by This is Financial Accounting not Regulatory Accounting but in any case the transaction here adds BOTH an Asset and a Liability: Currently, accounting standards require that repurchase agreements appear on balance sheets this way: First, repo borrowings are netted with repo loans when conducted with the same company, and only the net amount appears on the balance sheet. Then (1) the borrower reports the net new cash as an addition to cash assets, (2) it keeps the repoed securities in the investments section of its assets, and (3) it reports the net new debt as an addition to collateralized financing liabilities. So the functional equation of bank regulation (iow MMT's axiomatic 'banks are constrained by Capital!') expressed as the functional equation (A-L)/A = CsubL will be reduced
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This is Financial Accounting not Regulatory Accounting but in any case the transaction here adds BOTH an Asset and a Liability:
Currently, accounting standards require that repurchase agreements appear on balance sheets this way: First, repo borrowings are netted with repo loans when conducted with the same company, and only the net amount appears on the balance sheet.
Then (1) the borrower reports the net new cash as an addition to cash assets,
(2) it keeps the repoed securities in the investments section of its assets, and
(3) it reports the net new debt as an addition to collateralized financing liabilities.
So the functional equation of bank regulation (iow MMT's axiomatic 'banks are constrained by Capital!') expressed as the functional equation (A-L)/A = CsubL will be reduced by introduction of additional repurchase agreements by the Central Bank... ie BOTH A and L are increased for the term of the Agreement...
Obviously the current Fed policy of increasing Reserve Assets at the Depositories by conducting Repurchase Agreements between the Fed and the Depositories so the Depositories "have more Reserves to lend out!" (ie unqualified people reifying the accounting abstractions) is not helpful and imo damaging the credit system and leading to the current severe reduction and volatility in risk asset prices..
We have THE WRONG PEOPLE running the Central Bank.... this is the problem...