Re:For the First Time, the Fed Is Losing Money
by JumpCrisscross on Tuesday March 28, 2023 @12:45AM
(#35336024)
> misses the point of why Reverse Repos were created. IMO, it's to allow the biggest banks who cannot find a way to effectively and safely put their enormous pile of money to work in the economy to still get a return on it
The history is more complicated [1]. Modern repos are also all about finding non-bank channels through which the Fed can influence the economy. (When done with banks, it's to induce them to not lend their reserves to each other.)
Again, your complaint is much more apt for interest on reserves. Repos aren't unique to the Fed. IOER pays banks for parking money in an account at the Fed.
> seemingly designed precisely to avoid scrutiny
I'd argue it's more about competing interests and anachronisms. (The Fed is, almost to a fault, tremendously transparent.) Why does the Fed have private bank shareholders? Because of irrelevant details from a hundred years ago. Is it confusing? Yes. Is it a priority to fix? No.
The history is more complicated [1]. Modern repos are also all about finding non-bank channels through which the Fed can influence the economy. (When done with banks, it's to induce them to not lend their reserves to each other.)
Again, your complaint is much more apt for interest on reserves. Repos aren't unique to the Fed. IOER pays banks for parking money in an account at the Fed.
> seemingly designed precisely to avoid scrutiny
I'd argue it's more about competing interests and anachronisms. (The Fed is, almost to a fault, tremendously transparent.) Why does the Fed have private bank shareholders? Because of irrelevant details from a hundred years ago. Is it confusing? Yes. Is it a priority to fix? No.
[1] https://www.richmondfed.org/publications/research/economic_b...