
The Fed Wants to Test How Banks Would Handle Negative Rates - irln
http://www.bloomberg.com/news/articles/2016-02-02/rates-less-than-zero-is-bank-stress-fed-wants-to-test-in-2016
======
IgorPartola
My jaded view would be that the banks would just borrow free money, but not
pass anything onto the consumers, instead using it for more high risk trading.
Seems to me that the government has a much better way to stimulate the
economy: lower rates on existing student loans. If the Fed can afford to give
negative rates to the banks, shouldn't it follow that the DoE can afford to
give negative rates to students?

~~~
maxxxxx
I think you are onto something but lowering student loan rates would probably
just cause even higher tuition.

How about incentives for companies to pay their employees better? I know it's
sacrilegious to even think such a thing...

~~~
nickff
The only incentive that will effectively cause companies to pay their
employees better is more demand for labor, which is most likely to be caused
by increased economic growth. Most other programs end up being more
complicated and costly than earned income tax credits and other methods of
redistribution.

~~~
maxxxxx
I am not an economist but I am pretty sure you could design tax policies that
make it more attractive to pay higher salaries for the average worker or maybe
give them shares in the company.

Can you imagine how much demand there would be if average wage growth would
have kept up with productivity? People who make 30000/year would spend much
more if they had 40000/year. I don't think a CEO's behavior will change much
if he has 30 million or 40 million.

Obviously this won't happen but it's a thought that should be brought up from
time to time.

~~~
nickff
> _" Can you imagine how much demand there would be if average wage growth
> would have kept up with productivity? People who make 30000/year would spend
> much more if they had 40000/year. I don't think a CEO's behavior will change
> much if he has 30 million or 40 million."_

There might be more demand for the consumer goods popular for low-middle
income citizens, but then again, this could reduce capital investments and
reduce productivity in the long term, thus reducing wage growth in the future.
I suppose my answer is that I can't imagine how much 'demand' there would be
if average wage growth kept up with productivity, largely because the economy
is a complicated beast, and 'demand' is not a simple thing.

~~~
maxxxxx
How would more demand reduce capital investment? If anything it should make it
more attractive to invest. Supply and demand?

~~~
nickff
I am assuming that we hold M2 velocity of money constant for the purpose of
this analysis; which is to say that I assume richer people and poorer people
hold on to money for the same amount of time before re-allocating it (to
stocks, bonds, consumables, durable goods, etc.). If this assumption is true,
both will create the same total 'demand', but for different goods. Richer
people tend to spend much less (as a proportion of their income) on
consumables and personal items than poorer people; the rich also tend to
invest the vast majority of their money, and that money often goes to capital
investments.

Supply and demand works the same for industrial buildings, robots, software,
and trains as it does for homes, couches, and cars. The primary (economic)
difference between these goods is their impact on long-term productivity.

~~~
TheOtherHobbes
>I am assuming that we hold M2 velocity of money constant for the purpose of
this analysis

Poor people have to spend money on essentials as soon as it comes in. Rich
people don't. That's pretty much the simplest possible definition of being
poor. So that is not a valid assumption.

>If this assumption is true, both will create the same total 'demand', but for
different goods.

This can't possibly be true either. Rich people spend money on essentials
_and_ on luxury goods _and_ on investments _and_ keep some spare cash on hand,
because why not?

Poor people spend money on essentials, and perhaps a little distraction and
entertainment.

Why would the total demand from both somehow be the same?

> The primary (economic) difference between these goods is their impact on
> long-term productivity.

Which is the crux of the problem - speculative casino "investment", which is
based on gaming markets, isn't economically productive. Neither is an economy
that leans heavily on usury.

Productive investment in R&D, small business development, and wage growth
stimulates economic capacity and increases confidence.

Speculative investment - including speculative gambling, systems of forced
debt like student loans and payday lending, and asset inflation which drives
up rents and property prices - destroys demand and economic capacity.

The fact that we're even discussing negative interest rates while in the
middle of severe commodity deflation proves the core problem hasn't been
addressed.

