count is credited before a corresponding debit is made to the account of the bank on which the check is drawn, the two banks have credit simultaneously for the same reserves. This creates a reserve float. Float can vary widely on a weekly or monthly basis, and sometimes shows large increases when there is an interruption or delay in the normal check delivery process. An example of this is severe weather conditions. If the FED cannot make delivery of checks because their planes are grounded due to bad weather, there will be an increase in the Reserve Float.Part VIAnalysis of Open Market OperationsAs the FED planned for the Y2K (year 2000) weekend, "the Federal Reserve Board voted to establish the Century Date Change Special Liquidity Facility (SLF) for lending to depository institutions from October 1, 1999 to April 7, 2000. The facility was designed to help ensure that banks with sound financial condition would have adequate liquidity to meet an unusual demand in the period around the century date change." [FRBNY Markets Group 2000] This facility was implemented using repurchase agreements totaling $141 billion that were outstanding over year-end. After year-end, these repurchase agreements matured, and by January 12, 2000, the balances were down to $63 billion, still far above the previous peak of $52 billion reached in April 1997. [FRBNY Markets Group 2000] On September 11, 2001, a massive tragedy struck New York City in the heart of the financial district, as the World Trade Center collapsed due to a terrorist attack. This caused a large disruption in financial transactions and increased the demand for liquidity and bank lending for the FED. The FED responded by announcing the FED is open and the Discount Window is available. As you may recall from Part II, discount lending is one of the tools available for monetary policy. "Discount window loans soared instantly from around $200 million to a peak of about $45 billion on ...
