Banks Still Earning Interest on $1 Trillion Reserves Thanks to Federal Reserve

[The Straight Story]

Banks Still Earning Interest on $1 Trillion Reserves Thanks to Federal Reserve

The nation’s largest financial institutions continue to sit on more than $1 trillion in excess reserves, a fact that has stymied economic growth during the recovery and that now poses a serious dilemma for the Federal Reserve. These are reserves beyond those that the financial institutions are required to hold.

It was the Fed that allowed banks to accumulate such an enormous amount of money, after loaning hundreds of billions of dollars at near zero interest rates to teetering institutions during the financial crisis. The public was told that this was necessary so that the banks could start lending, but instead of lending, they kept the bulk of the money. On September 1, 2008, the banks’ excess reserves totaled $1.9 billion. By February 2, 2011, their hoard had grown to $1.2 trillion. And, since October 2008, the banks have been allowed to collect interest on the excess reserves. At a rate of 0.25%, they gained $2.7 billion from taxpayers in 2010.

Now Federal Reserve chairman Ben Bernanke is advocating raising the interest rate on reserves. What’s needed, writes Professor Robert Auerbach at the University of Texas at Austin, is the opposite. He suggests that “The interest paid to banks could be lowered and eventually eliminated making the banks invest in loans and other income earning assets that benefit the economy and employment.”

http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Banks_Still_Earning_Interest_on_1_Trillion_Dollar_Reserves_Thanks_to_Federal_Reserve_110331

[fasttense]

1. Hoarding money, that's what a good neocon does when given tax breaks. n/t

[ixion]

2. The only 'recovery' happened on Wall St. Main St is still in a depression

in large part thanks to that so-called bailout, which was in actuality a daylight robbery.

[shraby]

3. Then what's the matter with them paying decent interest on

people's savings accounts?

[dkf]

5. They are getting 0.25%.

How does that translate to your idea of a decent rate on people's savings?

[SOS]

8. Credit card debt at $797 billion (November 2010)

Average interest rate of 16.82%.
They should offer more than 1% on a savings account.

btw - 16.82% charged by a state chartered bank in NY ( and most other states) would be subject to criminal prosecution for loan sharking.
Only because national banks have cleverly incorporated themselves in SD and DE can they get away with this.

[dkf]

9. The money at the fed are funds they aren't using to gain outrageous amounts in credit card debt

That is the essence of the complaint here, that the funds aren't being loaned out for credit cards or anything else.

[dkf]

4. But aren't we getting ready to raise capital requirements through the Basel III agreements?

Target dates start on January 1, 2013 which isn't too far off.

http://blogs.reuters.com/felix-salmon/2010/09/12/basel-iii-arrives/

[xchrom]

6. recommend

[Solomon]

7. The federal reserve bank is the root of all evils.

I'm 56 years old now and still, still, trying to understand why this thing is privately owned by a few families. That word "federal" doesn't belong there. They fund all the governments and charge interest on the loans. They make a killing when they get countries to fight each other as they loan both sides the money to waste and get gazillions of interest from doing so. Instead of printing our own money, we have to borrow it from them. Why do we allow it?

[SDuderstadt]

10. This is absolute nonsense

http://www.publiceye.org/conspire/flaherty/Federal_Reserve.html

[earthside]

11. Have you read ...

... "Web of Debt" by Ellen Hodgson Brown?

She very thoroughly makes the case you stated ... and which I also agree with.

[SDuderstadt]

12. With all due respect...

Ellen Hodgson Brown is a quack. How do you know what she tells you is true?

[earthside]

13. Oh brother.

Then Edward Flaherty is a quack, too. How do you know what he tells you is true? All the footnote links on the page you provided are to himself!

And the footnotes to the footnotes are to some of the same folks that Brown quotes, like Edward Griffin.

[SDuderstadt]

14. "All the footnote links on the page you provided are to himself"

Umm, no they're not. And the footnote regarding Griffin is about the misinformation Griffin provides.

I'd love see these footnotes in which Flaherty supposedly links to himself.