Bill Nelson on How Bank Examiner Preferences are Obstructing Monetary Policy
Macro Musings with David Beckworth
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Banks Demand for Reserve Balances Is Pushing Rates Up, Not Down
Bank examiners are doing two things that are unnecessarily increasing banks demand for reserve balances and therefore shortening the runway the Fed has to continue QT. The first thing is bank regulations recognize that a number of assets can be a source of liquidity, such as treasuries or agency MBS. It's just kind of expensive to make your examiner unhappy," he says. "Banks have to hold a tremendous amount of cash on hand"
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