Foreign Banks and Fed RRP; 401k Suit
Dow Jones writes, "Use of Fed's Foreign Repo Program Grows -- Abreast of the Market." It says, "Foreign central banks have sharply increased their overnight deposits in a Federal Reserve program that pays more than some prevailing money-market rates, the latest shift to reverberate through short-term global lending markets. Use of the Fed program, known as the foreign repo pool, has doubled over the past year to $250.8 billion as of the week ended Feb. 17, central bank figures show, reflecting growing balances held by overseas government-related institutions. Analysts and traders said that a recent increase in one-month Treasury-bill rates was likely driven in part by increasing use of the program.... The influx is striking for a decades-old Fed facility -- run by the Federal Reserve Bank of New York -- that for years hovered in the tens of billions of dollars and captured little attention as foreign central banks used it to manage their daily investments." It continues, "The Fed keeps some details of the foreign repo program confidential, including users' identities, the daily market-based rate, and how that rate is derived, in part to protect activity by foreign official institutions.... "We would like to know how the rate is determined because we want to have a clearer understanding of how the program is interrelated with the demand for bills," said Joseph Abate, money markets analyst at Barclays PLC. Dow Jones adds, "The balances have also risen as use of a domestic overnight reverse repo facility maintained by the New York Fed is waning. Fed officials lifted a $300 billion cap on that program to around $2 trillion in December, but the domestic repo program took in only $35 billion on Tuesday, its lowest level since last April." It goes on, "Peter Yi, who oversees about $230 billion of short-term fixed income products at Northern Trust Asset Management, said central bank's use of the foreign repo pool has been contributing to higher Treasury bill rates." Also, in some of the craziest news we've ever heard, some 401k plans participants are suing over Vanguard's fees. Pensions & Investments writes, "Chevron 401(k) participants sue company over high fees, underperforming funds." The article says, "Participants in Chevron Corp.'s 401(k) plan have sued the company and plan executives, alleging breaches of fiduciary duty for, among other things, paying "unreasonable investment management fees," providing a money market fund instead of a stable value fund and offering underperforming mutual funds.... The complaint alleges the Chevron plan has offered a Vanguard Prime Money Market Fund as its sole capital preservation option since February 2010. Chevron "imprudently and disloyally ... failed to provide a stable value fund as the plan investment option" in violation of the plan's investment policy statement to "provide a high degree of safety and capital preservation," the complaint said." In January, Investment News also wrote, "New 401(k) suit targets Vanguard fund fees."
