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Non-Tech : Money Supply & The Federal Reserve
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To: Cush who started this subject8/8/2002 9:28:32 PM
From: Cush  Read Replies (1) of 1379
 
Here's a link to a great post by UnBelievable.

Message 17651964

Here's part of it-

Daily FOMC activity is generally made public about 10:00. Some information usually appears on this site: biz.yahoo.com while the details are made available usually a little later at the Feds. site at app.ny.frb.org. For those not familiar with FOMC activity there is a very good explanation at their site: newyorkfed.org under the heading Monetary Policy. Within that article there is a link on FOMC which also provides further information.

For those who want a brief summary:

The Federal Reserve Open Market Committee (FCOM) is part of the Federal Reserve Bank Of New York. They have responsibility on a daily basis to intervene in treasury bill market to "fine tune" the amount of liquidity available.

The way they do this is by temporarily lending cash against treasury bills (to increase liquidity) or by borrowing cash (to decrease liquidity) from primary dealers. When the FOMC wants to increase liquidity they will temporarily make a loan to a group of securities firms designated as primary dealers with the treasury bills which the firm own as collateral. This transaction is called a a Repo or RP. While RP's are usually only for the day (Overnight ON) they can be for a greater length of time such as 3, 4, or 28 days. For this reason the information provided at the Fed's site about that days activities is really only useful when considered in the context of any other RP's which had been made in the past with more than a days duration.

While theoretically RP's increase overall liquidity, in fact the cash is used by the primary dealers to buy stock or stock futures, thereby supporting stock prices. Of course when the RP expires the money exits the market.
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