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Wednesday, April 19, 2017

Free Money! Is The Fed Paying Banks $22 Billion To Not Lend?

Excess reserves of depository institutions peaked at $2.7 trillion in August of 2014. By December of 2016, excess reserves fell to $1.9 trillion but have since climbed back to $2.2 trillion.

On October 3, 2008, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed the Federal Reserve banks to begin paying interest on excess reserve balances (“IOER”) as well as required reserves. The Federal Reserve banks began doing so three days later.

As interest rates have risen, so has the free money to banks.

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2 comments:

Anonymous said...

Obama told them to do that so small businesses would be destroyed and only the rich would survive.

Anonymous said...

Then blame Trump. That's an Obama win/win.