A bank pledges collateral and the Fed loans them the money. Credits their account. Later, the Fed sends back the collateral, takes the money back.
Thanks for the explanation, regardless.
A bank pledges collateral and the Fed loans them the money. Credits their account. Later, the Fed sends back the collateral, takes the money back.
The fed reserve has money/prints money. They give say $10 billion to citi for ‘mortage back securities’ at 5% interest for 30 days. At 30 days later, Citi pays back the $10 billion cash + 5% interest on 30 days. While it is a temporary monetary injection, it’s removed in 30 days or less. It’s usually 7 days or less but the Fed increased it to 30 in August when the sh!t hit the fan.