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"The money" is money held in the bank's account at the Federal Reserve, and sending an electronic message to the Fed to transfer this money immediately (FedWire
by superuser2 11y ago
"The money" is money held in the bank's account at the Federal Reserve, and sending an electronic message to the Fed to transfer this money immediately (FedWire) counts as actually moving money. The only problem is that all banks have decided to charge $25 for this service, despite it costing them on the order of $1.
- pbhjpbhj 11y agoBut they have agreements with banks to process the final transaction at the close of day [don't they??] - so the reserve would then charge them $1 per day per bank they had to settle a debt with? Presumably the transaction receipts and acknowledgements are binding meaning they can't legally screw another bank out of that money. So the risk is that they'll have to sue another bank in to the ground and make oodles of money if that bank refuses to settle with them at the end of the day? [Off-shore is obviously going to be different.] Can someone speak to the situation in the UK in this respect too, please.
- PeterisP 11y agoInsolvency screws another bank out of that money no matter what legally binding acknowledgements you have, and you won't be able to recover much from suing because, well, they don't have enough to pay. They are rare, but not that rare, especially whenever the economic cycle again and again reaches some hard times. for example http://www.statista.com/statistics/276231/bank-insolvencies-amount-in-the-us-since-2001/ http://www.statista.com/statistics/276231/bank-insolvencies-... lists a few hundred insolvent institutions just in the last dozen years.