Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Well, I guess we would stop doing reverse repos to signal our protesting of the fact that the fed funds rate is trading soft to its targets. That’s the first thing we’d do. I have to say that I think the probability of this happening is extremely remote because banks are balance sheet constrained and therefore aren’t going to do that perfect arbitrage. Maybe in a normal world it would be possible to get fed funds to trade above the interest on excess reserves, but in this world it’s just extraordinarily unlikely. But if it were to happen, we would signal our unhappiness with that, and the first thing we would do is we’d stop doing the reverses that we’ve been doing every day to protest the softness in the funds rate.

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