Bloomberg NewsJPMorgan Chase & Co CEO Jamie Dimon said Friday that the turmoil in the plumbing of the financial system last month may be precursor of a bigger crisis if the Federal Reserve doesn’t learn from the experience.
During a moderated discussion at the Institute for International Finance meeting in Washington, Dimon said problems in money markets, a crucial source of funding for Wall Street, was exacerbated due to regulations that currently tie up bank’s extra cash parked at the Fed.
As a result, Dimon said his firm, and other major money-center lenders, couldn’t step in and sop up Treasury debt, in the so-called repo market at a key period. That lack of liquidity in the repo market resulted in short-term rates spiking by at least 10% in September, even though banks like JPMorgan were able and willing to step in to relieve the pressure in the system and lower key lending rates.
JPMorgan JPM, +0.17% has $120 billion parked at the Fed now, Dimon said. The balance regularly goes down to $60 billion, but not much below that level because of regulatory rules……More Here