~~~
nickff
> _" Poor people have to spend money on essentials as soon as it comes in.
> Rich people don't. That's pretty much the simplest possible definition of
> being poor. So that is not a valid assumption."_

Rich people invest money in capital goods as soon as it comes in, either
through a direct purchase, or because the investment bank where they hold the
money gives it to someone who spends it.

> _" This can't possibly be true either. Rich people spend money on essentials
> and on luxury goods and on investments and keep some spare cash on hand,
> because why not?"_

I said 'as a proportion of income'; rich people spend far less on living
expenses than the poor do as a proportion of income. They might have a car
that is 10x as expensive, but with 100x the income to pay for it.

> _" Poor people spend money on essentials, and perhaps a little distraction
> and entertainment."_

This agrees with my previous statement.

>> _" If this assumption is true, both will create the same total 'demand',
but for different goods."_

------
clarkmoody
For a good read on why this Keynesian push toward consumption is misguided,
check out this 2005 article[1]. The counterargument against consumption as the
driver of the economy states that saving and investment actually leads to
growth. The thesis of the linked article is that a huge amount of business
investment is hidden from GDP numbers since it falls under "net investment,"
with two very large sums (business income & business investment) netting out
to a small number. When we ignore the huge amount of business investment and
focus only on the net, we miss its importance.

Negative interest rates are simply the latest contortion of the Keynesians
that will fail to produce the desired results yet again.

[1] [https://mises.org/library/standing-keynesian-gdp-its-head-
sa...](https://mises.org/library/standing-keynesian-gdp-its-head-saving-not-
consumption-main-source-spending)

~~~
jerf
I know I'm just a lowly programmer and engineer who shouldn't opine about
economics very much, but I observe simply this: The "stimulus" didn't work. I
find arguments about how it wasn't big enough to be null, because it isn't
clear that we could have afforded much more and if the only way this stimulus
works is to spend more than is possible, that is just a way of saying "it
doesn't work" that saves some face but doesn't change anything about the
practicality.

It's been 8 years now we've been on this policy. Nobody 8 years ago would have
predicted what happened. From a scientific perspective, what you do with
theories that fail to correctly predict future occurrences is simple.

But our elites _really like_ what quasi-Keynesianism tells them, so the rest
of us can continue to live impoverished lives for their benefit.

~~~
nabla9
Stimulus worked.

What Debate? Economists Agree the Stimulus Lifted the Economy
[http://www.nytimes.com/2014/07/30/upshot/what-debate-
economi...](http://www.nytimes.com/2014/07/30/upshot/what-debate-economists-
agree-the-stimulus-lifted-the-economy.html?_r=0)

Once again: Yes, the stimulus worked.
[http://www.latimes.com/business/hiltzik/la-fi-mh-stimulus-
wo...](http://www.latimes.com/business/hiltzik/la-fi-mh-stimulus-
worked-20140228-story.html)

"Internet economics" and the discussion is full of fringe theories that refer
to mises.org. For them every mainstream economist is Keynesian. Even if they
belong to Chicago school.

~~~
dismal2
A couple trillion dollars was used to buy up securities that are realistically
worth $0 in pretty much every timeframe for 100 cents on the dollar, cleaning
up bank balance sheets. This allowed them to continue to speculate on all
sorts of things, like housing, commodities, etc, looking for returns (some of
it probably saw its way to silicon valley too). It was passed on as easy money
to corporations, who mostly used it to do stock buy backs that pretty much do
nothing for "the economy" while lifting the stock market.

As for employment, if you actually look at the numbers, its people over 55 who
can't afford to retire doing service jobs. The participation rate is trash and
young people are fucked.

#recovery

~~~
morgante
> A couple trillion dollars was used to buy up securities that are
> realistically worth $0 in pretty much every timeframe for 100 cents on the
> dollar, cleaning up bank balance sheets.

I have no idea what you're referring to, but if it's TARP then that's totally
false. The government made a profit on the bailout.

The vast majority of the securities which the government bought up had
intrinsic values higher than what the fear-driven market was pricing them at.

