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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: GraceZ who wrote (234034)4/7/2003 12:55:49 PM
From: UnBelievable  Read Replies (1) of 436258
 
It Like Saying The Broker Who Lends You Margin

Is lending it to you against money that you have loaned to the Broker and for which he is paying you a higher rate of interest than he is going to charge you for the loan.

This is a very attractive arrangement. And there are a number of firms that would like to get as much of that as they can. Even though the RP's are done on a competitive bid basis they always receive at competitive prices bids for more funds then they are going to lend.

So the Fed has the ability to award the RP's to those primary dealers whose view of what they want to do with the money is consistent with the Fed's view of what needs to be done.
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