tag:blogger.com,1999:blog-582368152716771238.post440951840499092591..comments2024-03-28T05:14:02.071-05:00Comments on The Grumpy Economist: Fed Nixes Narrow Banks ReduxJohn H. Cochranehttp://www.blogger.com/profile/04842601651429471525noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-582368152716771238.post-56990117836276126722019-06-01T23:55:00.814-05:002019-06-01T23:55:00.814-05:00I see today in the WSJ.com that Sanders and O-Cort...I see today in the WSJ.com that Sanders and O-Cortez are proposing the USPS should offer expanded financial services, beyond postal money orders. The classic European giro system, with a twist. Yet, it could be structured as a pure Narrow Bank. Many Social Security pensioners will hold all their surplus there, instead of investments that pay fees to managers.<br />Plus, it puts one more nail in the coffin of classical "central management" banking, in contrast to what markets can do. (In spite of being the post office; a passive bureaucracy in this concept.)<br />Joe Cobbhttps://www.blogger.com/profile/08291560283071288527noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-57335177746780530912019-06-01T21:05:20.097-05:002019-06-01T21:05:20.097-05:00Kernals:
What restrictions on MMFs are you referr...Kernals:<br /><br />What restrictions on MMFs are you referring to? The only one I am aware of is that non-individuals are no longer allowed to invest in MMFs that own investments other than Federal government securities. However, I was referring to MMFs that so limit their investments. see: https://investor.vanguard.com/mutual-funds/profile/VMMXX download the statutory prospectus, the rules are explained beginning at p. 15.<br /><br />Running a customer facing system requires enormous investments in people, systems, and technology. I cannot believe that the Fed would make those investments even if they had the statutory authority to do so, which they do not: https://www.federalreserve.gov/faqs/does-the-federal-reserve-maintain-accounts-for-individuals-can-individuals-use-such-accounts-to-pay-bills-and-get-money.htm I also believe that existing commercial banks would scream bloody murder to Congress if the Fed were to ask for the authority.<br /><br />One of the latest political idiocies is the idea that the Post Office should run a banking business with ATMs, credit and debit cards, and checking accounts. Never mind that the institution is basically insolvent, and that it is having a devil of a time running its traditional delivery business. Fat Manhttps://www.blogger.com/profile/09554029467445000453noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-91888756188317563742019-06-01T16:30:22.158-05:002019-06-01T16:30:22.158-05:00The banks would not be able to use those reserves ...The banks would not be able to use those reserves to '"pay off depositors withdrawing from their accounts to put their money in the fed"" because they would need those reserves to back the new commercial bank deposits created by the Fed purchasing the treasuries.<br /> the only assets the banks could offer The Fed to facilitate the transfer would be mortgages and loan contracts which the Fed does not have the resources or objectivity to scrutinise as I wrote before.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-70020088952403421762019-06-01T15:02:19.966-05:002019-06-01T15:02:19.966-05:00If the banks cannot compete with interest on reser...If the banks cannot compete with interest on reserves then the Fed is setting the rate it is paying on reserves too high. Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-53897206983155915112019-06-01T15:01:25.839-05:002019-06-01T15:01:25.839-05:00I expect that the Fed already uses the money it ge...I expect that the Fed already uses the money it gets from reserves to buy Treasuries.Absalonhttps://www.blogger.com/profile/09131268683451462949noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-54473236148237667522019-06-01T10:21:07.472-05:002019-06-01T10:21:07.472-05:00MMFs come with restrictions. Accounts at the Feder...MMFs come with restrictions. Accounts at the Federal Reserve could offer all of the convenience of a checking account. kernalshttps://www.blogger.com/profile/11637649961507805778noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-22810575701968309922019-06-01T10:03:18.274-05:002019-06-01T10:03:18.274-05:00Banks would need to use those reserves to pay off ...Banks would need to use those reserves to pay off the depositors withdrawing from their accounts to put their money at the Fed.kernalshttps://www.blogger.com/profile/11637649961507805778noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-17830650344344544372019-06-01T06:58:06.428-05:002019-06-01T06:58:06.428-05:00If the Fed purchased those Treasuries it would cre...If the Fed purchased those Treasuries it would create more deposits ,the treasuries would then be backing the new Fed deposits held by the banks of the previous holders of the treasuries and so they would not be available to back any deposits held by the public from transfers from banks.