Suggestions
M. Meraj Allahrakha
Liquidity at FDIC
M. Meraj Allahrakha
M. Meraj Allahrakha is a Complex Financial Institutions Specialist at the Federal Deposit Insurance Corporation (FDIC). His LinkedIn username is m-meraj-allahrakha-80587537.
Experience
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Capital Markets Policy Analyst, FDIC As a Capital Markets Policy Analyst, Allahrakha works with his team to implement regulation and monitor news and trends in the financial sector that impact banks.2
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Vice President for Supervisory Risk and Surveillance (SRS), Federal Reserve Bank of Dallas From September 2018 to July 2022, Allahrakha had oversight for six teams, approximately 40 people, in SRS at the Federal Reserve Bank of Dallas.1
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Financial economist, Office of the Comptroller of the Currency From October 2010 to September 2014, Allahrakha worked in OCC's Economics and Policy Analysis group, focusing on international macroeconomic and financial issues, interest rate and liquidity risk, and large bank trends.1
Education
Certifications
- Chartered Financial Analyst (CFA)1
Languages
- Russian, professional working proficiency1
Highlights
This is an interesting conundrum. The basis trade is useful/necessary for the smooth functioning and pricing of Treasuries, but is also a potential financial stability threat. The Fed is to blame for shrinking their balance sheet with QT, and providing the standing repo facility (which helps this trade happen indirectly), and the (correct) expectation that the Fed will step in and save the day if anything goes wrong.
It’s a nice delicate balance. You know what I think would help? Transparency. Maybe some real reporting. We don’t even know how crowded this trade is - we only have proxies. Markets will decide what funds are too leveraged (500x???) and counterparties and adjust margins and haircuts to manage risk. That seems cleaner than hard leverage limits or dealer requirements (which will inevitably be circumvented). IM revisions could be nice too.
Or maybe the Fed lets hedge funds fail and lets treasuries spike and spiral out of control for a few weeks?
One thing I’d like to NOT see is the big banks using this as an opportunity to convince lawmakers and regulators to remove treasuries from leverage ratio calculations to “free up capital to allocate to these low margin trades”.
The debt-fuelled bet on US Treasuries that’s scaring regulators
I’m seriously concerned about all of this consumer credit. Between affirm and klarna and afterpay and now apple - getting an accurate picture of household credit is going to be difficult. Who has balance sheet information for any of these BNPL companies? What’s the total outstanding amount for US across all BNPL companies?
