After the first repo test was a complete failure, the FRBNY has decided to try one more time. However, unlike the large test conducted before, this time the Liberty 33 (in the words of Jeffrey Lebowski "That was me... and 32 other guys") "plan to conduct a series of small-scale, real-value transactions with primary dealers." Anything coming from the New York Fed that has the "real value" stigmata attached to it makes one wonder if April 1 came late this year. We can not wait to report on the near-certain failure that this particular round of repo tests will once again be proven to be, as banks simply can not wait to onboard the toxic filth they so graciously have handed to US taxpayers over the past six months.
As noted in the October 19, 2009 Statement Regarding Reverse Repurchase Agreements, the Federal Reserve Bank of New York has been working internally and with market participants on operational aspects of triparty reverse repurchase agreements to ensure that this tool will be ready if the Federal Open Market Committee decides it should be used. In the coming weeks, as an extension of this work, the Federal Reserve Bank of New York plans to conduct a series of small-scale, real-value transactions with primary dealers. Like the earlier rounds of testing, this work is a matter of prudent advance planning by the Federal Reserve. It does not represent any change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.
These forthcoming operations are being conducted to ensure operational readiness at the Federal Reserve, the triparty repo clearing banks, and the primary dealers. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.
The results of these operations will be both posted on the Federal Reserve Bank of New York’s public website where all temporary open market operation results are posted and reflected as a liability in tables 1 and 9 in the Federal Reserve System’s consolidated balance sheet statements.