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The repurchase market and shadow banking: A coverage guide

Mary Fricker

Mary Fricker, Photo by Santa Rosa Press Democrat

Mary Fricker was a veteran journalist when she decided to focus her efforts on a new area of coverage – the repurchase market. Fricker had retired in 2006, but she returned to journalism after the financial collapse of 2008 to chase this story.

The repurchase market, or repo market, is the selling of securities with the intention to repurchase the security at a later date, often the next day. The goal is to use the securities as collateral to secure money to be used for investment in another area.

Banks, investment banks and other financial institutions use the method on a daily basis. It’s the main way they lend and borrow money for shadow banking, which is banking that occurs outside traditional deposit-based banking.

Fricker, whose website RepoWatch.org won SABEW’s best business blog in 2012, said although the practice is a key reason for the ferocity of the financial crisis, coverage is still limited.

“The repurchase market is one of the biggest financial markets in the world. It’s a key way the Federal Reserve controls the economy,” Fricker said. “It’s the hidden financing behind many personal investments and business operations. It’s at the heart of shadow banking, which may provide half the credit in this country.”

MORE on COVERING
THE REPURCHASE MARKET
AND SHADOW BANKING

An introduction
Resources
Story ideas
Tips for localizing

“It’s inherently unstable. It triggered the financial crisis in 2007 and 2008. It’s a key reason that our recovery is weak. Yet in 2008, when the financial markets were collapsing, no one I knew had ever heard of it, including me. Now that’s a great story.”

In a multi-part package for the Reynolds Center, Fricker provided some in-depth advice for reporters looking to dive into the repo market.

“Once we understand the danger of short-term borrowing, and once we start looking, we’ll see stories everywhere,” she said “For example, if I were a business reporter in Memphis and this press release crossed my desk on Feb. 6, it would sure make me want to know more about First Tennessee National Bank.”

To learn more about how to cover the repurchase market and shadow banking, use Fricker’s tips in the coverage guide below:

About the Author

The Reynolds Center, created through generous grants from the Donald W. Reynolds Foundation of Las Vegas and operated by ASU’s Walter Cronkite School of Journalism and Mass Communication, is dedicated to improving the quality of business and economics coverage through training programs for business reporters and editors.

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