US News

2467 readers

73 users here now

News from within the empire - From a leftist perspective

founded 6 years ago

MODERATORS

muad_dibber@lemmygrad.ml

ComradePupIvy@lemmygrad.ml

The Fed just dropped $18.5 billion into the banking system this week. It's only the fourth biggest cash infusion since the pandemic panic and even tops the dot-com bubble's peak. (fred.stlouisfed.org)

submitted 1 day ago by yogthos@lemmygrad.ml to c/us_news@lemmygrad.ml

6 comments fedilink hide all child comments

you are viewing a single comment's thread
view the rest of the comments

[–] chesmotorcycle@lemmygrad.ml 2 points 8 hours ago (1 children)

Thanks for that. So why might a bank need so much reserves? Just clearing unusually large balances?

[–] FuckyWucky@hexbear.net 3 points 8 hours ago* (last edited 8 hours ago)

Reserves are what are used by banks when you transfer money from one bank to another, when Treasury tells you to give certain account money (social security, Gov payments in general) or when you withdraw cash (since cash is a Government liability, not bank liability).

The clearing balances (aka reserves) are held at the Fed, it's Government's liability. Banks can only clear debts between one another using a higher up liability (and that's Gov).

Banks don't need reserves, they need what is known as HQLA (High Quality Liquid Assets) which includes Treasuries. These can then be presented to the Fed or in the interbank market for reserves if needed.

But since they shoved so much reserves, maintaining interest rate by paying interest on reserves, these windows had been very quiet.

See https://billmitchell.org/blog/?p=13078