Federal Reserve Float Law and Legal Definition

Federal Reserve Float is a temporary condition occurring when a Federal Reserve Bank credits a depositary bank's account for an item prior to debiting the account of the drawee bank. As a result, the accounts of both banks may reflect the check amount until the checks are delivered to the drawee bank and charged against the drawee's account. Thus, the Federal Reserve float is an over-estimation of the country's money supply due to uncleared checks showing as an asset on the books of both the receiving and sending institution.