Fixing market-based finance: duct tape or deep reform?

Deeper reforms may be needed to avoid stretching central banks’ balance sheets to breaking point

On March 9, 2020, the Federal Reserve Bank of New York increased its overnight repo offering by 50% and doubled its two-week operation. Signs of distress were starting to appear as markets digested news of the spreading Covid-19 pandemic. Central Banking’s reporting at the time highlighted how analysts knew a shock was coming, but were unsure whether it would be particularly severe. Still, Goldman Sachs’ Praveen Korapaty recognised the Fed was in “firefighting mode”.

Within a few days, the fire

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