T-Bills are purchased by Depository Institutions, who pay for them with Excess Reserves, or Vault Cash.

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And, during the Kennedy Administration, the Fed sold T-bills and purchased an equal amount of longer dated T-Notes in order to reduce long-term rates.

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What is important is what happens to money and credit flows as the Fed allows special lending programs to expire and begins to replace other purchased assets on its balance sheet, mainly mortgage-backed securities, with traditional Treasury bills.

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