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Fears at Fed of rate payouts to banks

Home - by - February 19, 2013 - 15:00 America/New_York - 6 Comments

FT

US Federal Reserve officials fear a backlash from paying billions of dollars to commercial banks when the time comes to raise interest rates.

The growth of the Fed’s balance sheet means it could pay $50bn-$75bn a year in interest on bank reserves at the same time as it makes losses and has to stop sending money to the Treasury.

Officials at the US central bank fear it could create a public-relations nightmare after the Fed was lambasted for rescuing banks during the financial crisis. It is one factor prompting some inside the Fed to reconsider the eventual “exit strategy” from easy monetary policy.

In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”

Mr Bullard said that neither interest paid to banks nor possible losses on exit made any difference to the substance of monetary policy.

more    http://www.ft.com/intl/cms/s/0/9b245cd6-79e1-11e2-b377-00144feabdc0.html#axzz2LJT6oBNh

 

» 6 Comments

  1. thirdtwin

    February 19th, 2013

    “Public relations nightmare” for who exactly? Because this one has preordained Blame Bush/GOP written all over it, and Obama/MSM won’t even need Ed Asner to narrate the narrative for Lo Info Voters.

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  2. Tim

    February 19th, 2013

    So, look for inflation to increase by another $50 – $75 Billion per year – on top of what Bernanke’s already printing.

    Bernanke’s printing, what, $85 Billion per month …

    so that’s only an additional 8.3% (1/12) increase.

    Zimbabwe – Here We Come!

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  3. Anonymous

    February 19th, 2013

    You panicky guys forget that The Won™ can erase $2 TRILLION of debt with the blink of an eye.

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  4. Stranded in Sonoma

    February 19th, 2013

    When I first started buying powdered milk at Costco, the price for a box was $4.99. I remember that clearly. It has gone up as the federal reserve paper has been inflated. In 2009, the price for that box was about $25. After about a year of 0bama, the price jumped to from $25 to $32 in one hit. I remember that because I was expecting a $25 cost and would have bought it at that price. When I saw the $32 price I realized it was now out of my budget. That same box is for sale on Amazon for nearly $40.

    But there’s no inflation.

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  5. Tim

    February 19th, 2013

    Obama is, with malice aforethought, destroying our economy and shepherd in some sick(er) form of socialism, which can eventually meld into some worldwide globaloney bullshit caliphate.

    The Republicans simply are NOT up to the task of even recognizing, much less stopping, this madness.

    We cannot solve a problem until we define it.

    We should shout “BULLSHIT” every time one of these mealy-mouthed, corrupt pols opens its mouth. The media is certainly ensconced in the socialist camp, and cannot be trusted. Even FOX is too timid to call it what it is.

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  6. sablegsd

    February 19th, 2013

    EVERY time I go to the store, prices have gone up. EVERY time. Shortly before Christmas, I crossed paths with a little old lady in the flour, sugar, etc. aisle. She wanted to bake cookies for her grands and great-grands, but she simply couldn’t afford the ingredients. I wanted to cry. Then I wanted to fold, spindle and mutilate.

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