Assets don’t equal cash. Cash is liquidity. Without it, banks can’t make transactions. And due to post 2008-crisis rules, banks have to maintain a higher percentage liquidity. In the view of the fed, they would rather inject cash than return this requirement to pre-crisis levels.

This isn’t the fed giving away money, it’s nothing at all like startup capital.

Economics are complex. Don’t be outraged that the fed is trying to maintain a stable economy.

Why can't the banks sell stuff to achieve the proper liquidity percentage?

Well, you need buyers for one. And those buyers need cash. (And where do they get the cash... the repo market)

Banks don't want cash. Cash sucks in terms of value. It's liquid, but it is constantly losing value due to inflation. Assets typically appreciate in value, so it is in the best interest of banks to maximize assets and minimize cash. You trade liquidity for value/earning potential. (Just thinking about opening a certificate of deposit at a bank compared to a money market or savings account. Lower liquidity == Higher interest rate)

The repo markets exists so that banks don't have to hold tons of cash. If it didn't, banks would need TONS of cash on hand for all of their transactions, and it would significantly devalue them.

So there's not enough cash in circulation for banks to sell some of their assets marked down?

In some sort of bad event won't the be unable to pay back the one day loan and so the fed is just helping them juke the required liquidity ratio?

It's not a matter of cash in circulation. It's just against the incentive of banks to hold any more cash than necessary.

> Don’t be outraged that the fed is trying to maintain a stable economy.

The explanation for the FEDs doing the lending is it will spike short term rates or something. Why can't we be mad that the Fed is willing to do this? Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit?

> Like what if I'm one of the institutions waiting on the sidelines to make some money off of short term lending and the Fed keeps tamping down on what could be a source of profit?

That's the problem. If you are one of these institutions, you're setting your interest rate much higher than is healthy for the repo market.

..but the omniscient Fed knows better than the market?

Is that what you are saying?

Well, they're part of the market.

They have their judgments just like every other entity in the market. They use their best judgement to know that the repo market needs a cash injection.

They're not infallible, but as regulators... their job is to regulate.

Nonetheless, $200-billion has been added to the money supply. (See FRED M2 Index link below from September 19 to the present)

$200-billion could have been implemented for more worthy projects than the repo market. In my opinion, the FED needs more oversight from Congress and/or the Treasury.

https://fred.stlouisfed.org/series/M2

This is not an equity investment, those 20,000 startups would need to return the money the next day.

> I believed they infused over $200-billion this year. That is equal to giving $1-million in startup capital to 20,000 startups.

Only if the startups are each going to pledge $1 M in treasury bonds, and return the money the next day (or in two weeks, the article also mentions the 14-day repo market).

> That is equal to giving $1-million in startup capital to 20,000 startups.

No, it's not. The Fed is just providing short term liquidity.

20k * $1m does indeed equal $200b...but they are most definitely not the same thing.

20k * $1M is $20B, not $200B.