Banker Conspiracy Theories?

[Will Wiley]

The Fed today is a group of privately owned banks that own 12% of the U.S. debt, and they get first dibs on a specially high interest rate.

But don't they rebate the interest earned, from T Bills anyway?

 

[ryan]

The Fed today is a group of privately owned banks that own 12% of the U.S. debt, and they get first dibs on a specially high interest rate.

But don't they rebate the interest earned, from T Bills anyway?

Maybe a little, see http://www.federalreserve.gov/aboutthefed/section7.htm .

 

[Horatio Parker]

Yes though IIRC they talk about inflation of the money supply.

It's fractional reserve lending that increases the money supply. Again, according to the Austrians. The MMTers OTOH say since a loan is simultaneously an asset and a liability, it nets to zero, nothing is added or lost.

Bank loans aren't constrained by reserves. They can make the loan and get the reserves later.

Doubtless. Fair enough but there are supposed to be certain restraints. Even if banks don't adhere to them all the time too.

They're restrained by capital.

 

[Harry Bosch]

It's fractional reserve lending that increases the money supply. Again, according to the Austrians. The MMTers OTOH say since a loan is simultaneously an asset and a liability, it nets to zero, nothing is added or lost.

Bank loans aren't constrained by reserves. They can make the loan and get the reserves later.

Doubtless. Fair enough but there are supposed to be certain restraints. Even if banks don't adhere to them all the time too.

They're restrained by capital.

I think that Will is from Australia which has different banking regulations. In the US, bank loans are restricted by capital. A bank that has a higher capital ratio can lend more. Loans do not create reserves.

 

[Loren Pechtel]

100% reserve banking would mean huge fees for having a bank account.

Why?

This isn't my idea btw. The Paulian types who want the Fed eliminated favor it.

100% reserve means they can't make money on deposits. Oops--now there's no source of revenue to pay for the bank itself.

 

[Loren Pechtel]

Why?

This isn't my idea btw. The Paulian types who want the Fed eliminated favor it.

I think they want gold don't they?
But to answer the question. banks create more money (or credit) because they end up loaning out more than they have. This enables them to pay for the running of the business and pay dividends etc. If they have 100% reserves then they can't create anywhere near as much credit. They can't loan as much out.
So, either interest rates go up to provide enough profit, or they charge you a fee to "mind" your money.
Presently they don't have to charge a fee because they loan out, more than you give them , so they make their interest margin "many times over" on the "same money", at the same time. They multiply the amount of money as it's get re deposited and re loaned, each time putting a fraction in reserve.
This all works fine while the economy grows.

No, this is the standard misunderstanding of how fractional reserve banking works.

No bank is allowed to loan out more than it has. In fact, they can't even loan out as much as they have--the reserve is how much of the deposits they aren't allowed to loan out.

Where the "more than they have" bit comes from is when money is loaned out it almost always ends up in a bank account somewhere--and now that bank has more deposits and can make more loans.

As for "can't loan as much out"--with 100% reserve they couldn't loan out anything. Interest rates don't matter--even with an infinite interest rate on $0 they still make $0.

 

[Horatio Parker]

I think they want gold don't they?
But to answer the question. banks create more money (or credit) because they end up loaning out more than they have. This enables them to pay for the running of the business and pay dividends etc. If they have 100% reserves then they can't create anywhere near as much credit. They can't loan as much out.
So, either interest rates go up to provide enough profit, or they charge you a fee to "mind" your money.
Presently they don't have to charge a fee because they loan out, more than you give them , so they make their interest margin "many times over" on the "same money", at the same time. They multiply the amount of money as it's get re deposited and re loaned, each time putting a fraction in reserve.
This all works fine while the economy grows.

No, this is the standard misunderstanding of how fractional reserve banking works.

No bank is allowed to loan out more than it has. In fact, they can't even loan out as much as they have--the reserve is how much of the deposits they aren't allowed to loan out.

Where the "more than they have" bit comes from is when money is loaned out it almost always ends up in a bank account somewhere--and now that bank has more deposits and can make more loans.

As for "can't loan as much out"--with 100% reserve they couldn't loan out anything. Interest rates don't matter--even with an infinite interest rate on $0 they still make $0.

No.

Deposits have nothing to do with a banks ability to loan. Deposits are not capital.

The system is not reserve constrained; banks can get any reserves they need from the Fed.

 

[Will Wiley]

It's fractional reserve lending that increases the money supply. Again, according to the Austrians.

Which is what I said. We seem to be talking past each other. I'll leave it

 

[Will Wiley]

The FED already gets audited.

http://www.federalreserve.gov/faqs/about_12784.htm

Does the Federal Reserve ever get audited?

Yes, the Board of Governors, the 12 Federal Reserve Banks, and the Federal Reserve System as a whole are all subject to several levels of audit and review:

• The Government Accountability Office (GAO) conducts numerous reviews of Federal Reserve activities.
• The Board's financial statements, and its compliance with laws and regulations affecting those statements, are audited annually by an outside auditor retained by the Office of Inspector General (OIG).
• The Board's OIG audits and investigates Board programs and operations as well as those Board functions delegated to the Reserve Banks. Completed and active GAO reviews and completed OIG audits, reviews, and assessments are listed in the Board's Annual Report. (Before 2002, the reviews were listed in the Board's Annual Report: Budget Review.)
• The financial statements of the Reserve Banks are also audited annually by an independent outside auditor.
• Each week, the Federal Reserve publishes its balance sheet and charts of recent balance sheet trends, as well as provides an interactive guide to the Fed's balance sheet. The balance sheet is included in the Federal Reserve's H.4.1 statistical release, "Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks."

In addition, the Reserve Banks are subject to annual examination by the Board. The Board's financial statements and the combined financial statements for the Reserve Banks are published in the Board's Annual Report.

See our audit page for more information on all of the above audits and more information on the accounting, financial reporting, and internal controls of the Federal Reserve Board and Federal Reserve Banks.

I notice one of the Presidential candidates is asking for a thorough and independent audit. Maybe the current one is neither thorough nor independent?

Bernie Sanders: We Need A “Full and Independent Audit of the” Federal Reserve

 

[Crazy Eddie]

If there weren't compensation (interest or something else) why would anyone lend anyone money? It's a risky thing.

I was not aware that there were a lot of anti-bank conspiracy theories and not being familiar with any of them I have no comment on them.

That's because "banker conspiracy" is just a sanitized version of "JEWISH banking conspiracy." It's a very popular meme in white supremacists circles that gets no traction anywhere else because everyone hears "Jewish" at the beginning of that phrase and assumes the rest of it is bullshit.

Stormfront et al have started pushing the Jewish Banking Conspiracy idea to try and get it picked up in the mainstream. You'll be hearing a lot more about it int he future.