4 ms·

> Serious question: How does a bank keep "cash on hand"? Was the plan to keep all USD deposits in Fed balances? Banks keep cash on hand inside vaults, on depos

by mike_d 4y ago

> Serious question: How does a bank keep "cash on hand"? Was the plan to keep all USD deposits in Fed balances? Banks keep cash on hand inside vaults, on deposit at their local Federal Reserve Bank, "in transit" (stored at an armored car company), or in accounts at correspondent institutions internationally (primarily for settling debits and credits on international wires).

lxgr 4y ago
The only one of these that makes sense is a Fed balance (as it is not only free but even pays interest), but the Fed does not seem to be a fan of the idea [1]. Cash in vaults has negative yield (the vault itself isn't free, nor is insurance for it), and if you don't like fractional reserve banking and/or counterparty risk, foreign correspondent banks don't really seem like a good way to eliminate it either. [1] https://www.bloomberg.com/opinion/articles/2019-03-08/the-fed-versus-the-narrow-bank https://www.bloomberg.com/opinion/articles/2019-03-08/the-fe...
- mike_d 4y ago
  I'm not sure what you are criticizing specifically, I just answered the question of how banks hold cash.
  - lxgr 4y ago
    Ah, yes, for regular banks that makes total sense – I was just outlining why neither of these options would be realistic for a full-reserve bank as mentioned by GPs.