Why Do Banks Want Our Deposits?

Written on October 29th, 2014 in politics Comments Off

Hint: It’s Not to Make Loans – Published on truthDig (first on Web of Debt), by Ellen Brown, Oct 26, 2014.

… Reckoning with the Fed:

Ever since the Federal Reserve Act was passed in 1913, banks have been required to clear their outgoing checks through the Fed or another clearinghouse. Banks keep reserves in reserve accounts at the Fed for this purpose, and they usually hold the minimum required reserve. When the loan of Bank A becomes a check that goes into Bank B, the Federal Reserve debits Bank A’s reserve account and credits Bank B’s. If Bank A’s account goes in the red at the end of the day, the Fed automatically treats this as an overdraft and lends the bank the money. Bank A then must clear the overdraft.  

Attracting customer deposits, called “retail deposits,” is a cheap way to do it. But if the bank lacks retail deposits, it can borrow in the money markets, typically the Fed funds market where banks sell their “excess reserves” to other banks. These purchased deposits are called “wholesale deposits.”

Note that excess reserves will always be available somewhere, since the reserves that just left Bank A will have gone into some other bank. The exception is when customers withdraw cash, but that happens only rarely as compared to all the electronic money flying back and forth every day in the banking system.

Borrowing from the Fed funds market is pretty inexpensive – a mere 0.25% interest yearly for overnight loans. But it’s still more expensive than borrowing from the bank’s own depositors.

Squeezing Smaller Banks: Controversy Over Wholesale Deposits: … //

… The Public Bank Solution: … //

… In other states, increased regulatory compliance costs are putting small banks out of business. The number of small banks in the US has shrunk by 9.5% just since the Dodd-Frank Act was passed in 2010, and their share of US banking assets has shrunk by 18.6%. But that is not the case in North Dakota, which has 35 percent more banks per capita than its nearest neighbor South Dakota, and four times as many as the national average. The resilience of North Dakota’s local banks is largely due to their amicable partnership with the innovative state-owned Bank of North Dakota.

(full text).

Links:

(US) Healthcare Not Warfare, Getting From Here to There, 45.31 min, uploaded by PDamerica, May 25, 2014: website Progressive Democrats of America PDamerica.org;

The USA Labor Party Initiative, 1993-2007, on Zcomm.org. by Jack Rasmus, Oct 27, 2014;

Chilean President: Latin America Has More Women in High Office than Europe, on Spiegel Online International, by Helene Zuber, Oct 27, 2014 (Photo Gallery): In an interview, Chilean President Michelle Bachelet discusses her effort to remove the last vestiges of the Pinochet dictatorship and her desire to create a better social system and import German-style vocational training to South America …;

Socialist Feminism: A Strategy for the Women’s Movement, on History is a Weapon, by Hyde Park Chapter, Chicago Women’s Liberation Union, Oct 26, 2014 … a long text;

The Myth of the Free Press, on truthDig, by Chris Hedges, Oct 26, 2014;

Human Trafficking in Central California, 13.55 min, uploaded by American Party of Labour, Oct 11, 2011 … and 24 other videos in autoplay: website American Party of Labour APL.org/About;

Invisible Austerity: How the Liberals are Getting Away with Slashing Social Assistance, on Still My Revolution, by A.J. Withers, Oct 10, 2014;

SAT Scores and Income Inequality: How Wealthier Kids Rank Higher, on WSJ, by Josh Zumbrun, Oct 7, 2014;

Society for Socialist Studies Conference 2015 / La Société d’Etudes Socialistes, June 2, 2015 – June 5, 2015, University of Ottawa – Call for Papers and Sessions Now Open, on Conferences UVIC.ca;

Websites:

Raise the Rates: … to raise social assistance rates in Ontario;

Advanced Vocational Training Scheme AVTS – Directorate Maharashtra State/India;

India: ATI Training; /SHORT TERM COURSES UNDER Advanced VOCATIONAL TRAINING SYSTEM AVTS AND HI-TECH TRAINING SCHEME;

advanced vocational training system AVTS on Google Web-search;

… and this:

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