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The original was posted on /r/Superstonk by /u/WhatCanIMakeToday on 2025-01-27 15:06:09+00:00.

As the US central bank, the Federal Reserve (“Fed”) has been acting as the Lender Of Last Resort to the financial system by lending through their “discount window”. [Wikipedia, Federal Reserve Discount Window Lending]

One of the core responsibilities of central banks is to act as “lender of last resort” to the financial system. In the U.S., the Federal Reserve has been operating as a lender of last resort through its “discount window” (DW) for more than a century. Historically, however, the DW has been plagued by stigma—banks’ reluctance to use the DW, even for benign reasons, out of concerns that it could be interpreted as a sign of financial weakness. [NY Fed: Can Discount Window Stigma Be Cured?]

It doesn’t take Sherlock Holmes to figure out that if someone is borrowing from the Discount Window of the Lender of Last Resort, they’re probably having financial trouble as nobody else is willing to lend to them.  Which is why nobody wants to be seen as a broke ass scrub [YouTube] doing so…

[1]

Just as nobody wants to be seen going into a pawn shop, financial institutions don’t want to be seen borrowing emergency liquidity [SuperStonk: Let's Talk Liquidity] from the Fed’s discount window.  To avoid this problem of borrowers short of cash looking broke at the discount window, the Fed created a new option for emergency borrowing: Standing Repo Facility (SRF).

Additional Reasons for a Standing Repo Facility

Lending to Banks in Good Standing

There are several other reasons why introducing a standing repo facility makes sense. First, as discussed here, it is a way for the Fed to lend cash to banks that are in good standing and have high-quality Treasury securities as collateral but may find themselves short of cash. Importantly, this facility would not suffer from stigma problems that make the discount window an ineffective tool in these circumstances.

[Federal Reserve: Why the Fed Should Create a Standing Repo Facility]

So in July 2021, just 6 months after the GameStop Sneeze 🤧, the Fed created a new borrowing option for financial institutions short on cash to borrow money; and apparently anyone using this new borrowing option will not look like they’re desperate and in need of cash.  A “safe” side door to the same pawn shop.  The author of Central Banking 101, Joseph Wang, says “Another way to think about the SRF is as a type of Discount Window”.

[2]

Repos are different from the Reverse Repos (RRP) that this community has been tracking. (HUGE Thank You to the RRP apes!) and the Fed has a page about both Repo and Reverse Repo Agreements which links to the daily Fed reports on how much Repo Operations borrowing is accepted at their Standing Repo Facility.  (Similarly, the Reverse Repo Operations page tracked by this community is linked from there.)

The Repo Operations page has a convenient chart which shows us a quick overview of Repo usage where I selected the dates from before Sneeze (Nov 1, 2020) to Jan 17, 2025 (when I started drafting this post).  We can immediately see that repo wasn’t used much early on meaning there was not much emergency borrowing from the Fed, even around the Sneeze.  However, repo usage increases over time with borrowing from the lender of last resort happening more often and more regularly after March 2024. (Coincidentally right when the BTFP Not-A-Bailout Can Kicking Bailout [SuperStonk] expires? I think not!) Looks like one or more financial institutions started running out of cash around March 2024 and started borrowing emergency cash from the Lender of Last Resort (going through the side door instead of the front "discount window" door after the BTFP window closed).

Shortly after troubled financial institution(s) started relying upon the Lender of Last Resort, Roaring Kitty returned in May 2024.  

Idiosyncratic Systemic Risk

WHEN things happen can be very informative.  (The SEC redacting Failure To Deliver “FTD” data is a prime example. [SEC Strategically Failing To Deliver FTD Data, SEC Responds to FOIA Request saying they’re withholding data and that there’s no publicly available data missing.] THANK YOU FOIA APES!)

You may have noticed the $2.6 BILLION 😳 emergency borrowing spike on Sept 30, 2024, a very notable day.  On that day, Roaring Kitty “RK” (aka DeepFuckingValue and Keith Gill) proved that stock prices are fake and the stock market broken by rolling his 🐕 position into GME [SEC Filing for the sell; DD for the roll].  🤔

We can look closer at the time frame when RK returned to see if any of these bigger emergency borrowing spikes correlate with key events of the GME saga and FTD redactions. 

• May 9 is a pretty damn good start as that’s the day Roaring Kitty 👍 a tweet for the movie Run LOLa Run.  Two days later (e.g., on T2 settlement) GME ran, peaking at $64 intraday with a high close of $48.75 on May 14.
• May 16 is interesting as that’s right after GME was slammed down after spiking up to a May 14th high of $64.83.  Was $100M in emergency funding borrowed to push GME back down? 🤔 GME did a 45M ATM Offering the very next day (i.e., May 17) which suggests the possibility GameStop was asked to help smooth things out and banked $933M in the process.
• June 5 is interesting because two days prior BRKA glitched dropping from ~$618,000 to $185 which was followed the next day by a DTCC Bulletin on Unscheduled Closing in the event a former President needs mourning; and these events occurred in between Roaring Kitty’s YOLO posts (6/2, 6/3, and 6/6).  On June 7, GameStop did a 75M ATM Offering ending on June 11 which suggests the possibility GameStop was again asked to help smooth things out and banked $2.1 BILLION in the process.
• June 13 Deep Fucking Value posts another YOLO Update showing he’s acquired 4M more shares and, on the same day, $100M in emergency funding was borrowed.  (GME closed at $29.12 on June 13 where 4M ...

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