2011-05-23 — economicpolicyjournal.com
... the Fed is considering draining the reserves by getting money market funds to conduct reverse-repos with the Fed. This gets a little technical, so just know that if the Fed does reverse-repos with money market funds, it will drain reserves from the system. But the money market funds have nowhere near the cash on hand to do the sizable reverse-repos with the Fed that the Fed may need to do...
Huge sales of short-term paper would panic the markets. It is a very dangerous scenario.
The Fed knows this. When they actually figured this out I am not sure. Trust me, they would have never started paying interest on reserves, if they understood the problem back then.
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