MBS. It was in the bilateral repo market that they could be funded. The best available data suggest that the bilateral repo market was three times larger than the triparty segment.49 Because the players in the bilateral market tended to be investment banks and hedge funds, the types of assets acceptable as collateral were more wide ranging. It is here, along with ABCP and various types of interbank and unsecured borrowing, that the investment banks financed their holding of private label MBS and CDO portfolios. Given the wide range of collateral, haircuts in the bilateral repo market ranged in
...more
