Description
This paper presents the findings of original archival research about controversies over repurchase agreements (‘repos’) on the Federal Open Markets Committee (FOMC) in the early 1950s. It is part of a broader, comparative historical project into the political origins of shadow banking in the United States encompassing Eurodollars and promissory notes (1948-1966). The paper’s primary aim is to show that while the Federal Reserve engaged in ‘creative lawyering’ to extend repurchase agreements to nonbank dealers in Treasuries (in contravention of the Federal Reserve Act), this move did not go uncontested. In particular, Governor Robertson regularly dissented from the extension of repos to dealers, culminating in a speech given to the FOMC meeting of 20 October 1954 where he excoriated the practice. Robertson argued that repos are loans in disguise, that their low rates privileged dealers over member banks, and that the automaticity of their provision by the New York Fed had disempowered monetary policymakers. Based on research into Robertson’s personal correspondence at the Library of Congress, this paper provides the backstory to Robertson’s intervention and utilises its findings to reflect on the dynamics of “rule evasion from above”. I theorise the ever-greater provision of repos to nonbank dealers on increasingly liberal terms as a paradoxical case of what historical sociologist Michael Mann conceptualises as “social caging”, with implications for understanding and explaining the proto-institutionalisation of these shadow banking markets.
