Coordinated central bank action to enhance the provision of US dollar liquidity

Re:Coordinated central bank action to enhance the provision ... by aeternum on Sunday March 19, 2023 @07:56PM (#35225182)

Changing the reserve requirement won't fix this. Banks no longer have the deposits, they used those customer deposits to purchase debt (t-bills, corporate bonds, mortgages, etc.).

The debt they own has decreased significantly in value since because who wants to own a mortgage at 3% when new mortgages are at 6-7%? The sooner banks are forced to sell this debt, the more they lose.

Thus increasing the reserve requirement would force early sales of debt and make the bank go further into the red.

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Re:Coordinated central bank action to enhance the provision ... by lowkey on Sunday March 19, 2023 @08:25PM (#35225449)

To be clear, I agree that you can’t raise reserve requirements now, but zero reserves was supposed to be a temporary Covid measure. We are here in 2023 and the banks are all insolvent having speculated using 100% of depositor funds as collateral.

The Fed tells us everything is fine and we shouldn’t worry our pretty little heads. The Fed is the problem here. They are too close to the banks they regulate. This is yet another example of regulatory capture. Propping up a failed fractional reserve banking system now featuring no reserves.

I don’t want innocent depositors to lose their money but I do think it is high time to reconsider this experiment that is the Federal reserve.

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Re:Coordinated central bank action to enhance the provision ... by voldacar on Sunday March 19, 2023 @08:29PM (#35225478)

There are no temporary measures. Passports were a temporary measure

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Re:Coordinated central bank action to enhance the provision ... by lowkey on Sunday March 19, 2023 @08:35PM (#35225540)

So was income tax (agreeing with you)

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Re:Coordinated central bank action to enhance the provision ... by lumb63 on Sunday March 19, 2023 @10:37PM (#35226608)

The goal was to encourage the banks to speculate using 100% of depositor funds as collateral. How could we have ever seen a problem coming?

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Re:Coordinated central bank action to enhance the provision ... by anon291 on Sunday March 19, 2023 @11:00PM (#35226738)

> To be clear, I agree that you can’t raise reserve requirements now, but zero reserves was supposed to be a temporary Covid measure.

Anyone who thought anything about COVID was temporary was deluded. When was the last time any temporary measure actually expired and stayed that way?

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Re:Coordinated central bank action to enhance the provision ... by bradleyjg on Sunday March 19, 2023 @09:07PM (#35225891)

What regulators should have done starting a year ago, and can still do now, is force banks to restore the mark to market value of their equity cushions via share sales.

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Re:Coordinated central bank action to enhance the provision ... by lowkey on Sunday March 19, 2023 @09:34PM (#35226144)

I agree with that as a short-term strategy to address the immediate crisis. However if we want to avoid more crisis in the future I think it is necessary to re-examine the fundamental assumptions of the existing model.

Also, we have to do something about the issue of regulatory capture. The Fed knew that hundreds of banks were insolvent as far back as September [0], yet they did nothing to protect depositors. Why not and why should we trust the Fed going forward given their terrible terrible track record?

The Fed gave us a decade of zero interest rates. The Fed told us there would be no inflation, then they told us inflation was transitory. As far as I am concerned the Federal Reserve is nothing more than a centralized public relations arm of the banking industry.

[0] https://mobile.twitter.com/balajis/status/163733241114198835...

Edit: Added a source

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