[https://www.washingtonpost.com/business/economy/bailout-
high...](https://www.washingtonpost.com/business/economy/bailout-highly-
profitable-for-taxpayers-when-you-look-at-the-right-
numbers/2015/01/01/dc2a05a6-8fa5-11e4-a412-4b735edc7175_story.html)

~~~
dismal2
[https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_...](https://en.wikipedia.org/wiki/Quantitative_easing#US_QE1.2C_QE2.2C_and_QE3)

~~~
morgante
I don't think anyone thinks the assets bought in QE were worth $0. The Fed's
impact was entirely at the margin (increasing the supply of investable
dollars).

If the assets bought under QE were sold for 50 cents on the dollar (for
example), even the most bearish investors would be lining up to buy in droves.
Of course, that applies to investors with actual money behind their beliefs
rather than random internet commentators who can pull valuations out of
nowhere.

------
pc86
Let's assume rates reach a point such that personal savings accounts have an
interest rate of 0% or negative. How is this any more an incentive to spend
than it is an incentive to have a box with thousands of dollars in cash under
your bed?

~~~
gtrubetskoy
It's an incentive for the bank to have as little money as possible. The banks
will do everything to get rid of cash, which, in theory, should devalue the
currency.

Bottom line: negative rates are all about devaluing the currency against other
currencies in the world so that the exports become cheaper.

~~~
lasermike026
I wonder what it would do to commodity prices?

~~~
ihsw
Commodity prices have already crashed through the floor, seeing them crash
further may actually start freaking people out.

Frankly I think we need to stimulate the demand side of things -- give people
free money, and don't let the banks screw it up like the subprime mortgage
crisis.

~~~
dragonwriter
> Frankly I think we need to stimulate the demand side of things

That's a fiscal policy choice that would take action by Congress, and doesn't
seem likely with the Congress we have.

OTOH, if people get to care enough about it, well, it _is_ an election year,
so in principal that could change.

------
nostromo
I wish the Fed would research sending checks to tax payers as a stimulus
strategy. Because it appears the low interest rate (and QE) strategy isn't as
effective as it once was - in part due to uncooperative banks.

If/when the time comes to put the breaks on the economy, the money could be
removed from circulation with a slight uptick in taxes of some sort (income,
gas, tariffs, whatever) -- but unlike a normal tax, we would apply it against
the Fed's balance sheet and not place it in government coffers.

Milton Friedman and Ben Bernanke have called this idea helicopter money.

[http://www.economist.com/blogs/buttonwood/2014/11/reviving-e...](http://www.economist.com/blogs/buttonwood/2014/11/reviving-
economy)

~~~
chiph
Bush did this in 2008, sending rebate checks of $600 to individuals, and $1200
to joint filers.

[http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/](http://www.cnn.com/2008/POLITICS/02/13/bush.stimulus/)

Results were mixed - The dollars amounts weren't really a windfall to most
people, so _some_ additional spending went on. But most people realized they
would need to repay that money at tax time, and held onto it.

~~~
nostromo
The difference is the source of the funds.

I'm suggesting the Federal Reserve do this -- not the federal government. The
federal government can't create money, so the stimulus effect is lessened.

------
s_q_b
This is a classic failure of aggregate demand, and it cannot be fixed with
monetary policy alone. I'm struck by the continued relevance of the lessons of
the Great Depression.

For example, see these lines from FDR's First Inaugural Address:

 _Plenty is at our doorstep, but a generous use of it languishes in the very
sight of the supply.

Primarily this is because the rulers of the exchange of mankind’s goods have
failed, through their own stubbornness and their own incompetence, have
admitted their failure, and abdicated. Practices of the unscrupulous money
changers stand indicted in the court of public opinion, rejected by the hearts
and minds of men.

True they have tried, but their efforts have been cast in the pattern of an
outworn tradition.

>>Faced by failure of credit they have proposed only the lending of more
money. Stripped of the lure of profit by which to induce our people to follow
their false leadership, they have resorted to exhortations, pleading tearfully
for restored confidence.

They know only the rules of a generation of self-seekers. They have no vision,
and when there is no vision the people perish._

------
roymurdock
> New York Fed President William Dudley said last month that policy makers
> were "not thinking at all seriously of moving to negative interest rates.

