Bernanke wants to eliminate reserve requirements
Has anyone seen this Tech Ticker?
In sum, it says that Bernanke wants to eliminate minimum reserve requirements because it "impose[s] costs and distortions on the banking system". Heres an excerpt:
Up until now, the United States has operated under a "fractional reserve" banking system. Banks have always been required to keep a small fraction of the money deposited with them for a reserve, but were allowed to loan out the rest. But now it turns out that Federal Reserve Chairman Ben Bernanke wants to completely eliminate minimum reserve requirements, which he says "impose costs and distortions on the banking system". At least that is what a footnote to his testimony before the U.S. House of Representatives Committee on Financial Services on February 10th says. So is Bernanke actually proposing that banks should be allowed to have no reserves at all?
That simply does not make any sense. But it is right there in black and white on the Federal Reserve's own website....
I don't even want to fathom what would happen if Bernanke succeeded in removing minimum reserve requirements.