[runbathtime]

So the banks are lending their cash to the Fed or (repo market), and holding the treasuries (making interest) to let other banks or the Fed borrow the cash for some reason overnight.

The only thing I get from it is that banks are flush with cash and overnight rates should go lower because there is an abundance of cash being lent.

Seems like a game. Must be nice to be a banker.

[jkhdigital]

The whole point of this charade is to prevent negative rates. The Fed can put a floor on interbank lending of reserves by paying interest on them, but it also wants to keep a floor under the non-Fed overnight money markets. Reverse repo is the answer, as it can always offer a positive rate even when market participants refuse to.