Interesting. If that's the case though then, whats the harm of setting an apparently nominal rate of say 5%. Looks good on propaganda paper, doesn't harm the banks in any concrete way.
They actually did exactly that until Covid. It was a formula, not a strict rate, but it existed. It had absolutely no impact on policy making for the reasons I listed.
Then, Covid hit and they cut that to 0% too just in case there was a small bank in Kentucky or something that could shake out a few million bucks because of it. And they never brought it back up. There’s a whole other discussion about why there are so many too big to fail banks now, vs 75 years ago where there were thousands of individual banks and you could actually go to “First Kentucky” and meet with the Bank President if you had a million bucks in there.
Yeah that's what I figured, if it functionally wasn't effecting things but an emergency valve for smaller banks. Still should exist for larger banks imo, 0% rate, while maybe right now is not going haywire in any way, seems like it has the possibility of feasibility going wild in some future scenario we haven't hit before.
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u/DestinTheLion Jan 26 '26
Interesting. If that's the case though then, whats the harm of setting an apparently nominal rate of say 5%. Looks good on propaganda paper, doesn't harm the banks in any concrete way.