I have been saying for a while now that I expect the Fed to reduce the rate it pays in IOER and start to raise requirements to hold treasuries for both banks and insurance companies as they seek to continue to reduce their balance sheet, reduce their current losses, and ensure that the treasury can continue to issue debt to a captive audience. the banks will scream, but the population will not care. after all, the banks are not paying depositors current market rates, I think my JPM savings account pays 0.02%. If JP takes a haircut on their MRR, it's ok with me, and probably everybody else except Jamie Dimon.
Thank you for an excellent description of the process ongoing in Europe. I'm sure we will see something here in the States soon enough
Thank you Andy for your kind words. Personally, my first port of call for the Fed would be to limit ONRRP. I'm not even confident it meets the restrictions set in the Federal Reserve Act. The Federal Reserve Act stipulated that deposits are expected to come from ‘depository institutions’. ONRRP seems to have emerged as a response to evident changes in the financial plumbing, as Jeremy Stein argued in 2013. But that doesn't mean it is in strict accord with the legislative framework.
My take, though I am no expert, is there are a number of things the Fed is currently doing that fall outside the Federal Reserve Act, but nobody is willing to bring up the issues for fear of creating a bigger problem
I have been saying for a while now that I expect the Fed to reduce the rate it pays in IOER and start to raise requirements to hold treasuries for both banks and insurance companies as they seek to continue to reduce their balance sheet, reduce their current losses, and ensure that the treasury can continue to issue debt to a captive audience. the banks will scream, but the population will not care. after all, the banks are not paying depositors current market rates, I think my JPM savings account pays 0.02%. If JP takes a haircut on their MRR, it's ok with me, and probably everybody else except Jamie Dimon.
Thank you for an excellent description of the process ongoing in Europe. I'm sure we will see something here in the States soon enough
Thank you Andy for your kind words. Personally, my first port of call for the Fed would be to limit ONRRP. I'm not even confident it meets the restrictions set in the Federal Reserve Act. The Federal Reserve Act stipulated that deposits are expected to come from ‘depository institutions’. ONRRP seems to have emerged as a response to evident changes in the financial plumbing, as Jeremy Stein argued in 2013. But that doesn't mean it is in strict accord with the legislative framework.
My take, though I am no expert, is there are a number of things the Fed is currently doing that fall outside the Federal Reserve Act, but nobody is willing to bring up the issues for fear of creating a bigger problem