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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: Softechie who wrote (8592)11/28/2001 12:57:59 AM
From: FR1  Read Replies (1) of 99280
 
Banks can sit on money over 1 year and get free money.

Yeah but the downtown office buildings that banks have cost a lot. They have to loan out money to get the kind of return they need to meet overhead.

The same is true with businesses. They can't rely on CDs to make money at these rates. That is what the FED is trying to do - make money so cheap that you can't live off savings. You have to invest it in some kind of business development that makes money.

For further pressure, the FED also has the power to buy up CDs & other paper that the banks hold leaving them with mostly cash.
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