{"id":35079,"date":"2018-06-14T06:05:31","date_gmt":"2018-06-14T11:05:31","guid":{"rendered":"http:\/\/olduvai.ca\/?p=35079"},"modified":"2018-06-14T06:05:31","modified_gmt":"2018-06-14T11:05:31","slug":"free-money-calculation-fed-will-give-36-93-billion-of-taxpayer-money-to-banks","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=35079","title":{"rendered":"Free Money Calculation: Fed Will Give $36.93 Billion of Taxpayer Money to Banks"},"content":{"rendered":"
\n
\n
\n
\n

Free Money Calculation: Fed Will Give $36.93 Billion of Taxpayer Money to Banks<\/a><\/h3>\n<\/div>\n
\n
\n
\n
\n
\"\"<\/div>\n<\/div>\n<\/figure>\n<\/div>\n<\/div>\n<\/div>\n
The Fed upped the interest it pays on excess reserves to 1.95% today. This is free money (taxpayer funded) to banks.<\/p>\n<\/section>\n<\/div>\n<\/header>\n
\n
\n
\n
\n
\n
\n

The Fed bumped up the interest it pays on excess reserves today to 1.95%. Currently, excess reserves sit at $1.894 trillion.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

The math is simple enough. At the current rate, the Fed will hand over approximately $36.93 billion of taxpayer money to banks. That assumes the status quo, but things will change.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n

Factors<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

\n
\n
\n
    \n
  1. The Fed is shrinking its balance sheet slowly. That reduces excess reserves the Fed pays interest rates on.<\/li>\n
  2. When the Fed hikes interest rates, it also increases the interest it pays on excess reserves.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n
    \n
    \n
    \n

    The first point acts to reduce free money, the second acts to increase free money.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Note to ECB<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    If you want to recapitalize Italian banks, just give them free money instead of your profit-reducing policy of holding rates negative.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Taxpayer money?<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Yes! Otherwise the Fed would return this money to the US Treasury.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Some claim free money is paying banks to not lend. The claim is fallacious. Banks do not lend from excess reserves.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    For discussion, please see Free Money! Banks Paid $22 Billion to Not Lend?<\/a><\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    That was the amount I calculated on April 17, 2017. Interest then was 1.0%.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Even though the Fed’s balance sheet is lower, the increased rate bumped up the free money calculation to $36.93 billion.<\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    No Outrage!<\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n

    \n
    \n
    \n

    Why isn’t $36.93 billion in free money to banks an outrage?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n","protected":false},"excerpt":{"rendered":"

    Free Money Calculation: Fed Will Give $36.93 Billion of Taxpayer Money to Banks The Fed upped the interest it pays on excess reserves to 1.95% today. This is free money (taxpayer funded) to banks. The Fed bumped up the interest it pays on excess reserves today to 1.95%. Currently, excess reserves sit at $1.894 trillion. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,233,303,6039,431,14648,13390,1886,827,3650,2202],"class_list":["post-35079","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-ecb","tag-fed","tag-free-money","tag-interest-rates","tag-michael-shedlock","tag-mishtalk","tag-taxpayer","tag-united-states","tag-us-federal-reserve","tag-us-treasury"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35079","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=35079"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35079\/revisions"}],"predecessor-version":[{"id":35080,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35079\/revisions\/35080"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=35079"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=35079"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=35079"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}