Sort of like, what's happening in the repo market is in, is in some sense sort of like what was happening in the fed funds market, right? Remember I showed you last time, I argued, it was, it was about an inter bank market, right? And about how deficit banks and surplus banks could meet at the end of the day and, and, and trade. The surplus bank could lend to the deficit bank so that this, this is like this, okay? That this bank which is now borrowing overnight. So this is like, this is like the surplus agent. This one's lending overnight. This is, this is the, this is the this one's borrowed. Did I, did I say? So they're borrowing, so they're the deficit agent. And this is the surplus agent. They're lending overnight. and this is the dealer who's standing in the middle, so this is like that HSBC that I said was acting as a Fed funds dealer. In fact, in the Fed funds market, there's not much dealing, it's almost all just brokering. Okay, there's not an actual dealer, but in the in the repo market, it's all dealing. Okay, pretty much, it's, it's mostly on the balance sheet of security dealers that are on one or the other side of these, of these accounts. One or, one or the other side of this market. So, what I'm trying to, this, this image here should have in, should, should give you the impression, which is correct. Okay? That the repo market is like the fed funds market in the sense that it allows deficit agents and surplus agents to meet and to clear the, and to push their liabilities and assets off into another day. That's true. But here, it's almost any agent, right? If you have a treasury bond, you can do repo, okay? it's not, you don't, you don't have to be a bank, you don't have to be a member of the federal reserve system, you don't have to do anything of those things, okay? So, the repo market is for everybody. Okay? And, and, and, and but banks of course can operate in it as well so it's, it's much more democratic, okay, much more open than, than than the Fed, Feds fund market. Why is it that the repo market is a dealer market whereas the Feds funds market is a, is a is a broker market? What did I do with my chalk? Here it is. one of the reasons is because people know the security dealer, okay? There's a very, these are, these are prime dealers, these are big banks, okay? And so having them on the other side of your transaction. Means that you don't have to worry about who, who, who's over there, you just worry about him. You just, you see, you see that name. In a way the dealers are making a, a heterogeneous object, you can imagine, you can repo anything. You know you can repo a corporate bond, you can re, repo a mor, mortgage bank security, you can repo all kinds of stuff, okay. So it's pretty, and you can be anyone. You know, as I said, anyone can be, can be in the repo market. so it's a pretty heterogeneous market, but the dealers are on the other side of all that and that's what makes it homogeneous. Okay, naturally the dealer is borrowing at a lower rate than is lending, okay and he's taking that and he's taking that spread and, and doing, this is just business, and making making a market here as, as well. That is to say many different kinds of agents okay, who are wanting to use repo as a source of funds borrowing. Many different kinds of agents who are wanting to use repo, as a use of funds as something they invest in the kinds of securities that are available to back this are many different kinds in the fixed income market. You know every corporation has it's own security, it has several different classes of security, there, it's not like Treasury bonds, Treasury bonds is kind of a Treasury bond you know and, and yeah they have different maturity's and so forth. But it's the Government, it's pretty standardized it's pretty homogeneous. this is, the, the what makes the repo market homogeneous, is the name of the dealer, okay? Is the dealer who is, who's sort of dictating terms, and making the market, and, and making it, making it homogeneous in this way. There's even, they even have general collateral reto, repo now, so that the dealer is, has permission to replace this collateral with another kind of collateral. So that you don't have to re, you don't have to give back the same kind of collateral that you, that you got, in order to keep it smoother and. So, there, there, it's the, it's the dealer as the central figure, in a, in a way the dealer, it's, it's a liability. Of the of the dealer on both sides. The liability to return securities and the liability to return money. Yes? >> If someone defaults on a repo does anything happen other than losing the collateral [INAUDIBLE]? >> well, you're still like any loan, you are still supposed to. You, you're liable for it, and typically, now I'm going to show you. Typically you want to repay because the collateral is usally more than the value of the loan. So we going to, this, this comes to that. Usually people default on repo. Because they, they don't have the security. There was somebody, somebody bought it from them and didn't return it. it's not because they've gone insolvent. [BLANK_AUDIO]