Should savers earn the same rate banks earn on their Federal Reserve deposits? – AEI – American Enterprise Institute: Freedom, Opportunity, Enterprise29th November 2018
Many have suggested requiring narrow banks as an alternative to government safety nets. Until recently, a narrow bank, which takes deposits and invests only in super-safe assets, would not have been profitable. But since the Federal Reserve began paying interest on bank reserves, a super-safe narrow bank can pass most of the interest it earns on Fed deposits to depositors and still be profitable. The state of Connecticut has licensed TNB to operate a narrow bank, but the Federal Reserve has refused to give TNB an account that pays interest on its reserves. The Fed’s refusal is stifling competition that would otherwise raise the rate savers earn on their bank deposits. Why won’t the Fed give TNB an account?
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