Oleg Zabluda's blog
Sunday, September 09, 2018
Start a bank;
Take deposits;
Invest 100 percent of those deposits in reserves at the Fed; and
Pass the interest on to your depositors.

It is called TNB USA Inc. (for “The Narrow Bank”), it is run by the former head of research at the New York Fed, a

“The FDIC recently reported that jumbo deposits — $100,000 or more — on average earned 0.08% from savings accounts, and 0.05% from checking accounts, while the Federal Reserve Banks pay 1.95%" notes TNB.
TNB is in the news because it got a provisional banking charter in Connecticut, set itself up as a bank, and went to the Fed asking to open a reserve account, but the Fed said no. So TNB is suing the Fed, arguing that the Fed’s rules require it to open an account for any qualified bank, and that it is a qualified bank. Here is TNB’s complaint; here are an analysis from John Cochrane and an article about it in the Wall Street Journal. From the complaint it seems like TNB is mystified about why the Fed said no, but it apparently goes all the way to the top: The New York Fed declined the account “reportedly at the specific direction of the Board’s Chairman,” Jerome Powell. The Fed has not said what its objection is.


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