Fed adds U.S. GSEs to reverse repo counterparties

NEW YORK May 24 (Reuters) - The Federal Reserve Bank of New York on Tuesday added government-sponsored agencies to the roster of counterparties it could eventually tap to drain cash from the financial system.

The New York Fed, in laying out the criteria for GSEs as eligible counterparties to participate in reverse repos, said that among other things the GSE must be chartered by the U.S. Congress, and "be a consistent cash investor in the tri-party repo market ... with an average daily outstanding amount of reverse repo transactions of at least $15 billion for the past three months."

Although the New York Fed did not mention them directly by name in a statement on its website, the criteria are most likely to include the U.S. mortgage financing agencies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB).

Reverse repos are one of the tools that the Fed has said it can use to tighten monetary policy when needed to help prevent inflation.

In a reverse repo the New York Fed sells securities to financial firms for a set period, temporarily draining excess reserves from the financial system. (Reporting by Chris Reese; Editing by James Dalgleish)