Re: Why do the banks need my money? (CD offerings)

From: smithaa02 (asdf_at_asdf.net)
Date: 07/28/04 

Date: Tue, 27 Jul 2004 19:29:40 -0500

Mason A. Clark <masoncNOT@THISix.netcom.comQQQ> wrote in message
news:icfbg0d7add9e4ctpuf5d0adb0fsuqd6h0@4ax.com...
> Why do the banks need this money? Is it just a
> marketing scheme to get new depositors? But if
> so, why do they need new depositors? Can't they
> make loans to create money and depositors?

A banks ability to create 'checking account money' is limited by government
regulations and the threat of potential liquidity problems. The CD features
an interest penalty for early withdrawels and is not subject to reserve
ratios, so this option is another path for bank credit growth as opposed to
M1.

Relevant Pages