4 ms·

We don't know what interest rates would be if the fed wasn't promising free money to the big banks. My credit union can offer 2.0%, why can't Bank of America o

We don't know what interest rates would be if the fed wasn't promising free money to the big banks. My credit union can offer 2.0%, why can't Bank of America or Chase or Wells Fargo? This is no different from the LIBOR manipulation that happened a few years ago. Back then, the media was quick to point out how the LIBOR interest rate impacted everyone from pensioners to savers.

delfinom 7y ago
>We don't know what interest rates would be if the fed wasn't promising free money to the big banks. My credit union can offer 2.0%, why can't Bank of America or Chase or Wells Fargo? Because banks aren't around to make the customers money, they are there to give the shareholders dividends.
- freejulian85 7y ago
  > Because banks aren't around to make the customers money, they are there to give the shareholders dividends. Fine, but that doesn't entitle them to free money from the Fed.
  - vuln 7y ago
    For the Fed it’s just the “cost of doing business” at zero cost to them.
  - TuringNYC 7y ago
    Once you are a sufficiently powerful and influential entity, you write your own entitlements and the government delivers them. We saw this clearly in 2008 and 2009.
basementcat 7y ago
> My credit union can offer 2.0%, why can't Bank of America or Chase or Wells Fargo? BoA and Chase can attract sufficient deposits without offering 2.0% on savings. Your credit union may need to offer higher rates to attract sufficient deposits.
- freejulian85 7y ago
  > BoA and Chase can attract sufficient deposits without offering 2.0% on savings Ummm, the fact that the fed is printing money for the banks seems to indicate otherwise?
  - basementcat 7y ago
    The Fed only lends funds to financial institutions for a short term. These institutions still need deposits to meet reserve ratios (hence why they offer certificates of deposit and similar products). It isn't immediately clear to me if there is a problem in the repo market (experts, please chime in!). It appears there were some side effects of various new regulations put in place since the last recession which resulted in a recent short term high demand for liquidity. This need for liquidity was satisfied by the central bank and everything worked the way it was supposed to work.
    - roenxi 7y ago
      The Fed has been maintaining emergency interest rates for a decade now. When do we expect the emergency to end and rates to go back to the good old 3-5% band from prior to 2008? Short-term is looking decidedly long-term now. Interest rates are in a structural downward trend and probably going to break below 0. People keep saying 'temporary' and 'short term' around these economic decisions before they become business as usual. If the banks mis-manage money to the point where the health of the system is at risk, the Fed creates more money to rescue them from their bad decisions. The Fed is then hailed as a heroic and necessary institution for 'saving [the economy|the banks|people's savings|our way of life]' by said banks. The incentive structures here are outrageous. Problems will not be resolved if the punishment for running out of money is being given money. However if that is the approach to be taken there is no justification for not giving everyone free money when they run in to troubles. Except the fact that we all know the unfair advantage being given to the banks can't be scaled up to everyone without collapsing the economy.
      - 0x8BADF00D 7y ago

delfinom 7y ago

>We don't know what interest rates would be if the fed wasn't promising free money to the big banks. My credit union can offer 2.0%, why can't Bank of America or Chase or Wells Fargo? Because banks aren't around to make the customers money, they are there to give the shareholders dividends.

freejulian85 7y ago
> Because banks aren't around to make the customers money, they are there to give the shareholders dividends. Fine, but that doesn't entitle them to free money from the Fed.
- vuln 7y ago
  For the Fed it’s just the “cost of doing business” at zero cost to them.
- TuringNYC 7y ago
  Once you are a sufficiently powerful and influential entity, you write your own entitlements and the government delivers them. We saw this clearly in 2008 and 2009.

basementcat 7y ago

> My credit union can offer 2.0%, why can't Bank of America or Chase or Wells Fargo? BoA and Chase can attract sufficient deposits without offering 2.0% on savings. Your credit union may need to offer higher rates to attract sufficient deposits.

freejulian85 7y ago
> BoA and Chase can attract sufficient deposits without offering 2.0% on savings Ummm, the fact that the fed is printing money for the banks seems to indicate otherwise?
- basementcat 7y ago
  The Fed only lends funds to financial institutions for a short term. These institutions still need deposits to meet reserve ratios (hence why they offer certificates of deposit and similar products). It isn't immediately clear to me if there is a problem in the repo market (experts, please chime in!). It appears there were some side effects of various new regulations put in place since the last recession which resulted in a recent short term high demand for liquidity. This need for liquidity was satisfied by the central bank and everything worked the way it was supposed to work.
  - roenxi 7y ago
    The Fed has been maintaining emergency interest rates for a decade now. When do we expect the emergency to end and rates to go back to the good old 3-5% band from prior to 2008? Short-term is looking decidedly long-term now. Interest rates are in a structural downward trend and probably going to break below 0. People keep saying 'temporary' and 'short term' around these economic decisions before they become business as usual. If the banks mis-manage money to the point where the health of the system is at risk, the Fed creates more money to rescue them from their bad decisions. The Fed is then hailed as a heroic and necessary institution for 'saving [the economy|the banks|people's savings|our way of life]' by said banks. The incentive structures here are outrageous. Problems will not be resolved if the punishment for running out of money is being given money. However if that is the approach to be taken there is no justification for not giving everyone free money when they run in to troubles. Except the fact that we all know the unfair advantage being given to the banks can't be scaled up to everyone without collapsing the economy.
    - 0x8BADF00D 7y ago