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Fed, After Pushing to Reform Repo Market, Is Now Its Biggest Player

The U.S. Federal Reserve, after pushing Wall Street firms since the financial crisis to reduce risk in the $2-trillion-plus short-term lending arena known as repo, has quietly become the market's biggest player.

Repo loans, technically called repurchase agreements, have been used for more than a century by Wall Street firms and traders to buy bonds with borrowed money, under a strategy designed to multiply returns. The market is so vital that Lehman Brothers' loss of repo financing in 2008 helped drive that firm into bankruptcy.