So I understand the ownership of the Federal Reserve consists of some unknown entities but that it likely includes a number of large commercial banks who also sit on the Board of Governors. I keep seeing statements that the Federal Reserve’s actions are trying to get the commercial banks to resume lending to spur economic growth but that the banks are choosing instead to build their reserves.
If the FR is a cartel of banks, shoudln’t they have a little more influence on the actions of banks? I understand this might not be the case legally but wouldn’t the interests be in alignment. Or is lending controlled too far down the food chain? If JP Morgan Chase is a member bank (not sure that it is) wouldn’t we see that bank lending? What’s going on?
as far as i understand, and i am no expert on how the fed really functions, the fed can only create conditions that make it more desirable to lend, i.e. low interest rates etc.
however, it cannot actually make banks lend, if the situation is too dire, like it may be now, banks simply choose to hold onto their money, regardless of how low rates are.
i guess you could say its too far down the food chain, its up to individual banks perhaps. i may be wrong though.
No you are right, however my understanding is the banks are in fact the entities that control the Fed, so why would their interests not align? The Fed is not a government entity, it is an entity owned by private banks.
well, i cant think of some basic reasons that may or may not be correct.
the fed has to abide by certain political trends, i.e. giving easy money during a recession and such. therefore it is in its interests to go along with policies that make the goverment look like it is in fact trying to help the situation.
even though they are owned by the same companies, individual banks may have more incentive to be prudent with their money than the fed simply for the reason that they are still, to some extent business entities, whereas the fed is not.