
US banks threaten to charge for deposits - miles
http://www.ft.com/cms/s/0/b1d409d0-5399-11e3-b425-00144feabdc0.html
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joshdotsmith
Would be awesome if I could actually read the article in question. Love that
the overlay has id="DRMUpsell".

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kalleboo
Secret browsing window to kill any cookies, search for the URL on google,
click it there. They can't serve up a different page to google visitors on
threat of being banned for spam.

This method also works for WSJ.

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VLM
"but paying just to leave money in the bank would be highly unusual and
unwelcome for companies and households."

LOL I'm the treasurer for a kids organization and no one seems to care that
we're paying about 10% on fees (sadly I wish I were kidding) in addition to
real world inflation specs (not made up .gov propaganda) so we're already used
to losing about 15% annually at the bank.

My personal account at a credit union with much higher balances and lower fees
only loses about 5% annually on deposits.

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RockyMcNuts
\- Financial crisis... everyone wants safe liquid assets, like short term
Treasurys, bank deposits.

\- Those instruments get bid up, rates go to 0.

\- This breaks retail Main Street banking model... no point in banks paying to
rent and staff branches, take deposits from customers when they have more
deposits than they know what to do with, no safe liquid place to invest that
pays any return at all.

\- To not make the crisis worse with branch closures, bank layoffs, Fed starts
paying interest on excess reserves... bank takes deposits, puts them at the
Fed in excess reserve account, Fed pays 0.25%.

\- On the one hand this saves bank branches from closing, retail customers
from being charged fees... on the other hand you're paying banks not to lend
in a back-door bailout.

\- My first guess would be that the Fed would have to taper QE, let short
rates rise above 0 before ending IOER. But maybe there is some room to reduce
IOER a small amount where a retail deposit would be breakeven but the back-
door bailout would be reduced/eliminated.

\- Naturally the banks are going to squawk. Ultimately one side will back down
and depositors probably won't have to pay fees.

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dsl
_US banks warn Fed interest cut could force them to charge depositors_

Leading US banks have warned that they could start charging companies and
consumers for deposits if the US Federal Reserve cuts the interest it pays on
bank reserves.

Depositors already have to cope with near-zero interest rates, but paying just
to leave money in the bank would be highly unusual and unwelcome for companies
and households.

The warning by bank executives highlights the dangers of one strategy the Fed
could use to offset an eventual “tapering” of the $85bn a month in asset
purchases that have fuelled global financial markets for the last year.

Minutes of the Fed’s October meeting published last week showed it was heading
towards a taper in the coming months – perhaps as soon as December – but wants
to find a different way to add stimulus at the same time. “Most” officials
thought a cut in the interest on bank reserves was an option worth
considering.

Executives at two of the top five US banks said a cut in the 0.25 per cent
rate of interest on the $2.4tn in reserves they hold at the Fed would lead
them to pass on the cost to depositors.

Banks say they may have to charge because taking in deposits is not free: they
have to pay premiums of a few basis points to a US government insurance
programme.

“Right now you can at least break even from a revenue perspective,” said one
executive, adding that a rate cut by the Fed “would turn it into negative
revenue – banks would be disincentivised to take deposits and potentially
charge for them”.

Other bankers said that a move to negative rates would not only trim margins
but could backfire for banks and the system as a whole, as it would
incentivise treasury managers to find higher-yielding, riskier assets.

“It’s not as if we are suddenly going to start lending to [small and medium-
sized enterprises],” said one. “There really isn’t the level of demand, so the
danger is that banks are pushed into riskier assets to find yield.”

The danger of negative rates has deterred the Fed from cutting interest on
bank reserves in the past. If it were to do so now, it would most probably
expand a new facility that lets banks and money market funds deposit cash at a
small, positive interest rate. That should avoid any need for banks to charge
depositors.

About half of the reserves come from non-US banks that do not have to pay the
deposit insurance fee. Their favourite manoeuvre is to take deposits from
money market funds and park them overnight at the Fed, earning millions of
dollars risk-free. Cutting the interest on reserves would stop that.

Lowering interest on reserves would also affect money market funds, said Alex
Roever, head of US interest rate strategy at JPMorgan.

“[It] would decrease the incentive for those banks to borrow in the money
markets, which in turn could leave money market funds short of certain
investments and force them to bid up the price of their next best options,” he
said.

Richard Gilhooly, strategist at TD Securities, highlighted some benefits to
the Fed from the possible cut: “[It] would not only anchor short-term rates
near zero, it also stands to boost the profits for the Fed as they pay less
interest to banks,” he said.

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RougeFemme
_“It’s not as if we are suddenly going to start lending to [small and medium-
sized enterprises],” said one. “There really isn’t the level of demand, so the
danger is that banks are pushed into riskier assets to find yield.”_

I wonder how many small and medium-sized enterprises would agree that there
isn't demand for bank loans. There is anecdotal evidence that small and
medium-sized companies _are_ looking for bank loans but can't get them. Is it
that they truly can't get them at any rate or can't get them at the rates they
want. . . Conversely, will banks be "pushed" into riskier assets because they
truly have nowhere else to invest/loan their money or because lending to
small/medium companies will not pay the yields required to satisfy Wall
Street, their stockholders and their senior execs?

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acd
Well if they can't harvest you by debt so have you pay to them for deposits,
you will somehow pay. All shall be debt enslaved to The central banks
artificially cheap interest rates, don't mind the Central Bank of EU chief is
ex Goldman Sachs and the FED well the daughter of the senator who created it
was married to the banker who wanted it.

Banks vs You [http://en.wikipedia.org/wiki/File:Claas-
lexion-570-1.jpg](http://en.wikipedia.org/wiki/File:Claas-lexion-570-1.jpg)

How they harvest you, credit any form. Credit cards, mortage, car loans, boat
loans, check credit, corporate loans.

Then there is the legal settlements, where the banks know they are guilty but
pay not to have to go to court. London Whale, Sub prime credit, Libor scandal
etc.

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scotty79
Money really became worthless. People have to pay other people to take it an
store it.

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VLM
Bitcoins don't charge a fee.

Note that people have owned gold and "valuables" for a long time. If you think
owning a serious art painting is free, you're in for a surprise, especially if
its insured against loss. And my safe deposit box has both a monthly rental
fee and some valuable pieces of metal inside it. (And most importantly a set
of USB flash drives periodically rotated in storage, which is a bit off topic)

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smsm42
Bitcoins aren't money, not yet at least. When I could pay my mortgage and my
electricity bill with bitcoins, then it may become money. Until then, it's no
more money than baseball cards, and with much larger volatility.

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VLM
Geeze you make them sound as useless as euros or Canadian dollars. Its a lot
easier to spend BTC than euros.

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giardini
Site wants me to register to read the article.

