The Fed doesn’t like narrow banks, but asset managers do
Narrow banks would funnel money managers’ cash to the Fed to get its lush rate. The managers are intrigued
They don’t exist yet, but the possibility of narrow banks is making the Federal Reserve very uneasy.
The novelty banks would have just one purpose: to act as a channel for the big cash pools of money managers, corporations and other large institutions into the Fed, where those funds would earn its succulent interest on excess reserves (IOER) rate.
But the Fed sees the idea as a threat: it has suggested the narrow banks could undermine commercial banks, be a destabilising force in times of
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