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Central banks perform a number of functions; basically they act as the government's own bank, holding the government checking accounts and collecting tax receipts, facilitating the issuance of bonds, etc. They are also frequently given regulatory functions, such as the enforcement of fractional reserves...
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Good question. The New York Fed does not lend money to major securities dealers; it buys securities and pays for them with a check. These securities do not always have to be Treasuries. Last year, the Fed bought mortgage-backed securities. If the number of securities remained constant, there would indeed...