| 来源类型 | Article
|
| 规范类型 | 评论
|
| Federal Reserve has bad idea on interest rates for different banks |
| Paul H. Kupiec
|
| 发表日期 | 2019-04-09
|
| 出版年 | 2019
|
| 语种 | 英语
|
| 摘要 | There is a problem with the Federal Reserve system for managing interest rates. It is attracting new bank entrants, but the Federal Reserve does not want their business. To “fix” the problem, it has proposed rule changes that govern the way it pays banks interest on reserves. The plan would allow it to pay different banks different rates on reserves, including a rate of 0 percent. The Federal Reserve would choose which banks qualify for a high rate, which quality for a low rate, and which will earn nothing.
These changes would give the Federal Reserve a new dangerous power to use interest on reserves to choose winners and losers, including blocking new bank entrants it deems “problematic.” In 2006, when Congress gave the Federal Reserve authority to pay banks interest on reserves, it never imagined the Federal Reserve would use that authority to pay favored banks higher interest rates on their reserves. Congress needs to revisit the Financial Services Regulatory Relief Act to limit central bank authority and require the Federal Reserve to treat all legally chartered banks equally.
New startups have satisfied the existing rules and regulations and successfully acquired bank charters that entitle them to open Federal Reserve master accounts and earn interest on reserves. These startups have secured state charters to operate a limited purpose bank that takes in large deposits from money market mutual funds and similar institutions, invests these deposits in a Federal Reserve master account, and earn interest at the “interest on excess reserves” rate. These limited purpose banks have low operating costs so they can keep a small spread and pass most of the reserve interest onto mutual fund shareholders.
Banks, of course, would prefer that these institutions not get access to Federal Reserve master accounts. Banks currently earn a handsome spread taking in customer deposits and placing them at the Federal Reserve, which currently pays banks 2.4 percent on reserve balances while banks pay on average 10 basis points to 18 basis points to acquire insured deposits, depending on the type of account. If the new limited purpose banks are successful, deposits will leave banks and flow into money market funds that pass the reserve interest on to their customers. To staunch deposit outflows, banks will be forced to increase the rates they pay depositors. The cost of funds will increase and a larger share of reserve interest payments will be passed on to savers who will earn higher returns on their bank deposits and money market mutual funds.
Read More
To staunch deposit outflows, banks will be forced to increase the rates they pay depositors. The cost of funds will increase and a larger share of reserve interest payments will be passed on to savers who will earn higher returns on their bank deposits and money market mutual funds. |
| 主题 | Economics
; Tax Reform
|
| 标签 | banks
; central bank
; Federal Reserve
; interest rates
; mutual funds
; Startups
|
| URL | https://www.aei.org/articles/federal-reserve-has-bad-idea-on-interest-rates-for-different-banks/
|
| 来源智库 | American Enterprise Institute (United States)
|
| 资源类型 | 智库出版物
|
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/265687
|
推荐引用方式
GB/T 7714 |
Paul H. Kupiec. Federal Reserve has bad idea on interest rates for different banks. 2019.
|
除非特别说明，本系统中所有内容都受版权保护，并保留所有权利。
