"simple enough to understand." That's mean ;)

Does the Fed "lend out cash" in an RRP transaction? You say yourself the "borrower pays upon returning the collateral". Why would the fed give BOTH cash AND collateral. Isn't the whole point of banking the separation of the two?

I'm hazy on this, but my understanding is the Fed lends out the collateral where the borrower can use the collateral to generate the cash it needs, through its balance sheet then it could through normal banking activities. That is, the borrower take the risk of the collateral to allow it to lend more cash to businesses (and earn interest) that it has to pay back to the Fed (otherwise, it wouldn't work very long?).

I believe RRPs used to be only used for short-term imbalances between a bank's assets and lending. Now it's used all the time. I think that's the biggest problem. It's like the banks are your nephew and they're coming to you every day to borrow your food truck ;) You know that one day he won't have that food truck because he had to sell it to pay off some other debt.

Again, I can't say I understand all this. I feel you're close. I love George, but he makes my head spin too. Try again? I'd love to get it once and for all! Perhaps you can clear up those question below. Exactly what collateral is lent to who and how cash generated paid back.