The Fed uses Treasury's money to buy the assets on its books and transfers the assets to the treasury.
This way the assets don't re-enter the market, pushing up interest rates.
At least until Treasury sells them.
Good enough, so far. As long as Treasury keep the assets.
Now, what to do with the remaining $1.2 trillion in securities?
* * * * * J B K * * * * *
San Francisco
The Treasury said it will borrow $200 billion and leave the cash proceeds on deposit with the Federal Reserve, reviving a program that will make it easier for the Fed to raise interest rates when the time comes.
Officials sought to dispel the notion that the move marks a step toward tightening credit now.
http://online.wsj.com/article/SB10001424052748703503804575083920751605784.html?mod=WSJ_WSJ_US_News_6
