As unbelievable as it seems, and almost sounds like an Onion story, the Federal Reserve has ‘reduced’ reserve requirements to zero as of March 26, 2020. So, why care? Because if we can ‘take over’ any depository institution, we can lend unlimited amounts of money, the sell the loans off in the secondary market, and make bank! The first thing we need to do is to find the smallest market cap of a ‘depository institution’ to take over; then we can lend out trillions, and make bank on the spread between the fed funds rate of 0% to 0.25% (one quarter of a percent) and refinancing everything under the sun at a lower interest rate. And the best part, it is all perfectly legal.
“Reserve Requirements As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.” www.federalreserve.gov/monetarypolicy/reservereq.htm
People talk about making one hundred to one on an investment, we could make 1,000 to one. And as the economy get pumped with all kinds of new money, we would also diverisfy into physical metals and such, and clean up even more as the USD becomes worthless wallpaper.
I am amazed that the current financial institutions are not already making loans like mad, since it would be the first time that easy money was available that they either are showing restraint or simply do not realize the gift that has been given to them.
I also expect this trade will become better as the Fed goes negative on interest rates shortly; then we could make bank on the overnight borrowing since it would pay interest and the spread on the borrowers.