So you are for one bank loaning another bank money an infinite amount of money without having any assets to back up the loan? Great, that's what we need, a banking trust.setting bank minimum capital standards,
Monitoring isn't a power.monitoring/regulating the health and available credit line/resources of individual banks
Detail this "authority".the authority to intervene in acquisitions and mergers..
No bank can lend more money than they have. I think if they did, it would be a criminal matter and should be refered to the police.
The Fed is the only bank that has an infinate amount of money.
Nope! Setting the reserve ratio for banks is tool no.2. (although this tool is now considered "last ditch").So you are for one bank loaning another bank money an infinite amount of money without having any assets to back up the loan? Great, that's what we need, a banking trust.
No.3 is the ability to lend through the discount window.
But then it gets rather complicated. The Fed can create various lending facilities (with congressional approval).
Term auction lending facility (TALF) is no. 4. Essentially, the FRB NY would auction off funds to the highest bidder for a specified period of time. This was created to combat the stigma of what borrowing form the discount window entails.
Primary dealer credit facility (PDCF) is no. 5. Essentially, an overnight collatoral swap for primary dealers.
Term securities lending facility is no. 6. Essentially, the FRB of NY allows eligible institutions to swap collateral for 1 month.
Interest on excess reserves (for selected institutions!) is no. 7. Essentially, the FRB pays every eligible institution a set amount of interest on the amount of excess reserves (see reserve requirements) as a means to provide a floor to interest rates. Very complicated tool. The motivation for this is to set a "hard floor" to the fed funds overnight market.
There are probably another half dozen various lending facilities like the asset backed commercial paper and money market facility (although this program and others have expired as financial markets have been more healthy).
The more you know
Last edited by Kushinator; 03-23-12 at 01:41 PM.
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