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Politics : Ask Michael Burke

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To: accountclosed who wrote (54303)	4/1/1999 9:13:00 PM
From: Kailash	Read Replies (2) of 132070

Thanks, AR - I did mean that as a real question. What I'm not getting from your account is whether any of the money is cumulative, and if not what's the point. If it's not cumulative - if this is just four billion dollars of spare change that banks for some reason find handy to have overnight - then I don't see how it can have an effect on the Fed funds rate. Since the repos are explicitly tied to the funds rate, I find it hard not to conclude that these are funds genuinely being lent to the banks, keeping interest rates low by increasing the supply of money. The obvious anxiety today that the Fed was letting rates slip up by not filling up the trough confirms this conclusion. In brief, it still looks to me like the repos are cumulative, but I'd be happy to be shown wrong. Kailash

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