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The repurchase market and shadow banking: Tips for localizing

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These tips will help you track down repo stories in your local coverage area.

By Mary Fricker

How can reporters cover this beat in their own backyard? Where should they begin?

Earnings: One good place to begin would be with earnings reports. Every local earnings story should include a look at where the organization gets its money.

Here are some other ideas, with examples. Search these documents for “repurchase agreement.” Notice whether the organization is a repo lender or repo borrower or both.

Traditional banks: See the 10K annual report or the FDIC filing or the Call Reportfor Sterling Savings Bank, a Spokane, Wash., bank with branches in my county.

Pension plans: See the annual report from CalPERS, the biggest U.S. public pension fund.

Municipalities: See the annual report for my county, Sonoma County, in northern California, population about 450,000.

University endowments: See the financial statements for the Sonoma State University foundation, in my county.

Insurance companies: See the 10-K annual report for American International Group.

MORE on COVERING
THE REPURCHASE MARKET
AND SHADOW BANKING

An introduction
Resources
Story ideas
Tips for localizing

Real estate investment trusts: See the 10-K annual report for Redwood Trust, Inc. Many REITs use repo loans to finance their purchase of mortgage securities.

Giant bank holding companies: See the 10-K annual report for J.P. Morgan Chase, the largest bank holding company in the U.S.
(Large repo lenders like J.P. Morgan can reuse the repo collateral they receive, putting it up as collateral to get repo loans for themselves and creating a daisy chain of debt. Check out this 10-K’s Note 30, which tells that at the end of 2011 J.P. Morgan had reused $515.8 billion of the collateral it had received as a repo lender and in other capacities.)

Non-bank companies: See this 10-K annual report report for Costco Wholesale Corporation. Search for “repurchase agreement,” and also search for “short-term investment.” In this 10-K, Costco is a repo lender. How safe is the collateral they accept? If Costco suddenly becomes a repo borrower, why?

Money market funds:
(1) The new monthly filing that the SEC requires of money market funds gives details of the fund’s repurchase lending, including the types of securities it takes as collateral.
Go to www.sec.gov.
Click on the “Filings” heading
Click on “Search for company filings”
Click on Mutual fund name, ticker, or SEC key (since Feb. 2006)
Enter name or ticker symbol for fund and press “Fund Search”
Click on the number of the money market fund you want
Click on the most recent N-MFP filing
Click on the document
Search for “repurchase agreement”
(2) Also search for “repurchase agreement” in a fund’s Prospectus, usually available on the company’s web site. For example, see Vanguard’s Statement of Additional Information for its Prime Money Market Fund.

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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