Fed Pays $22 BILLION to Banks to Not Lend!-Who Gets Hurt in a Gov. Shutdown

Free Money! Is The Fed Paying Banks $22 Billion To Not Lend?Zero Hedge
“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. At 1% interest, banks receive $22 billion in free money every year, nearly all of that goes to the largest banks. Banks Paid $22 Billion to Not Lend? Some argue that banks have an incentive to not lend, simply to collect interest. Mathematically, it does not work that way. Excess reserves are a function of the Fed’s balance sheet and those reserves do not change whether a bank lends more or not.”

Who keeps working – and who doesn’t – if the government shuts down next weekCNBC
“Here we go again. When Congress comes back from recess Monday, it has just five days to head off yet another government shutdown by the end of next week, when the U.S. Treasury officially runs out of the legal authority to spend money. That deadline will set up another showdown – this time with a new president and fractured GOP – that could once again inflict fiscal chaos and force federal agencies to suspend services and send workers home….If Congress once again shoots itself in the fiscal foot, the resulting gridlock would be inconvenient and costly for taxpayers. On the other hand, the disruption – even if a shutdown lasts only a few days – would be painful and widespread. Some benefits, like unemployment insurance and veterans’ benefits, could be delayed or reduced. National parks, museums and many passport offices would shut down; the Small Business Administration and FHA would stop guaranteeing new loan applications; farm subsidy checks stop flowing, and IRS tax pro! cessing would slow down, among other headaches.”

You may also like...