edu: banks

--Depository institutions ( commercial banks and thrifts) are required to maintain reserves --reserves are deposited in Fed reserve bank and called Federal funds --no interest is earned on fed funds --one way to bring reserves to the required level is to enter into a repo with a nonbank customer. An alternative is for the bank to borrow federal funds from a bank with excess reserves.(fed fund market) the equilibrum interest rate is decide by supply and demand, is called fed fund rate. --fed fund rate and repo rate are tied together because both are a menas for a bank to borrow.