Repos are supposed to be very short term loans, even over-night. To get troublesome assets off the books they were treated as sales, and then taken right back, as loans, after the accounts were noted as sales.
We hear, for example, how they may have contributed to the financial problems at Lehman Brothers and Citi Bank. We find out everything from media reportage after the problem occurred.
Much of the bookkeeping details that would have tipped off repo use would have been helpful if picked up in time by bank securities analysts.
Why didn’t bank analysts at least have asked banks how repos were being reported?
Federal regulators certainly failed to do so. ( See the Earl J Weinreb NewsHole® comments.)
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