Banks robbing the US Treasury, or how the US government is printing money for the Banks

So today's blog is a real short one.

Ever ask yourself why there's a shortage of money to loan in the US?  Or why we don't have any money to invest in basic infrastructure, pay for teachers and schools or a hundred other things that we know we should be investing in but our "fiscally responsible" Republican Congressmen keep pointing out we have no money?

Well here's one reason.  (Thanks to Business Insider for pulling together a comprehensive review of economic issues, this is just a slice of them.)

First of all, after the 2008 crash the Federal reserve decided to drop the Federal Funds Rate (the rate major banks pay the Fed to borrow money to raise cash equivalents on hand) to about zero.  They've held it at the lowest levels ever for three years now, and have signaled the intent to keep it that way for the next 18 - 24 months.   The stated rationale was to put money into the economy to drive loans for investment, to invigorate the economy.

So the federal government essentially is printing trillions of dollars to give to the banks to make loans.

Effective Federal Funds Rate

This has been accompanied by a lagged and modest return of lending (source of data: Federal Reserve bank of Saint Louis) - about a 50% return to pre 2008 levels.

So where is all the money that these banks are borrowing going?

Simple.

To buy US Treasuries.

Do a quick double take.

"Really!!??" you say?

That's right.  The banks are borrowing money at essentially zero percent (OK, 0.25% as of late) to purchase US Treasuries, and pocket the spread (known in the industry as "Coining Money").

Nice work if you can get it.

So what's that worth?

According "Coining Money", from the Business Insider, Banks made $211 Billion dollars in the first six months of last year using this scheme.

Nice.

Annualize this and you have a $420 Billion annual subsidy from you, the US taxpayer, to the major US banks.

And still they try to sock you with overcharge fees and monthly ATM access fees.

$420 Billion.

How many schools would that build?

How many crumbling bridges would that replace?

So that's it for today.

Once again - If you're not pissed off then you really haven't been paying attention.