- Federal Reserve officials argued the pros and cons of a possible policy tool that allows banks to borrow from the U.S. central bank using Treasuries and other securities as collateral, minutes of the Fed’s June policy meeting released on Wednesday showed.
These jumps in interest rates for banks and Wall Street to borrow from one another could disrupt the broader financial markets if they cannot raise enough cash to fund trades or to meet regulatory requirements. Some officials raised concerns that the facility if not properly designed would end up undermining its effectiveness as a policy tool.The facility’s repo rate at a narrow spread above money market rates would “likely provide better interest rate control and could also be helpful in avoiding stigma” with the use of the facility, the Fed minutes showed.
Another issue was the availability of such a repo facility to firms “in different states of financial condition.”
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