Posts Tagged ‘excess reserves’
Bad Banks
While the Fed has pumped trillions into private banks via QE, banks have been loath to lend. While partly due to the rebuilding of bank capital and changing federal regulations, it’s also due to low rates. Making fixed rate loans makes no sense because as rates rise, loan values fall. Variable rate loans are also…
Read MoreMoney for Nothing
On 7/5/12 the ECB reduced to zero the rate it pays banks that park excess reserves with it. The Fed is now considering following suit. There are $1.5 trillion of excess reserves at the Fed which if loaned, would help the economy. But the Fed won’t, as it will not increase lending much and would…
Read MoreBanking the Bucks
Despite what you think, monetary policy has not been expansionary, and that’s the problem. While the Fed’s assets grew from $0.8 trillion to $2.8 trillion between 10/08 and 7/11, it was matched, almost dollar for dollar, by a $1.6 trillion increase in commercial bank deposits at the Fed. The money supply cannot expand when banks…
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