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> If they don't meet reserve regulations at the end of the day, they borrow at exceedingly low interest rates to cover the gap. Borrow from whom? I've heard th
by losvedir 10y ago
> If they don't meet reserve regulations at the end of the day, they borrow at exceedingly low interest rates to cover the gap.
Borrow from whom? I've heard this idea before that the loans issued by a bank are essentially independent of the deposits, and it makes sense to me from a logistical perspective - is some BofA loan officer going to load up BofA's financials to make sure they have the money to issue the loan? No, they'll just do it, and it's someone else's job at the end of the day to "make it work".
But who are the banks borrowing from? If it's from other banks, doesn't it mean that in the aggregate loans and deposits are tied together?
- dpark 10y agoThey borrow from other banks or from the Fed. Borrowing from the Fed is generally more expensive, though. In general, yes, the aggregated loans and deposits are largely tied together. There some fuzziness even here, though, as the Fed can inject money or move loans onto their books in a number of ways.