The Fed and Those Money Market Funds Redux

First and most simply because, as notorious criminal Willy Sutton once said, that is where the money is. And if it stays there, the Fed must find a way to affect it to drain liquidity while mitigating the effects of their actions on specific institutions and sectors of the financial system.

Secondly, there is a strong possibility that the Fed's initial attempts to drain will not only involve reverse repos, but also an increase in the interest rate which it pays on the excess reserves.