House Financial Services Subcommittee on Oversight and Investigations Chairman Patrick McHenry (R-NC) and Subcommittee on Capital Markets and Government Sponsored Enterprises Chairman Scott Garrett (R-NJ) submitted a letter to Board of Governors of the Federal Reserve System (“FRB”) Chair Janet Yellen, urging the FRB to discontinue its temporary overnight reverse repurchase facility (“RRP”) by the end of the year.
According to Chairman Garrett and Chairman McHenry (collectively, “Chairmen”), there is concern that the use of the RRP could have a “significant negative impact on the U.S. economy,” a view which they stated is shared by several financial regulators. The Chairmen explained that the overall “lack of transparency” in the establishment of the RRP and the “potential for it to create financial instability if expanded” could inject needless uncertainty and volatility into financial markets.
The Chairmen applauded the FRB’s recent decision to cap the use of the RRP at $300 billion per day, as well as its commitment to use the program only to the extent necessary. Nevertheless, the Chairmen asked that the FRB respond to their questions regarding the program no later than October 23, 2014.
See: Chairmen Letter to FRB.