Re: A message from Prof. Auerbach
February 03, 2009 at 13:28 PM EST
[Skip to the end] (email exchange) Robert has it wrong. There are excess reserves because the Fed has decided to not do what it used to do, sell or ‘reverse out’ its securities to offset operating factors that caused reserves to increase. These operating factors include Fed purchases of securities. The reason the Fed would ‘drain’ excess reserves was to [...]