Fed mulls MBS repo to reduce balance sheet

Appearing before the House Committee on Financial Services last month, Federal Reserve chairman Ben Bernanke confirmed the regulator intends to eventually drain large quantities of cash in the banking system through the use of reverse repurchase agreements.

“To build the capability to drain large quantities of reserves, the Federal Reserve has been working to expand its range of counterparties for reverse repurchase operations beyond the primary dealers and to develop the infrastructure

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