> "But I suppose if the economy were to unexpectedly weaken dramatically, and
> we decided that we needed to use a full array of monetary policy tools to
> provide stimulus, it’s something that we would contemplate as a potential
> action," he said on Jan. 15.

The Fed continues to fritter away whatever credibility it has left by waffling
back and forth on interest rates.

It raised interest rates and committed to 2.0% core inflation by 2018 just two
months ago. By including this long-term negative interest rate scenario in its
2016 stress tests, it is basically admitting that there is some non-negligible
probability that it will be unable to follow through on this commitment, and
that banks should be prepared to weather the storm if and when it completely
loses control of its grip over the direction of the short term interest rate.

The article does not actually speculate on what might happen if the Fed were
to reverse its rate hike and instead lower the FFR into negative territory.
I'd imagine that basically nothing would change, and that the banks would
simply take a 0.25% haircut on their holdings of 3-month treasury bonds as
they have been doing in Europe for the past 1.5 years. They will not pass this
negative interest rate onto regular customers as this would either (a) drive
them to another bank which would benefit from the new deposits or (b) force
consumers to withdraw deposits and hold cash instead. Banks need these
deposits to loan against, and a 0.25% "holding tax" on a relatively small
portion of their holdings would not justify the loss in deposits. Banks will
just eat the hit to their profit margins and life will go on as normal in the
supply side of money world.

------
iphoneseventeen
What I read from the article: Relax, it is just a stress test. We aren't going
to actually do this. We would only do this in the case of an emergency. We
would totally do this, but only if we have to. We have to do this.

------
SilasX
I want to know how bankers would handle negative salaries.

Edit: Sorry if that sounded snarky, it was my attempt at a witty way of
saying, "it doesn't make sense for there to be a negative price for provision
of a scarce good, imagine if we did that to labor, like yours".

~~~
dragontamer
Sour Crude in some areas of the US hit negative values a few weeks ago. It
means that supply has grossly outstripped demand, and that storage of the good
has become the primary cost.

In the case of banking, it means that liquid cash has become so worthless (ie:
too many people are saving money) such that the Banks are now charging you for
the privilege of keeping the money safe.

~~~
SilasX
Even so, something is fundamentally wrong if markets are signaling, "no, we'd
rather you not lend us money to work with", even if the fix lies somewhere
else. We should never be at a state where "forgoing the use of money so that
others can invest it" is a non-scarce good.

(A charge _merely_ for having physical banknotes on demand can make sense, of
course.)

In contrast, there are sane worldstates that correspond to "sour crude
provides economic value less than its upkeep cost".

~~~
dragontamer
Yes. Which is why this is a stress test. Will the banks survive a financial
crisis if the entire world switched over to negative rates?

Well, the Fed wants to know, which is why they're running this doomsday test
scenario. The Fed currently expects to raise rates about 2 or 3 more times
this year btw... so the scenario probably won't happen, but that doesn't
change the fact that lead bankers are preparing for the worst.

In other words, the article is simply stating the following fact: big banks in
America are thinking about various financial doomsday scenarios. I don't think
that's a bad thing at all.

~~~
SilasX
Fair enough, I assumed the angle was less "hey let's kick the tires" and more
"the Fed wants to make interest rates negative", since a lot of economists
have been recommending the latter.

------
6stringmerc
Skimmed the article, did a Ctrl+F, didn't see mention of essentially
channeling free money into depressed bond interest rates leading to even more
aggressive corporate stock buybacks which predominately benefit the top 1%
investor class in the United States, without any discrenable benefit to wage-
level workers or the drastic income inequality, was not surprised.

------
Shivetya
So bad fiscal policy and regulatory policies have us finally at the end of the
road? Going negative? Since people won't spend and are so intent on saving
they will force their hand or punish them so they become good little
Keynesians ?

Well the only upside is that it won't encourage people to want a digital
currency based system. Those little bank notes under the bed cannot be hacked,
cannot be forbidden to be spent on specific goods or people, and cannot be
confiscated out of bank.