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-6045191529600497952019-06-01T00:27:04.289-05:002019-06-01T00:27:04.289-05:00I am suffering from the stupids. I do not see a di...I am suffering from the stupids. I do not see a difference between a narrow bank and a money market fund that invests solely in T-bills. Right now, that is what I am putting spare cash in. <br />Kernals: Right now you can invest in T-bills through treasury direct. It is kind of a pain and I don't see many people doing it. Most investors prefer the MMFs. They are cheap and easy. Fat Manhttps://www.blogger.com/profile/09554029467445000453noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-87708378116697730432019-05-31T15:14:57.754-05:002019-05-31T15:14:57.754-05:00Why is a single agency conducting both a very tech...Why is a single agency conducting both a very technocratic monetary policy and a less technocratic banking regulation? It seems to me that the ordinary reason for that is the role of Fed as the lender of the last resort. Since it bails out banks it has to regulate the riskiness of their assets (and the Fed knows better than anyone how much risk is tolerable). However, during normal times a lender of the last resort is not necessary. During the last crisis, on the other hand, Treasury did a lot of the bailouts. Wouldn't it be better to make a Treasury bailout a normal course of action, and strip the Fed of their regulatory powers?Pavel Shevchukhttps://www.blogger.com/profile/05577218879648798556noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-60736509544153747652019-05-31T14:03:19.926-05:002019-05-31T14:03:19.926-05:00John, what do you think of this idea to have the F...John, what do you think of this idea to have the Federal Reserve directly offer accounts to the public? <br />https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3192162<br />It's essentially narrow banking, but it cuts out the middle man by having the Fed be a giant narrow bank. <br />kernalshttps://www.blogger.com/profile/11637649961507805778noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-72436630108838796912019-05-31T14:00:22.861-05:002019-05-31T14:00:22.861-05:00There's enough Federal Debt outstanding for th...There's enough Federal Debt outstanding for the Fed to back all of the deposits it receives from the public with treasury securities. Banks could make loans from capital raised by issuing stock.kernalshttps://www.blogger.com/profile/11637649961507805778noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-68116537610070846632019-05-31T10:55:29.349-05:002019-05-31T10:55:29.349-05:00Money in the economy consists of commercial bank d...Money in the economy consists of commercial bank deposits backed by banks assets, with the Fed facilitating transactions between banks, and so having the public hold Fed accounts would be putting the cart before the horse.<br />In the ultimate case of deposits held at the fed, the banks would have no assets and the Fed would have to scrutinise every mortgage and loan in the economy, which it does not have the resources or objectivity to do, and the banks would only be credit brokers.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.comtag:blogger.com,1999:blog-582368152716771238.post-37046713482835157412019-05-30T21:03:01.933-05:002019-05-30T21:03:01.933-05:00I think this post makes a very strong case that th...I think this post makes a very strong case that the Federal Reserve, like all regulatory agencies, is prone to "regulatory capture"---that is, the industry that it regulates is calling the shots. <br /><br />How could it be otherwise? As a citizen, or earnest taxpayer, have I time to carefully peruse the actions of the various regulatory agencies? My mechanisms for citizen oversight of the regulatory agencies are 1) the R-Party or 2) the D-Party. <br /><br />Hooo-boy. <br /><br />Okay, add to regulatory capture the clarion calls for "Fed independence". <br /><br />We should want an independent and also captured Federal Reserve? <br /><br />My advice: Dudes, we have to give up. The best option here to attach yourselves to the (legalized) gravy-corruption train in one way or the other. Build up a big nest-egg stashed in the Cayman Islands. Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com