Steve Randy Waldman
@interfluidity.com

Treasury would be paying very little interest to banks, because banks would bid short-term bills to yields of zero+ε, while the banking system holds such a large pool of suddenly zero-interest, hot potato, reserves. 1/

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Steve Randy Waldman
@interfluidity.com

Effective FFR and T-bill rates would get pinned at near zero, unless/until the Fed drains reserves to render them scarce relative to demand for clearing purposes. /fin

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