutions such as banks, securities dealers and hedge funds do not have large amounts of cash available. They prefer to put all their money into work. If they need money in a hurry, they can turn to the pension market. On the other hand, money funds have a lot of money. They are happy to lend money to the financial institution overnight for a small fee. The pension market is booming. In addition, retirement transactions have become one of the main sources of financing for owner offices and hedge funds. It is therefore important to understand how retirement operations work. Mr.
Robinhood. ”What are the near and far legs in a buyout contract?” Access on August 14, 2020. A reverse buyback contract (Reverse repo) is the mirror of a repo transaction. In a reverse, a party buys securities and agrees to resell them later, often the next day, for a positive return. Most deposits are overnight, although they may be longer. When the government is in a budget deficit, it borrows by issuing government bonds. The additional debt leaves the major traders – Wall Street intermediaries who buy the securities from the government and sell them to investors – with an increasing amount of collateral that can be used in the pension market.