All articles tagged with #bank reserves
Senator Ted Cruz proposed ending the Federal Reserve's interest payments to banks, claiming it could save $1.1 trillion over ten years, a move supported by some conservatives but warned against by financial strategists due to potential market disruptions. The proposal aims to offset the costs of a large tax and spending package, with debates centering on the impact on liquidity and the federal deficit.
China's central bank announced a significant cut to bank reserves, injecting $140 billion into the banking system to support the economy and stock markets. The move, which will take effect from Feb. 5, is aimed at addressing a fragile economy, plunging stock markets, and a housing crisis. Analysts believe more policy measures are needed, and the central bank's decision to release policies on improving commercial property loans has given hope to investors. Despite the stock market rally and positive response from investors, there is still a need for more stimulus to spur economic growth and address deflationary risks.
The St. Louis Fed warns that the deluge of Treasury bills being sold by the US Treasury could drain bank reserves and potentially disrupt the banking system. As the government suspended the debt ceiling, the Treasury has sold about $1 trillion of bills since June, and the cash to buy this debt can come from bank accounts or money market funds. If too much money comes from the banking system, lenders may face a shortage of reserves to meet regulatory requirements, forcing the Federal Reserve to halt its quantitative tightening program. However, if money drains out of money market funds, the impact on the financial system is expected to be manageable. The Treasury is estimated to issue another $600 billion of T-bills by year-end.