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Photo illustration: Drew Angerer/Getty Staff; Aïda Amer/Axios

The banking industry has argued in recent weeks that the problems in the systemically important repo market are the result of excessive regulations and could result in larger and more damaging liquidity events in the future.

Driving the news: Sen. Elizabeth Warren wrote to Treasury Secretary Steven Mnuchin on Tuesday to call foul and request an explanation of what's really going on in the market.

Background: Rates in the repo market that banks use to access quick cash spiked last month, reaching five times their normal level.

  • This prompted the Fed to step in with emergency funding, and now daily cash injections and a standing $60 billion a month facility.
  • Bankers, research analysts and fund managers have worried that the turmoil portends larger problems in the equity and bond markets and could lead to a wide-ranging liquidity crisis.

What's happening: Bank lobbying groups and a handful of CEOs have said the problem stems from too much regulation of the financial sector.

  • “Recent repo market volatility highlights ... how policies intended to promote financial stability can sometimes frustrate it," Bank Policy Institute chief economist Bill Nelson told Axios.
  • JPMorgan CEO Jamie Dimon said last week that his bank had the capital but was unable to step in to calm the spiking repo market because of liquidity requirements.
  • State Street CEO Ron O'Hanley said Saturday that regulations will lead to more liquidity issues.

Between the lines: In her letter to Mnuchin, Warren said she's not buying the argument and the Treasury Department and Financial Stability Oversight Council, which Mnuchin chairs, should not buy it either.

  • “Banks are reporting profits at record levels, and it would be painfully ironic if unexplained chaos in a small corner of the banking market became an excuse to further loosen rules that protect the economy from these types of risks.”
  • Just last week, the Fed and four other regulatory agencies approved the rollback of some restrictions on banks' adherence to the Volcker rule.

Warren isn't the only one who's dubious of the banks' cries for reduced regulation. Minneapolis Fed President Neel Kashkari told Axios that his patience is "basically gone" for bank complaints about reduced liquidity.

  • Kashkari points to the Fed already providing a discount window where banks can access cheap emergency funding to deal with exactly the sort of liquidity squeeze that hit the repo market.
  • "The banks are using this as a manufactured crisis," Americans for Financial Responsibility policy director Marcus Stanley told Axios. "They do that all the time and they’re doing it here. ... We’ve seen the damage that deregulated finance can do and it’s very extreme and long-term damage."

Go deeper

Exclusive: Don Jr. tells Georgia Senate voters that Trump is on the ballot

Photo: Eva Marie Uzcategui T./Anadolu Agency/Getty Images

In a six-figure radio ad being released in Georgia today, Donald Trump Jr. tells the state's voters that the U.S. Senate — and his father's accomplishments — are on the line during January's special election, according to audio obtained by Axios.

Why it matters: Trump Jr.'s first of many advertisements in the Georgia Senate races argues the race isn't just about electing the Republican incumbents, but also about preserving President Trump's agenda.

Dion Rabouin, author of Markets
2 hours ago - Economy & Business

Everyone's bullish

Illustration: Sarah Grillo/Axios

Following positive vaccine news and the run-up in global equities punctuated last week by the Dow hitting 30,000 points, investors are again throwing caution to the wind and growing more uniform in their bets that stocks will continue to rise.

Between the lines: The resurgence of traders' risk appetite has some urging caution, as unanimity in either excitement or fear historically has proven to be a contrarian signal for the stock market.

Salesforce rolls the dice on Slack

Illustration: Sarah Grillo/Axios

Salesforce's likely acquisition of workplace messaging service Slack — not yet a done deal but widely anticipated to be announced Tuesday afternoon — represents a big gamble for everyone involved.

For Slack, challenged by competition from Microsoft, the bet is that a deeper-pocketed owner like Salesforce, with wide experience selling into large companies, will help the bottom line.