Thank you for the detailed explanation. Just for the clarification purposes, in the accounting table above, you are showing that Bank Holding Company has reserves. Are they actually eligible to hold reserves at the FED? Did you actually mean deposits that they hold in their bank subsidiaries? If that is the case the purchase of the loans from the proceeds of CP issuance would just contract the balance sheet of the bank (Debit Deposits to BHC, Credit Loans) without providing any new liquidity. It might just reduce deposits liabilities and “free up” excess reserves, unless, of course, initial funds for the CPs came from other banks to begin with which would obviously add to the reserves of the commercial bank. If you can confirm I would appreciate.
Thank you for the detailed explanation. Just for the clarification purposes, in the accounting table above, you are showing that Bank Holding Company has reserves. Are they actually eligible to hold reserves at the FED? Did you actually mean deposits that they hold in their bank subsidiaries? If that is the case the purchase of the loans from the proceeds of CP issuance would just contract the balance sheet of the bank (Debit Deposits to BHC, Credit Loans) without providing any new liquidity. It might just reduce deposits liabilities and “free up” excess reserves, unless, of course, initial funds for the CPs came from other banks to begin with which would obviously add to the reserves of the commercial bank. If you can confirm I would appreciate.