So I guess this just really comes down to a case that over the top government
borrowing is pulling so much money out of the markets that they need to force
private investors to put money in

~~~
mrchucklepants
An attack on cash will surely follow.

------
arca_vorago
Congress should have never given up it's constitutional power to control
monetary policy, the Federal Reserve (which is neither) should be audited and
the backlash from the revelations should be used to push a revocation of the
Federal Reserve Act which was passed under dubious circumstances by shady men
connected to the European banking oligarchy, along with various other bad
legislation pushed through by the same groups (that also pushed us into the
world wars.)

I've said it before, and I'll say it again. Bankers are more the enemy of the
people than terrorists, and just because Dimon and Blankfein need an extra
300mil bonus doesn't mean we should allow them to gut our economy. Unlike some
of the placating bullshit I've seen people posting in this thread, the 07-08
crash was because of abuse, fraud, and lack of oversight, and we need to start
sending the top people to jail. If not, then we are just going to have another
recession, and another, and maybe a depression.

Adjusted for inflation rates are basically negative already anyway! Negative
rates punish the middle class, the workers, the pensioners, and retirees,
while funneling even more money to the already grotesquely wealthy uber-elite.

------
AndrewBissell
Central banks exist to cram more credit into an economy than it would
otherwise support. If the people refuse to borrow & spend, they'll just take
the money right out of their bank accounts.

Even hinting at this level of meddlesome social engineering by the managers of
our currency ought to elicit reactions of disgust and outrage.

------
static_noise
The way I understand it, the banks do not simply get money from the Fed.
Combined with negative interest rates that would be "money for free".

It is similar to how you a credit from a bank when you buy a house. Yes, the
bank gives you money but you give (the rights to) the house to the bank until
you fully paid your credit back.

The banks then goes to the Fed and says: "Here, thake this house as security
and print me some real money."

The Fed says: "Great house you have there; here is the money and here is some
more."

In the end this leads to the creation of things that are accepted by the Fed
as securities, for example houses. With negative interest rates, the Fed
basically pays for the creation of such securities.

~~~
gherkin0
> The way I understand it, the banks do not simply get money from the Fed.
> Combined with negative interest rates that would be "money for free".

I don't understand this. Under a negative interest rate scenario, wouldn't the
banks be paying the Fed for the privileged of keeping their money there? Where
is the "free money" coming from?

~~~
static_noise
OK, we have a misunderstanding here.

I was talking about the scenario where the Fed gives out a credit in exchange
for securities. This usually is accompanied with postive interest rates such
that the banks have to pay back more.

Are you talking about the scenario where the banks deposit money to the Fed?

~~~
gherkin0
> Are you talking about the scenario where the banks deposit money to the Fed?

Yes, I thought that was what negative interest rates refer to.

> I was talking about the scenario where the Fed gives out a credit in
> exchange for securities.

Are you describing quantitative easing? Because my understanding that was just
the Fed buying securities (usually government ones) on the open market at
market prices like any other buyer. I think the big difference in the negative
interest rate scenario is the selling bank would have less incentive to then
take the cash and park it in the Fed afterward.

If it's a straight bailout, my guess is the Fed would be in a strong position
to set the terms so it wouldn't have to pay the bank to take the money.

~~~
static_noise
I don't think that's quantitative easing.

To my understanding banks go to the Fed when they need money as in dollar
notes instead of money as in credit balance. The Fed does not buy the house,
it just takes it as security. Meaning it takes the right to physically get the
house if the terms of the credit are not fulfilled but it won't actually do
anything physical as long as the terms are ok.

This makes an interesting situation for the banks. When you have a house (or
the rights to one) to use as security, you can give it to the Fed and get free
money for it. Now you have more money and can do stuff.

If you don't have the house, you might actually want to get one in order to
get the free money. This makes the money not so free because with a great
house come great responsibilites.

If the Fed bought those houses outright it would have many houses but the Fed
does not need many houses, so that wouldn't make much sense. It would work
financially to some extend and increase the money supply and give incentive to
build houses but it wouldn't actually directly create anything beneficial to
anyone.

------
lr
I think we already have that... It's called "bank fees", i.e., depositors pay
the bank to keep their money instead of the bank paying interest.

