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By Pancaking Term Loans, JPMorgan Had $30 Billion Outstanding from the Fed’s Emergency Repo Loans in the Last Quarter of 2019

Courtesy of Pam Martens

Jamie Dimon, Chairman and CEO of JPMorgan Chase

Jamie Dimon, Chairman and CEO, JPMorgan Chase

Jamie Dimon, Chairman and CEO of JPMorgan Chase, likes to perpetually brag about his bank’s “fortress balance sheet.” But in the fall of 2019, that fortress needed to borrow huge sums of money from the Federal Reserve – for still unexplained reasons. The trading units of other Wall Street banks also borrowed large sums from the Fed but they haven’t branded themselves as the “fortress balance sheet.”

Yesterday, the Federal Reserve Bank of New York released the names of the banks and the dollar amounts that were borrowed under its emergency repo loan operations for the last quarter of 2019. It had previously released the data for the period of September 17, 2019 through September 30, 2019. The Fed has yet to release the data for the emergency repo loan operations in 2020.

Repo loans, short for repurchase agreements, are supposed to be overnight loans. Corporations, banks, securities firms and money market mutual funds typically secure these loans from each other by providing safe forms of collateral such as Treasury securities. The repo loan market is supposed to function without the assistance of the Federal Reserve. The Fed’s emergency repo loans that began on September 17, 2019 (months before there was a COVID-19 case reported anywhere in the world) was the first such repo intervention by the Fed since the financial crisis of 2008. The Fed has yet to provide a credible explanation for why its emergency operations were needed.

The Fed’s emergency repo operations began as overnight loans. But then the Fed began regularly offering 14-day term loans in addition to the overnight loans. Then it began to add even longer term loans.

Just 24 trading houses on Wall Street (what the Fed calls its “primary dealers”) were eligible for these loans.  A handful of firms took the lion’s share. Until now, neither the public nor the participating banks knew who was under the most severe funding stresses that they had to borrow from the Fed for months on end.

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