Zero Bank Reserves?, Tucked away inside the bailout bill...
Sep 30 2008, 02:07 PM
Joined: 13-September 06
Member No.: 49
Screaming in a Burning Theater: Zero Bank Reserves
Mon Sep 29, 2008
...So here is the bill. Kindly download and turn to page 83. The following passage:
13 SEC. 128. ACCELERATION OF EFFECTIVE DATE.
14 Section 203 of the Financial Services Regulatory Re-
15 lief Act of 2006 (12 U.S.C. 461 note) is amended by strik-
16 ing ‘‘October 1, 2011’’ and inserting ‘‘October 1, 2008’’.
This made me almost cry for my country. Looks pretty innocuous, just sitting there, looking all legal. Sitting pretty if you will. No one will ever see it, buried so deep.
Well, I did.
So what is Title 12 of the Financial Services Regulatory Relief Act of 2006, proudly passed by the Republican-lead Congress? You remember that gang, don’t you? Surely they would have our best interests at heart.
What’s in Sec. 203?
SEC. 203. EFFECTIVE DATE.
The amendments made by this title shall take effect October 1, 2011.
Oh well, that’s fine. But what’s in the amendment?
SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b )(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b )(2)(A)) is amended--
(1) in clause (i), by striking `the ratio of 3 per centum' and inserting `a ratio of not greater than 3 percent (and which may be zero)'; and
(2) in clause (ii), by striking `and not less than 8 per centum,' and inserting `(and which may be zero),'.
Wow, looks like somebody is taking a ratio to zero. I wonder what that ratio is? I bet you in the back already know.
Let’s go to 12 U.S.C. 461, and see exactly what is is we are adjusting.
Let’s see here, Section 2, Subnote A of 12 U.S.C. 461. How is that for obscure! Let’s see what we got here.
(A) Each depository institution shall maintain reserves against its transaction accounts as the Board may prescribe by regulation solely for the purpose of implementing monetary policy—
(i) in the ratio of 3 per centum for that portion of its total transaction accounts of $25,000,000 or less, subject to subparagraph (C ); and
(ii) in the ratio of 12 per centum, or in such other ratio as the Board may prescribe not greater than 14 per centum and not less than 8 per centum, for that portion of its total transaction accounts in excess of $25,000,000, subject to subparagraph (C ).
You dirty apes...
The text in red is modifying the text in blue from a previous code. If I'm understanding this correctly, the text in red is law as well, passed in 2006 - but the potential elimination of reserve requirements wouldn't have taken effect until 2011. The bailout package that just failed to pass would have moved that up to tomorrow.
Links to the relevant US codes are included in the article.
Sep 30 2008, 02:53 PM
Group: Core Member
Joined: 12-September 08
From: An Island off the coast of RSW
Member No.: 3,813
This is absolutely <snip> UNBELIEVABLE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!![size="6"][/size]
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