Right, and when the banks lend and borrow that money according to their reserve requirement, they are doing it in the Fed's fund market. Thus when the Fed does their trading in repurchase agreements it will affect the funds rate. The funds rate stayed on target. If the Fed adjusted the money supply, it must have done it some other way.
No, no, no. You're getting these mixed up. When the banks get this "new money" from the Fed they lend it out anyway they want. Fed Funds are overnight money. At the end of the day, banks see if they need a few bucks to meet their reserve requirement or if they have a few bucks extra. If so, they use Fed Funds. But if a bank gets $1 million in cash they'd like to make more than the 3.25% Fed funds rate. They'd prefer to make a home equity loan at 7% or make a prime business loan at 6.25%
Thus when the Fed does their trading in repurchase agreements it will affect the funds rate. The funds rate stayed on target. If the Fed adjusted the money supply, it must have done it some other way.
The Fed plays with the money supply by buying and selling treasuries. The Fed plays with the funds rate by doing overnight repos. Totally separate functions.