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Dollar plumbing: bank reserves, the TGA and the Fed's reverse repo
Ample reserves since 2008· Concept
Fact, law or dataA rule, statute, definition or measured number.
The accounts at the Fed through which dollars move: bank reserves, the Treasury's account and the reverse repo facility.
See it on the Money & Finance map →How it works
The Fed's assets, about $6.5 trillion of Treasuries and mortgage bonds in 2026, are matched by liabilities: currency, bank reserves (about $3 trillion), the Treasury General Account (roughly $0.8–1.0 trillion) and the overnight reverse repo facility. With assets unchanged, when one liability rises, another must fall. A tax payment moves money from bank reserves into the TGA; Treasury spending moves it back. Since 2008 the Fed has run an 'ample reserves' system, steering rates with interest on reserves rather than by rationing reserves.
Why it matters
Swings among these accounts can tighten or loosen money markets with no Fed decision, which is why traders watch the TGA and reserves every week.
Think of it like
Like a building's water system: total supply is fixed for the day, so filling one tank lowers pressure in the others.
Facts, rules and data
The Fed's weekly H.4.1 balance-sheet release, the Daily Treasury Statement and New York Fed market-operations data.
Debates and risks
No one knows exactly how low reserves can fall before money markets seize; the Fed's idea of 'ample' rests on surveys and judgment.
Inside this (2)
Connections (3)
▸Dollar plumbing: bank reserves, the TGA and the Fed's reverse repo sits on the liability side of The Fed's balance sheet and quantitative tightening (QT)Fact, law or data
The connection
Reserves, the TGA, the reverse repo facility and currency are the Fed's liabilities; Treasuries and mortgage bonds are its assets. When QT shrank assets from 2022 to 2025, liabilities had to shrink too: first the reverse repo drained, then reserves began to fall, which is why the Fed ended QT in December 2025.
When and why
On the Fed's books, reported every Thursday in the weekly H.4.1 release.
How we know
H.4.1 data show the reverse repo falling from $2.55 trillion to near zero as QT proceeded, before reserves declined.
Debates and risks
How large the balance sheet must stay to keep reserves ample, and whether to shrink it further, is debated within the Fed.
▸Dollar plumbing: bank reserves, the TGA and the Fed's reverse repo showed strain in the Sept 2019 spike in The repo market: overnight loans backed by TreasuriesFact, law or data
The connection
On September 16–17, 2019, corporate tax payments flowed into the TGA and new Treasury debt settled, draining reserves to about $1.4 trillion. Big banks held back cash, and overnight repo rates jumped from about 2% to as high as 10%. The Fed injected cash through repos, began buying T-bills, and in 2021 created a standing repo facility.
When and why
New York money markets, mid-September 2019; the New York Fed's trading desk responded within a day.
How we know
SOFR printed 5.25% on September 17, 2019; Fed and BIS analyses traced the spike to scarce reserves.
Debates and risks
Whether reserves were truly scarce or banks' liquidity rules kept cash idle is still debated; similar strains reappeared in late 2025.
▸Interest on reserve balances (IORB) sets the rate paid on reserves in Dollar plumbing: bank reserves, the TGA and the Fed's reverse repoFact, law or data
The connection
Banks hold reserves at the Fed and earn the IORB rate, set inside the fed funds target range. No bank lends overnight for much less than it earns risk-free at the Fed, so IORB steers market rates. That lets the Fed keep reserves plentiful, about $3 trillion in 2026, without losing control of rates.
When and why
Since October 2008, under laws passed in 2006 and 2008; renamed IORB in July 2021.
How we know
FOMC implementation notes set the IORB rate after each meeting, and fed funds trades track it closely.
Debates and risks
Some lawmakers proposed in 2025 ending interest on reserves to save money; critics say that would disrupt the Fed's rate control.