2008 Global Financial Crisis reforms have made banks more risk averse. Which means the Fed is going to have to take up the slack. Which they've found out. The hard way.
I still do not see how does lack of desirable collateral translate into higher repo rate? If everyone is flush with cash, has balance sheet aplenty and wants those very bonds on their balance sheet, the rate should be below unsecured. We saw the opposite. P.S. dealers did complain about lack of liquidity and inability to sell bonds from their balance sheet
Repo update--$281 Billion has been borrowed by banks in Repo operations in the past two days. This is a two-day record, by far.