Three features taken together distinguish federal funds from other money market instruments. First, they are short-term borrowings of immediately available money—funds which can be transferred between depository institutions within a single business day. In 1991, nearly three-quarters of federal funds were overnight borrowings. The remainder were longer maturity borrowings known as term federal funds. Second, federal funds can be borrowed by only those depository institutions that are required by the Monetary Control Act of 1980 to hold reserves with Federal Reserve Banks. They are commercial banks, savings banks, savings and loan associations, and credit unions. Depository institutions are also the.