~~~
pc86
To what fees specifically are you referring? If you mean things like low
balance fees or overdraft fees I think they're both appropriate when they're
not implemented or marketed in a predatory manner.

I'm not aware of any fees that are instituted "instead of the bank paying
interest" unless you're talking about something like a low balance fee on a
non-interest bearing checking account.

~~~
IgorPartola
Most big banks in the US have monthly fees for keeping your money in an
interest-free checking account. This ends up costing you something like
$5-25/month unless you (a) also set up direct deposit with them or (b)
maintain a minimum balance that is typically relatively large. This is why I
keep my money with a credit union instead: better customer service, better
rates, no stupid fees.

Edit: for example, [https://www.bankofamerica.com/deposits/checking/personal-
che...](https://www.bankofamerica.com/deposits/checking/personal-checking-
account.go)

~~~
ultramancool
You can find free chequing accounts though and if you're careful enough to not
get caught by overdraft fees, they're the way to go. I'm Canadian and I know 2
banks here that do it, but I'd imagine similar exists in the US?

------
jgalt212
WTF!. Why doesn't the Fed just send money to consumers? You can't budge CPI by
making Ray Dalio and Jamie Dimon richer (which is the main effect of ZIRP).
There's only so much eggs and butter they can consume.

~~~
dragonwriter
> Why doesn't the Fed just send money to consumers?

Because the Fed isn't the government, just a quasi-independent agency within
the government with limited scope of operations, and "just send money to
consumers" isn't within that scope.

If you think _the government_ ought to do this, then that should probably
inform your votes for Congress and the President, this being an election year
and those being the actors that would need to be involved in that.

