Historically, the Federal Reserve has interacted with 20 to 40 "primary dealers" banks and securities broker-dealers that transact directly with the Federal Reserve -- in its open market operations. This chapter uses the example of the primary dealers to answer questions about financial intermediation more generally. Our results suggest that changes in available collateral, either through Treasury auctions or Federal Reserve operations, can cause a temporary primary dealer portfolio reallocation, which can help the market more easily absorb the collateral, and as a consequence, can boost or dampen financing rates. Importantly, most of these frictions are short-lived, and conditions revert back to "normal" within a week or so of the initial impact of the shock.
Klee, E., & Monroe, W. (2014). Financial intermediation and monetary policy: A closer look at dealer balance sheets and money markets. In Business Cycles in Economics: Types, Challenges and Impacts on Monetary Policies (pp. 227–245). Nova Science Publishers, Inc.