{"id":37898,"date":"2018-09-18T05:41:40","date_gmt":"2018-09-18T10:41:40","guid":{"rendered":"http:\/\/olduvai.ca\/?p=37898"},"modified":"2018-09-18T05:41:40","modified_gmt":"2018-09-18T10:41:40","slug":"why-the-fed-denied-the-narrow-bank","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=37898","title":{"rendered":"Why the Fed Denied the Narrow Bank"},"content":{"rendered":"
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WHY THE FED DENIED THE NARROW BANK<\/a><\/h3>\n<\/div>\n<\/header>\n
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It\u2019s not every day that a clear example showing the horrors of central planning comes along\u2014the doublethink, the distortions, and the perverse incentives. It\u2019s not every year that such an example occurs for monetary central planning. One came to the national attention this week.<\/div>\n
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A company called TNB applied for a Master Account with the Federal Reserve Bank of New York. Their application was denied. They have\u00a0sued<\/a>.<\/p>\n

First, let\u2019s consider TNB. It\u2019s an acronym for The Narrow Bank. A so called narrow bank is a bank that does not engage in most of the activities of a regular bank. It simply takes in deposits and puts them in an account at the Fed. The Fed pays 1.95%, and a narrow bank would have low costs, so it could pass most of this to its depositors. This is pretty attractive, and without the real estate and commercial lending risks\u2014not to mention derivatives exposure\u2014it\u2019s less risky than a regular bank. According to Bloomberg\u2019s Matt Levine,\u00a0saving accounts for large depositors average only 0.08% interest<\/a>.<\/p>\n

So it\u2019s easy to see why many believe that the Fed\u2019s reason to refuse an account to TNB is unsavory: to protecting the crony too-big-to-fail banks. That is a plausible explanation for sure, but there is much more.<\/p>\n

The Bank: Spindled, Folded, and Mutilated<\/strong><\/p>\n

There has been a long, slow process\u2014punctuated by big changes in responses to crises\u2014of perverting the banks. Before the first world war, when a retailer received consumer goods he would sign a bill acknowledging delivery. Typically, he had 90 days to pay, which was enough time to sell the goods through to the consumer. The wholesaler could endorse this and pass it to his creditors. The bill traded at a discount to its face value.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

WHY THE FED DENIED THE NARROW BANK It\u2019s not every day that a clear example showing the horrors of central planning comes along\u2014the doublethink, the distortions, and the perverse incentives. It\u2019s not every year that such an example occurs for monetary central planning. One came to the national attention this week. A company called TNB […]<\/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":[61,63,7380,303,7957,21704,3650],"class_list":["post-37898","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking","tag-banks","tag-cobden-centre","tag-fed","tag-keith-weiner","tag-narrow-bank","tag-us-federal-reserve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37898","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=37898"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37898\/revisions"}],"predecessor-version":[{"id":37899,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/37898\/revisions\/37899"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=37898"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=37898"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=37898"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}