Reply #2: "Make alot more with the FED than by lending it" ...uh, no you wouldn't. [View All]

[anigbrowl]

Mortgages and commercial loans earn much higher rates of interest than deposits at the Fed, which are required by law so that banks have a capital cushion to deal with volatility. Capital requirements have been increased, interest is now paid to offset the loss of income to the banks that results from having to keep more capital on deposit. It's like one of those checking accounts where you can earn interest but you have to keep a minimum balance of $1000 or more to get it.

Why do you think that the Fed would pay more in interest, considring that all commercial lending takes place at an interst rate consisting 'prime + xx%'?