Back in the day, when the sophisticated deep thinkers who effuse deep economic thought, were deeply contemplating whether the Fed’s IOER was a better tool to assist if and when (hint: never) the Fed begins to hike rates, or whether the relatively new (conceived about a year ago) Reverse Repo was the better candidate to help push liquidity out of America’s bloated financial institutions, we made it very clear that the entire debate is completely irrelevant, as the only purpose of the Reverse Repo was to assist banks in pretending (with the Fed’s explicit knowledge) that they have a better balance sheet than they represent.
We did this first in January in “Window Dressing On, Window Dressing Off… Amounting To $140 Billion In Two Days”, then in April in “Month-End Window Dressing Sends Fed Reverse Repo Usage To $208 Billion: Second Highest Ever“, then in June “WTF Chart Of The Day: “Holy $340 Billion In Quarter-End Window Dressing, Batman“, then in July “Record $189 Billion Injected Into Market From “Window Dressing” Reverse Repo Unwind.”
Of course, the abovementioned deep thinkers ignored this because it would mean that all the argumentation about the Reverse Repo facility as a means to assist the rate hiking cycle was irrelevant, and that instead of hiking rates the Fed was far more concerned with the collateral shortage that the TBAC loudly complained about in the summer of 2013… just months before the RRP was unleashed (recall “Desperately Seeking $11.2 Trillion In Collateral“). Pure coincidence, right?
This post was published at Zero Hedge on 09/30/2014.
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