Bankers Warn Liquidity Crisis Looms

Written by Swiss America

bank 2907728 640Bank heads warn of looming liquidity crisis -Axios
"A growing number of market analysts are voicing concerns that the repo market shock in September may have been the first signal of a wide-ranging liquidity shortage, and now those warnings are being echoed by the heads of major banks...

Even with the Fed's commitment to pump $60 billion a month into financial markets, there still may not be enough funding because of regulations, changes to market structure, and banks' desire to keep their reserve levels high. Strategist from JPMorgan, Goldman Sachs and Bank of America sent recent notes also warning of the funding issues. Additionally, the increase of passive investments and major flows from pension funds and large asset managers into private equity funds is drying out typical sources of liquidity to the stock market and could mean major outflows in the face of bad news....The shadow banking sector is largely private and little is known about how much money the insurance companies, hedge funds, private equity funds and payday lenders that make up the industry actually have. IIF president and CEO Tim Adams likened it to the market for mortgage-backed securities before the housing bubble burst in 2007, triggering the global financial crisis."

Category: