Fedwire
Interbank overnight, and intraday lending as base case ensample
Fedwire is used now by people like you and I just to send bank-to-bank payments, but let me as our ensample, do a limited example of what I think of as it’s base case use, interbank intraday and overnight lending.
Fedwire, unlike what I call basic Fed (the old paper checks clearinghouse and FedACH) isn't a clearinghouse. Instead, it supports these other Fed payments facilities. Fedwire also competes with the other payments facilities as just one more way to send money.
Some differences between Fedwire and FedACH
So, unlike FedACH and other clearinghouse payments systems, Fedwire payments don’t clear via cross-cancellation of payments, and chains of payments. It is just a one-to-one sending system. Secondly, if not sending credits (in the Fed system, payor created reserve account balances), and if not voluntarily collateralized, but creating new credit account balances out of thin air, Fedwire must be cleared ("settled") within SIXTY SECONDS or accrue an annualized fifty basis point fee (interest payment to the Fed)1. . . I have no idea how much that is, by the way. Probably not so much.
But still, you see, Fedwire, when used for interbank lending, isn't basically sending pre-existent-to-the-day reserves, but merely credits that are the uncleared portion of the result of the FedACH payments process, sending them, for a negotiated intra-day or overnight bank-to-bank interest rate from net credit banks to net debit banks, to clear those, resulting in no net average reserve balance creation by banks OR Treasury over the course of a week.
Now when we, just individuals, sent via Fedwire between our two banks, probably it's hard to say what's happening without taking me off-course, but I think it's within this general framework, this hobbyist/concerned citizen would say.
For an (hypothetical) example2 of Fedwire used in interbank lending to settle FedACH payments:
Future Dated Forward Items
Transmission Deadline: 10:30 a.m. (Eastern Time)
Target Distribution: Noon ET
Settlement Schedule: 8:30 a.m. ET – future business day [next morning, etc.]
So for 10:30 a.m. The result of a FedACH payments credit file entry submission deadline, is that the payor bank has created out-of-thin-air a credit (a reserve...) in the Fed account of the payee, but doesn't require pre-existent reserves to do so!--as, note, the payee has already been credited at noon of the day before payment is due from the payor!
So one can Fedwire3 credits from banks with post-clearance excess credits to banks with excess debits (at a negotiated interbank lending intraday or overnight interest rate), thus causing all banks that failed to clear to clear anyway, with no increase by private bank or Treasury out-of-thin-air reserve creation over a weekly average. See FRED on weekly averages from 1971 to 2008.
https://www.federalreserve.gov/.../files/psr_2011_policy.pdf
made up out of my head, but deadlines copied from Federal Reserve Processing Schedule The table is FedACH, and applying Fedwire to that is but my interpretation.
For no fee because the credits are not in my example here made up OOTA reserve account "credits" (really private bank or Treasury created "reserves"), but rather are the imbalanced credit result of FedACH, or Fed paper check clearinghouse payments that failed to clear one against another: https://www.federalreserve.gov/.../files/psr_2011_policy.pdf, Section II