the crisis. 13 as part of this approach, the federal reserve acquired a new set of reverse bis central bankers ’ speeches repo counterparties, including money market funds and government - sponsored enterprises, in addition to the primary dealers with which it had traditionally transacted. these new counterparties were major investors of cash in overnight markets and had capacity to facilitate the “ draining ” of substantial reserve balances, if offered attractive term investments with the federal reserve. in addition, the federal reserve developed a term deposit facility to drain banks ’ reserve balances. 14 this playbook of draining reserves back to reserve scarcity to support the transmission of interest on reserves into market rates is standard among central banks. if policymakers had chosen to do so, the federal reserve could have made such a term reserve draining approach work to help control money market rates in the united states. 15 so, why did the federal reserve not follow this approach of large - scale reserve draining? as the balance sheet continued to grow as a result of asset purchase programs, it became apparent that such reserve draining operations would have been very large in comparison to the size of private money markets. as a result, they probably would have had lasting effects on the structure of those markets – for example, by reshaping the structure of term money market activity according to the structure of the federal reserve ’ s operations. these lasting effects could have been especially large if the balance sheet did not run off quickly. for this reason, the federal reserve instead pursued offering an overnight investment opportunity that could, with sufficient capacity, intensify competition in money markets and, without necessarily draining reserves, enhance the transmission of ior into other overnight money market rates. this approach entailed a twist on a traditional federal reserve tool, reverse repos : instead of running quantity - based, term operations aimed at altering reserve levels, the desk would run interest - rate - based overnight operations aimed directly at influencing market rates. a number of operational features were required to implement such an overnight reverse repo, or on rrp, facility : it would need same - day settlement ; 16 the operation would need to be run predictably, every day, and as late in the day as possible, to give lenders time to bargain with other counterparties using the outside option of investing with the federal reserve ; 17 an appropriate spread below ior would be required to ensure that the facility neither induced large changes in the structure of money markets nor lost the ability to support interest rate control

promote decisions aligned with the values and goals of your respective firms. 5 how choices are presented can have a dramatic impact on outcomes. taking account of ordinary, human biases — including the ones i just mentioned — and organizational culture can help you present options in a manner that yields better results. in the world of risk controls, individuals face choices every day — choices whether to walk right up to the line of appropriate behavior and risk crossing it ; choices to get more or less compensation in exchange for riskier behavior ; and choices to raise their hands ( or not ) when they suspect that something has gone awry. in my view, effective controls require an appropriate balance of narrowly focused, prescriptive rules, and broader principles and standards. the precise balance will vary, depending on the task and the firm. but regardless of the setting, a thoughtful set of risk controls can improve the choices that employees make. one other word of advice on choices. people need time — time to stop, breathe, and ask for help if they need it. making decisions sooner than necessary can lead to mistakes. as human beings, we do not always see consequences in the first instance. we need time to process. of course, time can sometimes seem like a luxury. time is, after all, money — or so we have been told. but the consequences of making the wrong choice because you are in a hurry can be far more expensive. i was speaking recently with a colleague with years of experience as a criminal prosecutor. she observed that the first step on the path to criminal ruin often begins with one seemingly small, often rushed choice. my own experience from years of seeing mistakes in the financial services industry leads me to agree. people — especially junior employees — too often decide sooner than they must, without taking the time to raise their hand and ask for help. so do not confuse thinking quickly and creatively with choosing rapidly in every instance. when considering what structures in your organization can help people make good decisions, consider ways to build in adequate time to decide. incentives in any discussion of choices, it is critical to consider incentives. compensation is a powerful form of incentive. we need to think creatively about how to structure compensation in ways that promote conduct aligned with the values and long - term financial interests of the firm. bill dudley, the president of the new york fed, has proposed one possible improvement. pay material risk takers and senior managers in the form of deferred debt, which vests in line