Money, Banking, and the Financial System - Anvari.Net文档[精品].ppt

* Central banks should provide short-term loans to banks that are illiquid but not insolvent. By lending to insolvent banks, the Fed increases the level of moral hazard in the system. * * * * * With less competition, banks paid relatively little for deposits, and could charge lower interest rates on loans. They were the leading lenders to households and firms. But whenever market interest rates rose above the Regulation Q interest rate ceilings, large and small savers had an incentive to withdraw money from bank deposits, thereby starving banks of the funds they needed to make loans. * Negotiable certificates of deposit provided competition to commercial paper. Automatic transfer system (ATS) accounts allowed customers to earn interest by “sweeping” a customer’s checking account balance at the end of the day into an interest-paying overnight repurchase agreement. * Depositors were allowed to write only six checks per month. The costs of these deposits to banks were low because the banks did not have to hold reserves against them or process many checks, so the banks could afford to pay higher interest rates on them than on NOW accounts. The combination of market interest rates and the safety and familiarity of banks made the new accounts instantly successful with depositors. * * Beginning in 1979, sharply rising market interest rates increased the cost of funds for SLs, decreased the present value of their existing mortgage assets, and caused their net worth to decline precipitously. SLs were also highly leveraged, with their capital often being as little as 3% of their assets, which magnified the impact of losses on their equity. A wave of SL failures during the 1980s was ended only by a costly federal government bailout. Many commercial banks also suffered losses during the 1980s, although the damage was limited by lower leverage and their lesser concentration in mortgage lending. * As we saw in Chapter 10, banks set aside part of their capital as a loan loss re