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July 28, 2021

Fed’s Creation of Standing Repo Facilities are a Dangerous Development

Wednesday, July 28, 2021
Contact: Doug Walker at 202-618-6430 or

WASHINGTON, D.C.—Dennis Kelleher, Co-founder, President and Chief Executive Officer of Better Markets, released the following statement in response to the Federal Reserve’s announcement that it is creating two standing repo facilities, one each for domestic and foreign firms:  

“By creating standing repo facilities, the Federal Reserve has needlessly and permanently inserted itself into private sector markets, dangerously increasing moral hazard and potential risk to the taxpayer and has done so without proper consultation and input from the public.

“The repo market was bailed out by the Fed in the 2008 Financial Crisis, again in the Fall of 2019 during repo market stress, and yet again in March 2020 at the onset of the pandemic. This short-term credit market is an early tripwire for financial crashes because it is ‘hot money,’ moving at the first sign of trouble. The ongoing turmoil in this market has been used by Wall Street’s biggest banks to pressure the Fed to ease leverage restrictions and to backstop the industry’s repo activities. Today the Fed unwisely gave them the latter.

“These standing facilities are unnecessary because the Fed always has the option to set up temporary repo facilities in times of extreme market stress. Today’s action further solidifies the market perception of a permanent ‘Fed put’ and dangerously increases moral hazard in the repo markets.  Also, it is a clear indication by the Fed that the repo market, which is integral to the functioning of banks and the financial system, is unable to operate without ongoing support from the Fed.

“This is even more troubling given the Fed’s failure to have a robust, public input process before making this decision. It should have consulted the public through formal comments as well as open forums, discussing in detail the pros and cons of establishing such facilities. Moreover, the public was not consulted on the alternatives, and so has been unable to assess which option is best for the American people rather than for Wall Street’s broker-dealers and other financial market participants.” 


Better Markets is a non-profit, non-partisan, and independent organization founded in the wake of the 2008 financial crisis to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies – including many in finance – to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit



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