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Fed wants to restrict premium interest rate to its pals
The Fed Fights a New Bank It Fears, While the Startup Sees Nothing to Worry About
By Alex Harris and Liz McCormick
Bloomberg News
Wednesday, April 24, 2019
The Federal Reserve is trying to kill a fledgling bank before the newfangled business takes root, arguing it's a dangerous idea. The nascent company says there's no reason to fret about its plan to give big investors access to the central bank's highest interest rates.
Figuring out who's right is no easy task.
... Dispatch continues below ...
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James McAndrews, once the New York Fed's director of research, created the bank in 2016, hoping to give pensions, insurers, and other large institutional investors higher yields on their cash by parking money at the Fed. Currently only a select few banks can receive that top-tier rate, now at 2.4 percent. The best that money-market funds -- a popular cash receptacle for the firms McAndrews is targeting -- can get from the Fed is 2.25 percent.
The New York Fed has prevented his company, TNB USA Inc., from opening the type of account it needs to make the business model work. That prompted the firm to sue the central bank last year, saying it was obstructing the project. The Fed found another way to fight back as the case continues to unfold. Last month it proposed rewriting its rules so TNB or any other potential "narrow banks" -- so named because they are focused solely on taking deposits -- could get only lower interest rates, sabotaging their raison d'être. ...
... For the remainder of the report:
https://www.bloomberg.com/news/articles/2019-04-24/fed-fights-a-new-bank...
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