s/cryptohayesFED PLUMBING•May 15
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Fed's Barr pushes intraday lending to cut bank reserve needs
The Fed is floating a way to shrink its balance sheet without loosening bank liquidity rules. Instead of cutting buffers, the idea is to change how payments clear during the day so banks need fewer reserves sitting idle.
• Barr pointed to intraday lending or a liquidity-saving mechanism to supply daylight cash and reduce reserve demand
• He tied resistance to rule cuts to the 2023 banking stress, arguing weaker liquidity buffers hurt resilience and money markets
That shifts the debate from deregulation to plumbing: fix payment timing so the Fed doesn’t have to absorb daily imbalances with a large reserve stock. A related idea surfaced in March, when Steve Miran floated destigmatizing daylight overdrafts as another balance-sheet tool.
• Barr pointed to intraday lending or a liquidity-saving mechanism to supply daylight cash and reduce reserve demand
• He tied resistance to rule cuts to the 2023 banking stress, arguing weaker liquidity buffers hurt resilience and money markets
That shifts the debate from deregulation to plumbing: fix payment timing so the Fed doesn’t have to absorb daily imbalances with a large reserve stock. A related idea surfaced in March, when Steve Miran floated destigmatizing daylight overdrafts as another balance-sheet tool.
Timeline3
May 14
Barr’s speech warning against shrinking the balance sheet via weaker liquidity rules circulated in markets.
May 15
Commentary highlighted Barr’s mention of intraday lending or a liquidity-saving mechanism as a tool to reduce the Fed balance sheet.
May 15
Commentary noted Steve Miran had also floated destigmatizing daylight overdrafts in March as another balance-sheet reduction tool.
1 comment
May 15