Professor Elam

Tuesday Sept 24, 2019

Here is a concise explanation of the repo market.

The repo market is a system of overnight loans paid back the next day.  Collateral should be low risk Treasury securities. The narrator explains how Lehman got in trouble, using low grade collateral and eventually there was no one on the other side of the trade. And Lehman was issuing short term commercial paper in its own name while borrowing 10x that amount to purchase  longer term sub prime mortgages