It's no secret that the vast and shadowy "repo market," where a wide variety of banks and investors pawn their assets in exchange for short-term loans, has had a tough time of it in recent years. It was ground zero for the financial crisis, and the size of the repo market has since fallen off a cliff, because of new rules that make the transactions more expensive for banks as well as the deep scars left by the 2008 crisis.
Yet the repo market is important to the global financial system. The securities, or collateral, that underpin repo loans help lubricate the overall system.
