Courtesy of Mish.
Excess reserves of depository institutions peaked at $2.7 trillion in August of 2014. By December of 2016, excess reserves fell to $1.9 trillion but have since climbed back to $2.2 trillion.
On October 3, 2008, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed the Federal Reserve banks to begin paying interest on excess reserve balances (“IOER”) as well as required reserves. The Federal Reserve banks began doing so three days later.
As interest rates have risen, so has the free money to banks.
Excess Reserves
Interest Paid on Excess Reserves
At 1% interest, banks receive $22 billion in free money every year, nearly all of that goes to the largest banks.
Banks Paid $22 Billion to Not Lend?
