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IPFS News Link • Central Banks/Banking

How Much Free Money is the Fed Giving Banks and Financial Institutions?

• by Mish

Free money to banks based on reserves, reverse repos, and current interest rate paid by the Fed. Chart and calculation by Mish.

Understanding Reserves

The Fed used to pay banks interest on "excess reserves". Excess reserves are total reserves minus required reserves.

As announced on March 15, 2020, the Board of Governors reduced reserve requirement ratios on net transaction accounts to 0 percent, effective March 26, 2020. This action eliminated reserve requirements for all depository institutions. 

Since there are no reserve requirements on either checking or savings deposits, all reserves are effectively excess reserves, and the Fed pay banks interest on everything. That includes free money crammed down banks throats via QE.

1 Comments in Response to

Comment by PureTrust
Entered on:

The question is, where does the Fed get the money that they give to the banks? They simply 'print' it? They get it from investors? They get it from the double repayment on loans - creations of new money? They get it from IRS collections/taxes? Where? --- And what are the rules that they follow so that they don't collapse the economy as they pay the banks? --- Is the payment to the banks tapering off because the money is going to Ukraine rather than the banks?