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This is a very good point. My take is that the Fed is trying to be vigilant amidst indicators of a looming recession. If the repo market rate is too high, bank
by bransonf 7y ago
This is a very good point.
My take is that the Fed is trying to be vigilant amidst indicators of a looming recession. If the repo market rate is too high, banks will hoard cash. Hoarding cash will devalue the banks, and we know that'll likely trigger a definitive recession.
- privateSFacct 7y agoNo question - but why not have some of these banks pay some high overnight rates? They have the money to do so. This push to squeeze every nickle of profit out leaves almost no margin if stress hits. The repo market is huge. If there ever is a real scare and people are used to be able to get free money (or expect the fed to step in) the fed will have to step in on a HUGE basis.