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To: ChanceIs who wrote (164835)	11/16/2008 6:56:49 PM
From: neolib	Respond to of 306849

What am I missing??? That the FED charges the bank slightly higher interest to borrow the money in the first place than the bank gets by depositing it with the reserve. IIRC, the article claimed the difference was 35 basis points, i.e. still not zero. The point seems to be that although the rate charged by the Feds is clearly above zero, the effective rate for the banks is getting close to zero, but only since the Fed agreed to pay interest on the balances held at the reserve banks. Hence the nearly free money sits there, what a shock. It does of course boost the banks balance sheet, and hardly costs anything to achieve that function, and also can't cause any inflation.