As promised, this report assesses the prospects for federal action in the wake of ongoing repo-market turmoil. We focus here on highlighting FRB actions and renewed regulatory attention to repo risk. We also anticipate Congressional reaction, which we believe will await market stability should that come in the near term and then focus on the extent to which post-crisis bank regulation may have been a contributing factor. The role of the Federal Reserve as a “market-maker of last resort” and the prospects for still larger Fed portfolios and increased IOER are also addressed. Given continuing market turbulence and the longer-term nature of many policy responses, this report is our initial survey, not an in-depth analysis of specific initiatives including the likelihood of changes to monetary policy, U.S. bank liquidity or capital requirements, new securities-financing transaction (SFT) haircuts, the role of the GSEs in the interbank market, and FSOC intervention.
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