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by kortilla
1978 days ago
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Are you saying JPM going down means there is no alternate provider and everyone defaults in 12 hours or if the entire tri-party repo market fails? Those are not even remotely the same thing. I would be shocked to learn that Exxon mobile will go bankrupt in half a day because one bank has an outage. It would speak volumes to how piss-poor financial networks are architected. More realistically, JPM goes down and within an hour all of its large repo clients have already called BNY or whatever and are ready to go. Billion dollar businesses have contingency plans for headquarters being taken out by a bomb, you better believe they have a plan for their repo provider taking a shit. > Lovely Do you not see how ridiculous it is to suggest that the entire functioning US economy hinges on a single service run by a single company being available 24/7? If it were true, it would be a bigger terrorist target than the Whitehouse. Apparently the entire US economy is dependent on the uptime of the work of a few engineers at one company. Better hope that information doesn’t become public or else they will be prime targets for coercion, bribes, nation state level manipulation, etc. These engineers are literally more important than Congress to keep alive and working. |
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Yes. Look up how tri-party repos work [1] and then look up the Fed’s commentary on their fragility.
One of the three legs is either JPMorgan or BoNY. These are short-term but critical loans. If one of those two fails or goes offline, which practically means failure since others can’t verify the other two legs’ liquidity, large swathes of the rates, credit, futures, regular repo and stock loan markets go offline which quite literally will lead to, maybe not Exxon, but the likes GE having payments failures. You can’t “hot swap” JPMorgan to BoNY after the contract has been initiated. It would be like saying it doesn’t matter if your brokerage fails, just call someone else. Sure, for your next trade that’s fine, but in the meantime the failed broker has your assets.
> Better hope that information doesn’t become public or else they will be prime targets for coercion, bribes, nation state level manipulation, etc.
Friend is a senior IT guy at BoNY. They are regularly in touch with the Fed and FBI. It’s a known vulnerability, and there is constant scholarship and policy work on nationalising or reforming the tri-party repo market. But it’s never failed, and it’s profitable work for the two champions, so for now there are higher priorities for legislators.
Also, there are loads of these centralised pressure points in our system. In every modern financial system. Cede & Co., the Fedwire system, ADP, et cetera.
[1] https://info.bnymellon.com/rs/651-GHF-471/images/BNY_Tripart...