Dan in Philly wrote:
> "Money Man" <Money@[EMAIL PROTECTED]
> wrote in message wrote:
>>> Federal Reserve policymakers will discuss paying interest on
>>> bank reserves in a closed door meeting on Wednesday.
>> Who would be paying - or where would the interest payments come from?
>
> The money would come from some combination of money creation (by the
Fed)
> and government spending (either taxes or borrowing, the latter being
> postponed taxes).
>
> The money would go to some combination of bank profits (to
shareholders),
> higher interest to depositors, and lower interest rates for borrowers.
>
> I wonder: would this mechanism allow us to get rid of the reserve
> requirement? Instead of requiring banks to keep reserves equal to e.g.
10%
> of loans, we could simply adjust the interest rate paid on reserves to
> achieve the same result. This might also get investment banks into the
> system voluntarily, making them a little safer and avoiding
> Bear-Stearns-style bankruptcies.
>
> Dan in Philly
>
>
This is bit of a right turn, but ... isn't there an educational
component to all this? If someone's credit score is low
enough, we could require people to go to "credit school", and
pass that in exchange for a shot at credit.
If the potential borrower had to pay for it, it would
be a net gain for whoever provides the service, no taxpayer
money involved. It would add a bit to transaction costs for lenders, but
if it reduced lending risk by 1%, how could it *not* be a banging
success?
And this answers for once and for all that lenders are
"predatory", luring the unsuspecting into a trap. How
could they oppose it?
--
Les Cargill
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