No, sir: it's because the Fed can fob-off risk — like the duration risk it assumed by investing in so many longer-term securities — on third parties, meaning taxpayers, who bear it in the form of reduced Fed remittances to the Treasury. That means in turn that any gain the MMMFs would realize by having a bank that's basically nothing but a shell operation designed to let them bank with the Fed would really amount to an implicit taxpayer subsidy.
Not quite.
If the door to master accounts was open there would be more demand than loan income , causing the Fed to charge congestion fees. Congestion fees stabilize the demand queue. With coingestion fees subtracting from interest payments, the Fed loan to deposit ratio returns to where it was. The difference is that any qualified party has competitive access to master accounts, which is the goal.
The remittances are a separate issue. Best to treat them as a bond tax that is shared between Treasury and the member banks. When the Fed raises the IOER it reduces the implied bond tax as remittances are reduced.
Congestion fees would be unnecessary in a truly open S&L currency issuer, a profitless statistical matching machine, for example. In the profitless, automated currency issuer, there are no remittances and the gap between loans and deposits can vary, the corridor effect. Even when the currency issues declares a fixed growth in the money supply, congestion fees should not be needed, nor remittances, as the issuance function should be hedged by participants..
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