Definition of "Draining Reserves"

Actions that are taken by the Federal Reserve to reduce the money supply in order to cut the funds available to banks for lending purposes. The Fed accomplishes this by: Raising reserve requirements--banks will need to keep more money on deposit with Federal Reserve banks; Escalating the rate that banks borrow to maintain reserves--making it unattractive to drain reserves by making loans; and Selling bonds at such attractive rates that dealers will reduce their bank balances to buy them