5 ms·

It's not a linguistic trick. It used to be that banks had to keep a certain percentage of they money they had on deposit on the premises. Slowly, this amount (t

by Ijumfs 6y ago

It's not a linguistic trick. It used to be that banks had to keep a certain percentage of they money they had on deposit on the premises. Slowly, this amount (the "reserve rate) was lowered to 0% under Obama.

jljljl 6y ago
“Reserves” are a completely different thing from “deposits” though. I don’t think the bank is deliberately being tricky, but I think the idea of banks “lending out people’s deposits” is not quite true.
SaltyLemonZest 6y ago
It used to be that banks had a regulatory requirement to do it. That's very different from the mechanistic requirement most people envision, where it's just not possible for a bank to make a loan if they don't have enough money stashed in their vault.
SilasX 6y ago
Wait, I thought the reserve ratio was set to zero for the first time this year, because of the pandemic?
gruez 6y ago
>Slowly, this amount (the "reserve rate) was lowered to 0% under Obama. Source for this? AFAIK it was done this year, under trump not obama. >As of March 2020, the minimum reserve requirement for all deposit institutions was abolished, or more technically, fixed to zero percent of eligible deposits. The Board previously mandated a zero reserve requirement for banks with eligible deposits up to $16 million, 3% for banks up to $122.3 million, and 10% thereafter. The removal of reserve requirements followed the Federal Reserve's shift to an "ample-reserves" system, in which the Federal Reserve Banks pay member banks interest on reserves that they keep in excess of the required amount https://en.wikipedia.org/wiki/Reserve_requirement#United_States https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...
- thedudeabides5 6y ago
  You two are mixing up required reserves ratio: https://tradingeconomics.com/china/cash-reserve-ratio https://tradingeconomics.com/china/cash-reserve-ratio and a bunch of other yields, which connect to the the rate paid on reserves, the rate on excess deposits, fed funds, libor etc etc. https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate

by Ijumfs 6y ago

jljljl 6y ago

“Reserves” are a completely different thing from “deposits” though. I don’t think the bank is deliberately being tricky, but I think the idea of banks “lending out people’s deposits” is not quite true.

SaltyLemonZest 6y ago

It used to be that banks had a regulatory requirement to do it. That's very different from the mechanistic requirement most people envision, where it's just not possible for a bank to make a loan if they don't have enough money stashed in their vault.

SilasX 6y ago

Wait, I thought the reserve ratio was set to zero for the first time this year, because of the pandemic?

gruez 6y ago

>Slowly, this amount (the "reserve rate) was lowered to 0% under Obama. Source for this? AFAIK it was done this year, under trump not obama. >As of March 2020, the minimum reserve requirement for all deposit institutions was abolished, or more technically, fixed to zero percent of eligible deposits. The Board previously mandated a zero reserve requirement for banks with eligible deposits up to $16 million, 3% for banks up to $122.3 million, and 10% thereafter. The removal of reserve requirements followed the Federal Reserve's shift to an "ample-reserves" system, in which the Federal Reserve Banks pay member banks interest on reserves that they keep in excess of the required amount https://en.wikipedia.org/wiki/Reserve_requirement#United_States https://en.wikipedia.org/wiki/Reserve_requirement#United_Sta...

thedudeabides5 6y ago
You two are mixing up required reserves ratio: https://tradingeconomics.com/china/cash-reserve-ratio https://tradingeconomics.com/china/cash-reserve-ratio and a bunch of other yields, which connect to the the rate paid on reserves, the rate on excess deposits, fed funds, libor etc etc. https://tradingeconomics.com/united-states/interest-rate https://tradingeconomics.com/united-states/interest-rate