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Fed Seen Paying Banks $77 Billion


Interest payments to banks (for money held on account wit the Fed) could rise from $1 billion in 2012 to $77 billion in 2016. Link to Bloomberg article.

“Essentially the Fed paid the banks $4 billion last year, which is about $12 per American,” David Howden, a professor of economics at Saint Louis University’s campus in Madrid, Spain, said in an e-mail.
Howden analyzed interest on reserve payments so far for the Ludwig von Mises Institute, named for an Austrian free-market economist and philosopher.
“If your bank called you up and said you have a new service fee of $12 because they screwed up in the crisis, you’d be livid, but that is basically what they are doing and no one knows about it.”
William C. Dudley, president of the New York Fed, has said interest payments on excess reserves are “not a subsidy to the banks.”

Mark Thornton is a Senior Fellow at the Mises Institute and the book review editor of the Quarterly Journal of Austrian Economics. He has authored seven books and is a frequent guest on national radio shows.

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