The bankers huddled with Hank Paulson and Tim Geithner at the New York Fed's downtown Manhattan office on the weekend of the Lehman crisis were there because they played a central role in the provision of global credit. I say this because the size of the balance-sheets of the broker-dealers is the best available explanatory variable for global asset prices. I use broker-dealers, market-makers, and banks interchangeably to mean the small number of big banking firms that make markets, have access to the Fed's window, and maintain large positions in the wholesale lending market. Their importance comes not just from their trillion dollar balance sheets but also from their role as marginal providers of US dollar credit.
Dealer Balance Sheets
Dealer Balance Sheets
Dealer Balance Sheets
The bankers huddled with Hank Paulson and Tim Geithner at the New York Fed's downtown Manhattan office on the weekend of the Lehman crisis were there because they played a central role in the provision of global credit. I say this because the size of the balance-sheets of the broker-dealers is the best available explanatory variable for global asset prices. I use broker-dealers, market-makers, and banks interchangeably to mean the small number of big banking firms that make markets, have access to the Fed's window, and maintain large positions in the wholesale lending market. Their importance comes not just from their trillion dollar balance sheets but also from their role as marginal providers of US dollar credit.