Bernanke wants to REMOVE minimum reserve requirements of banks??!!

[dixiegrrrrl]

Chairman Ben S. Bernanke
Federal Reserve's exit strategy
Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.
February 10, 2010

Statement as prepared for delivery. (The hearing was postponed due to inclement weather. )

"The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system"

http://www.federalreserve.gov/newsevents/testimony/bernanke20100210a.htm#fn9.

[ananda]

1. Uh oh.

That sounds super scary.

[ChairmanAgnostic]

2. shit.

the final protection created by FDR in the 30s is going to be dead meat. Clinton/Bush did their part. I cannot believe that Obama is continuing down that same road.

[gmoney]

3. Sure! It's what's restricting lending!

I mean, if you weren't required to actually HAVE any money, wouldn't you gladly loan it out to people? Wheeee!!

"I can't be overdrawn, I still have some checks left!"

:sarcasm:

[TreasonousBastard]

4. That's disturbing, but not for the obvious reasons...

Reserve requirements primarily control money growth, and thereby interest rates, inflation and other stuff, through the multiplier effect of loaning out money. So... if we remove these requirements, how do we control the acceleration of money through the banks? Those costs and distortions are SUPPOSED to be there.

Reserve rates around 10% or less that have been historically the norm wouldn't have much effect on whether a bank is going under or not-- the Fed, FDIC and other agencies can handle bank failures and runs in other ways.

[BrklynLiberal]

5. Where are we going....and why are we in this handbasket?????????

:crazy: :silly: :wtf:

[progressoid]

6. Gee, who would have thought that keeping Ben would turn out so well.

:eyes:

[Po_d Mainiac]

7. Obviously lowering reserves was the wrong approach.

We know what that led to. But the premise was correct, it just didn't go far enough.

This technique also eliminates the hassle of establishing asset market values, and opens up a whole additional revenue stream. Depositors would be expected to pay banks to safe-guard their cash.

[jschurchin]

8. I'll make a deal with you Ben.

If you restore the Mark to Market accounting rule, then you can remove the minimum reserve. Deal?

[Festivito]

9. If I can't cover my check it would "impose costs and distortions " on my account.

Can I have a pass too?

I'm thinking though, that the Fed has already done this and is trying to tell us slowly.

That's why they had to quit reporting the M3.

[dixiegrrrrl]

10. You might want to look at this, says banks are BUILDING reserves.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x76908

[Taitertots]

11. Handing over monetary policy directly to the banks

As opposed to having them decide monetary policy indirectly through the FED.