Bernanke Wants to Eliminate Reserve Requirements Completely
March 19th, 2010Via: The Economic Collapse Blog:
Up until now, the United States has operated under a “fractional reserve” banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest. But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says “impose costs and distortions on the banking system”. At least that is what a footnote to his testimony before the U.S. House of Representatives Committee on Financial Services on February 10th says. So is Bernanke actually proposing that banks should be allowed to have no reserves at all?
That simply does not make any sense. But it is right there in black and white on the Federal Reserve’s own website….
The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements, which impose costs and distortions on the banking system.
This is so crazy that I’m having a hard time believing that it means what it seems to mean. I have others developing their analysis of this currently, and Monday I’ll be contacting the Fed to see if I can get any direct clarification from them.
Should I find out anything definitive, I’ll be sure to share it here.
Maybe the collapse has fallen behind schedule. Ahem.
It’s like ‘Helicopter Ben’ wants to start a franchise.