Introduction The Federal Reserve (Fed) relies on the repurchase market in U.S. treasuries (repo market) and its interest rate in conducting monetary policy. This past September the market experienced unexpected stress when repo interest rates increased from the Fed’s target of 2 percent to levels as high as 10 percent. The demand for cash increased while lenders stepped back. The financial industry and others have offered various explanations for what happened. Quarter-end tax payments were due and the Treasury was auctioning new debt both of which temporarily drained cash from the economy putting upward pressure on rates. In most such instances the PDs would lend into the market, keeping rates near the Fed’s target. But the (Fed) had for some time been reducing the size of its balance sheet, allowing Treasury securities and other assets to role off as they matured. This systematically reduced PDs’ excess reserves (cash) available to lend. Although excess reserves still exceeded $1 trillion, PDs explained that mandated liquidity and capital requirements caused them to hoard balances and not risk falling below minimum requirements.