From emergency firefighting to daily operations, how has the Fed's repurchase protocol undergone transformation?

In the early years, repurchase agreements were a supporting role in the Fed's toolbox. Before the 2008 financial crisis, this tool was mainly used to adjust bank reserves - simply put, it was about adding or withdrawing money from the market to keep the federal funds rate within a set target range. At that time, operations were very flexible, adjusted temporarily based on whether the market needed money or had excess liquidity, with no fixed routines. The counterparties were mostly commercial banks, and the variety of collateral was limited, with a risk control system far less complex than it is today. The logic back then was quite simple: by adjusting the supply of reserves, one could control market interest rates.

Then the crisis of 2008 came, and everything changed. The financial markets collapsed completely, and liquidity was entirely drained. The Fed had to upgrade the repurchase protocol from a "temporary tool" to an "emergency measure," and began to use it on a large scale to stabilize the market. This shift is significant—since then, the scale and frequency of repurchase operations have been on a different order of magnitude than before.