It's probably not clear to most Americans how Fed Chairman Ben Bernanke has changed the rules of the game for the benefit of bankers since he has taken over as chairman. He calls these changes new Federal Reserve "tools".
One important example of Bernanke's new Federal Reserve "tools" is the paying of interest on deposits that banks leave with the Federal Reserve. It has resulted in over a trillion dollars accumulating at the Fed, as what is known as "excess reserves". The Fed is paying banks EIGHT times equivalent market rates when they keep the funds as excess reserves.
The money bankers deposit with the Fed is totally riskless and also does not require them to hold capital against the deposits. Prior to the Bernanke regime, interest was never paid on these deposits. Alan Greenspan never paid interest on deposits left at the Fed. Paul Volcker didn't. Arthur Burns didn't. In fact, no other Fed chairman in Fed history has done so. But because Bernanke is doing this, banks are racking up totally riskless earnings that no one else in America can get.
One important example of Bernanke's new Federal Reserve "tools" is the paying of interest on deposits that banks leave with the Federal Reserve. It has resulted in over a trillion dollars accumulating at the Fed, as what is known as "excess reserves". The Fed is paying banks EIGHT times equivalent market rates when they keep the funds as excess reserves.
The money bankers deposit with the Fed is totally riskless and also does not require them to hold capital against the deposits. Prior to the Bernanke regime, interest was never paid on these deposits. Alan Greenspan never paid interest on deposits left at the Fed. Paul Volcker didn't. Arthur Burns didn't. In fact, no other Fed chairman in Fed history has done so. But because Bernanke is doing this, banks are racking up totally riskless earnings that no one else in America can get.
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