~~~
jgalt212
I guess so, but 2008 the Fed has done a number of things it doesn't clearly
have the legal mandate to do so.

~~~
dragonwriter
There is at least one word (most likely "since" before "2008"), as well as
examples and argument on the lack of legal mandate, missing from your
argument.

------
staffanj
Rates will never be negative when banks lend FROM the fed.

Interest rates could become negative when the banks lend TO the fed (IE
parking the money overnight).

------
Johnie
First of all, there's a misconception on this discussion here. The Fed is
_PAYING_ banks the Fed Fund Rate (currently sitting at 0.5%) for parking their
excess reserves with the Federal Reserve overnight. So a negative interest
rate means that the banks have to pay the Fed money to hold their money. You
can think of this as if your bank charges you to hold your money for you.

Why would the Fed want to do this?

Banks make money by lending out deposits and charging a higher interest rate
than what they pay out. To support their lending operations, banks need to
hold a percentage of the asset as reserves. In recent years, banks have been
holding $2.3T [1][2] more than the minimum reserve that is required. This
means that the banks are sitting on the deposit and not lending it out. The
excess reserve are then deposit with the Federal Reserve earning 0.5%
interest. What the Fed wants to do is encourage banks to lend out the money
rather than sit on it so that it stimulates the economy. (More
lending->increase asset prices->people feel richers->people buy more
stuff->companies hire more people->stimulates economy)

Why aren't banks lending?

There are a number of reasons why banks are not lending as much as they used
to. After 2008, banks have become much more risk adverse. In addition,
regulations have forced tighter lending standards on the banks reducing the
amount of loans issued[3]. In addition, Dodd-Frank credit risk retention
regulation now forces banks to have "skin in the game" when they issue and
securitize loans and mortgages [4]. Because of this and the collapse of 2008
is still fresh in the bank's minds, they have increased lending standards and
reduced their risk profile.

So, the result is that they sit a huge pile of excess reserves that they can't
lend out.

In normal environments, the market resolves this problem itself. Banks that
are lending will offer higher rates to attract deposits from the banks that
are not lending and offering lower rates.

However, in recent decades, there's been a major consolidation of banks.
Between 1990-present, 37 regional banks have combined into or acquired by the
4 large banks (Citi, JPMorgan Chase, BoA, Wells Fargo)[5]. These top 4 banks
alone hold 6.46T of the $10.6T in consumer deposits. These four banks have pay
an interest rate of 0.01%. The national average interest rate is 0.06%.

On the other hand, commercial lending banks, like CIT, Sallie Mae, and
Synchrony, are trying to attract deposits paying over 15x the national average
interest rate. These traditionally lending banks have had to set up high yield
online banking operations to attract deposits to support their lending
operations.

The issue is that most consumers don't shop around for high yield accounts.
Many don't realize that there is such a drastic difference between the high
yield accounts and their local banks.

This leads to a significant amount of assets being locked up at the large
banks that aren't lending. Lenders, like Sallie Mae, end up paying higher
rates on deposits and need to charge higher rates for their student loans.

What happens to consumer deposits when Fed Fund Rate goes negative?

For the past couple of years, these large banks have been trying to shed
excess deposits. They have lowered their interest rate to practically 0%. The
large banks have even charged large institutional depositors to hold their
money [7]. If the Fed Fun Rates go negative, banks will try to charge greater
fees for banking services and/or encourage consumers to move their funds to
other banks. The difficulty here is that the banks want to maintain the
relationship with the consumer to generate future revenue while not holding
the deposits.

This misallocation and inefficiency in the deposit marketplace is what we are
trying to solve with smart technology.

[1]
[http://www.federalreserve.gov/releases/h3/current/](http://www.federalreserve.gov/releases/h3/current/)

[2]
[https://research.stlouisfed.org/fred2/series/EXCSRESNS](https://research.stlouisfed.org/fred2/series/EXCSRESNS)

[3] [http://www.urban.org/research/publication/impact-tight-
credi...](http://www.urban.org/research/publication/impact-tight-credit-
standards-2009-13-lending)

[4] [https://corpgov.law.harvard.edu/2014/11/16/a-closer-look-
at-...](https://corpgov.law.harvard.edu/2014/11/16/a-closer-look-at-us-credit-
risk-retention-rules/)

[5][http://www.upworthy.com/how-37-banks-became-4-in-just-a-
few-...](http://www.upworthy.com/how-37-banks-became-4-in-just-a-few-decades-
all-in-one-astonishing-chart)

[6]
[http://www.federalreserve.gov/releases/lbr/current/](http://www.federalreserve.gov/releases/lbr/current/)

[7] [http://www.wsj.com/articles/big-banks-to-americas-
companies-...](http://www.wsj.com/articles/big-banks-to-americas-companies-we-
dont-want-your-cash-1445161083)

------
bubbleRefuge
This is hugely disappointing. Its been 8 years since the economic crash and
the Fed has been trying to inflate this economy using monetary policy and we
have yet to eclipse 3% real GDP growth for a whole year. They FED has been
trying to create inflation and they have failed. Where is the critical
thinking at the policy making/ decision making level ? At some point we have
to reach the obvious conclusion that current economic policy models are
broken, don't work, and we need new leadership and a fresh approach.

Obama is largely to blame for this. He chose to listen to establishment/wall
street economic advisers rather than more progressive ( say Keynesian)
thinkers. This is why you are seeing Bernie/Elizabeth Warren gaining in
popularity. Quite sadly, the Gap between the middle class and extremely
wealthy in this country have never increased more so than under Obama, a
Democrat.

~~~
dnautics
[http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-
hig...](http://krugman.blogs.nytimes.com/2010/02/13/the-case-for-higher-
inflation/)

"When you have very low inflation, getting relative wages right would require
that a significant number of workers take wage cuts. So having a somewhat
higher inflation rate would lead to lower unemployment, not just temporarily,
but on a sustained basis."

Shorter Krugman: Cheat poor people out of their wages to make the government
look like it's doing something about unemployment.

~~~
bubbleRefuge
How about increase demand for labor via increasing overall aggregate demand
via stronger fiscal policy ( lower taxes or high spending depending on your
polics)

Keynesians criticizing Krugmeister. [http://stephaniekelton.libsyn.com/randy-
wray-on-krugman-and-...](http://stephaniekelton.libsyn.com/randy-wray-on-
krugman-and-the-frustration-of-the-
heterodox?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+StephanieKeltonPodcasts+%28Stephanie+Kelton+%C2%BB+Podcasts%29)

