WSJ says "​Repos Played a Key Role in Lehman'​s Demise"

The Wall Street Journal writes "​Repos Played a Key Role in Lehman'​s Demise". The article says, "​Six weeks before it went bankrupt, Lehman Brothers Holdings Inc. was effectively out of securities that could be used as collateral to back the short-​term loans it needed to survive. The bank'​s subsequent scramble to stay alive exposed the murky but crucial role that short-​term lending, done in a corner of Wall Street known as the repo market, plays in the financial world." It continues, "The battles Lehman had show that the repo market, which is the lifeblood of Wall Street, often isn'​t as simple and routine as some investors believe. The basic mechanics involve firms raising cash to fund their operations by posting high-​quality assets, with a simultaneous obligation to repurchase them within days.... [​F]​actors combined with collapsing market conditions put repo agreements into a tailspin." The Journal quotes Stephen Lubben, a professor at Seton Hall, "The basic problem is that the investment banks have become highly dependent on the repo markets for their funding ... but they were using a whole bunch of nontraditional securities for those repo agreements." It adds, "The rare look into the repo market embedded in the report comes 18 months after Lehman Brothers collapsed in the U.​S.'​s largest bankruptcy filing."

MMMF Assets Drop Below $​3.​1 Trillion

ICI'​s latest weekly "​Money Market Mutual Fund Assets shows assets falling below the $​3.​1 trillion level for the first time since November 2007. Yesterday afternoon'​s release said, "Total money market mutual fund assets decreased by $​36.​22 billion to $​3.​090 trillion for the week ended Wednesday, March 10, the Investment Company Institute reported today. Taxable government funds decreased by $​18.​82 billion, taxable non-​government funds decreased by $​12.​35 billion, and tax-​exempt funds decreased by $​5.​05 billion." Year-​to-​date, money fund assets have declined by $​203 billion, or 6.​2%, with institutional assets falling $​169 billion, or 7.​6%, and retail assets falling $​34 billion, or 3.​2%. Over 52 weeks, money fund assets have fallen a startling $​816 billion, or 20.​9%. (​Institutional assets have fallen $​485 billion, or 19.​1%, and retail assets have fallen $​331 billion, or 24.​3%.) In other news, see "​FDIC Board Approves An Extension Regarding the Safe Harbor Protection for Securitizations", which says, "The Board of Directors of the Federal Deposit Insurance Corporation (​FDIC) today approved by notational vote an extension through September 30, 2010 of the Safe Harbor Protection for Treatment by the FDIC as Conservator or Receiver of Financial Assets Transferred by an Insured Depository Institution in Connection With a Securitization or Participation." (​The ASF send out a release too.) Finally, see The Wall Street Journal'​s "​Reserve Management Demands Trial in Fraud Case".

Fitch Europe Money Market Fund Primer

A press release posted on Nasdaq.​com says, "Fitch Ratings has released a primer for investors on European Money Market Funds (​MMFs) which provides clear and key insights into the EUR1.​3trn sector, as well as explaining how different funds operate and the risks they present among other factors. The primer, which is presented in an easy-​to-​navigate question and answer format, aims to answer investors' questions about money market funds, such as who bears the risks, the differences between MMFs and other cash instruments, and which risks are embedded in such funds among other pointers. In addition, Fitch provides additional information explaining how the agency rates money market funds, and on its new MMF rating scale introduced in October 2009." Aymeric Poizot, head of Fitch Ratings EMEA Fund and Asset Manager Ratings group says, "Fitch provides MMF ratings to help investors compare between funds and distinguish between true/​traditional money market funds and so-​called liquidity plus or enhanced cash funds whose risk profiles may be more akin to short-​term bond funds.

Federal Register Version of SEC'​s Money Market Fund Reforms Posted