Michael McKee on Federal Reserve Assets

The video tutorial explains the role of bank reserves and the Federal Reserve's influence on interest rates. It discusses the impact of the financial crisis, leading to the introduction of quantitative easing and changes in Fed policies. The current system, which includes interest on excess reserves and repo rates, is described as more stable. The Fed's balance sheet, including Treasurys and mortgage bonds, is analyzed, and future reserve requirements are discussed, highlighting their implications for the market.

What percentage of deposits are banks required to keep as reserves?

• 5%

• 10%

• 15%

• 20%

What was the Federal Reserve's response to the need to push rates below zero during the financial crisis?

• Decreased interest rates to negative

• Increased reserve requirements

• Sold more bonds

• Started Quantitative Easing

What is the purpose of paying interest on excess reserves?

• To reduce the Fed's liabilities

• To encourage banks to lend more

• To control inflation by keeping money at the Fed

• To increase the money supply

What are the liabilities on the Fed's balance sheet?

• Corporate stocks

• Foreign currencies

• Treasurys and mortgage bonds

• Gold reserves

Why do banks want to keep reserves under Dodd-Frank regulations?

• To meet high-quality liquid asset requirements

• To earn higher interest rates

• To reduce operational costs

• To increase their lending capacity