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- whats wrong man?
- Ive got all this money, but it isnt secure... *sigh*
- A bank is a financial institution licensed to receive deposits and make loans.
- whats that?!
- they must apply for a charter with the state banking authority, if we're talking about commercial banks
- how do banks even get started?
- banks also hold reserves, and have a minum requirement called a required reserve. and the percent needed to reserve is called the reserve ratio.
- mostly to stop panic, and just incase something happens they have fallback money.
- why?
- citations-Ross, Sean. “Understanding How the Federal Reserve Creates Money.” Investopedia, Investopedia, 14 Aug. 2015, https://www.investopedia.com/articles/investing/081415/understanding-how-federal-reserve-creates-money.asp. “Federal Reserve Board - Open Market Operations.” Board of Governors of the Federal Reserve System, https://www.federalreserve.gov/monetarypolicy/openmarket.htm. Accessed 9 May 2022.
- they make money from it by giving out loans and the interest payments pay, they can also buy govt bonds that have interest.
- with excess reserves, this is held money that is over the required reserves
- how do they make money?
- there is also something called a money multiplier, which is just fancy way of saying how much the supply of money changes when the banks gain reserves.
- cool
- "The Fed" controls the banks, and they use opne market operations, discount rates, and the required reserve ratio
- who controls the bank and how?
- Discount rates are the lowest interest able to be payed and is set by the fed to control banks.
- Open market operations are basically the fed selling bonds and securities in order to influence the market.
- what are those?
- i already told you about the reserve ratio.
- The fed has many programs; they respond to crisis from case to case, depending on what the crisis is
- what if there is a financial crisis?
- Well, they essentially make money by influencing the supply of money by buying securities and adding the money to the reserves.
- I have heard the fed be called a money machine. why?
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