The Financial Times writes "Proposed US tax would hit repo industry". The article says, "The proposal to subject some bank liabilities to a financial crisis responsibility fee highlights the unintended consequences of regulating an industry that depends on an obscure but crucial funding model. The $3,800bn US repurchase or repo market, in which securities are used as collateral for short-term loans, is reeling from the proposed FCR [financial crisis responsibility] fee." The piece speculates that the fee would apply to repo, quoting Scott Skyrm, senior vice-president at repo broker Newedge, "A 15bp tax on bank assets above $50bn will have a devastating effect on the repo market." The FT also quotes Joe Abate, money-market strategist at Barclays Capital, "We expect significant changes to the proposal as the current version could potentially create significant distortions in money markets. Indeed, one way banks can reduce their FCR [fee] liability is to cut back on lending, which is clearly not the administration's intent." Also, see FDIC's "Final Rule Amending the Risk-Based Capital Rules to Reflect the Issuance of FAS 166 and FAS 167".
