Orla McCaffrey
speaker
593 appearances
13 recordings
1 series
first heard Mar 2020
last heard Jun 2022
Orla McCaffrey’s voice in public audio — every appearance, attributed to the second.
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Appearances
Right.
So that actually is probably one thing that has changed over the past 18 months or two years.
Banks are just flush deposits.
They have more than they can use in a way that makes sense, in a way that they can actually make money off of.
Some banks have even told commercial customers specifically, like, we don't really want your deposits anymore.
Please take them elsewhere.
So advertisements like that, kind of solicitations for money from lenders for deposits have probably decreased in recent years.
Believe it or not, yes.
So when the Fed raises rates, that means that when banks lend money to each other, they do it at
at a higher rate that the Fed has set in an effort to make borrowing more costly, to increase the cost of credit in the economy.
So when banks are paying more to borrow money, they pass that on to their customers and they're able to charge more when they're lending money.
So higher interest rates for consumers and businesses who borrow from banks.
The incentive for banks to raise deposit rates, one of the main ones typically, is to gather those deposits.
But because the system is so flush with deposits, they don't need to do that.
And that's a major plus for banks because banks make money on the difference between what they earn by lending and what they pay on deposits.
So as long as they can hold that rate that they pay, as long as they can pay really low deposit interest rates...
They're going to do that for as long as possible while rates rise.
So that spread, that gap between those two things widens and their profit from lending starts to recover.
The money banks have been able to make from lending, which is their core, their bread and butter business, has really just shrunk in kind of exponentially over the past two years or so.
as rates have fallen.
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