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This isn't actually true in the modern system; loans are generated by the bank taking a loan from the Federal Reserve at that interest rate, and then applying a
by solatic 4y ago
This isn't actually true in the modern system; loans are generated by the bank taking a loan from the Federal Reserve at that interest rate, and then applying a markup that covers the cost of KYC, due diligence, customer service, and of course the bank's profit.
- chii 4y agoIf the depositors were willing to accept a lower rate than the federal funds rate, the banks make a bigger profit from the loan interest spread. Therefore, it is always an incentive for a bank to attract deposits.
- JumpCrisscross 4y ago> loans are generated by the bank taking a loan from the Federal Reserve at that interest rate This is incorrect. Most bank assets are not Fed financed. (That’s the discount window and reverse repo operations.)