Banks Threaten to Charge Depositors if Fed Turns Rates Negative

As the Federal Reserve considers ways to begin tapering asset purchases without signaling withdrawal from monetary stimulus, the Financial Times reports that banks are not happy with at least one option.

“Executives at two of the top five US banks said a cut in the 0.25 per cent rate of interest on the $2.4tn in reserves they hold at the Fed would lead them to pass on the cost to depositors. Banks say they may have to charge because taking in deposits is not free.”

“About half of the reserves come from non-US banks that do not have to pay the deposit insurance fee. Their favourite manoeuvre is to take deposits from money market funds and park them overnight at the Fed, earning millions of dollars risk-free. Cutting the interest on reserves would stop that.”

The Weekly Numbers

Here are the economic data highlights for this week, along with consensus predictions, via Bill McBride and the Financial Times. This week’s highlights include home sale and house price data. All times are Eastern Time.

Monday, November 25
10:00 AM: Pending Home Sales Index for October. The consensus is for a 1.1% increase in the index.

Tuesday, November 26
9:00 AM: FHFA House Price Index for September 2013… The consensus is for a 0.4% increase.
9:00 AM: S&P/Case-Shiller House Price Index for September… The consensus is for a 13.1% year-over-year increase in the Composite 20 index (NSA) for August.
Note: The Census Bureau has postponed housing starts data for October until December 18.

Wednesday, November 27
8:30 AM: Durable Goods Orders for October from the Census Bureau. The consensus is for a 2.0% decrease in durable goods orders.

Thursday, November 28
Markets closed for the Thanksgiving Holiday.

Friday, November 29
Markets close early following the Thanksgiving Holiday.

What the Nuclear Option Means for the Economy

Now that Senate Democrats have detonated the “nuclear option” and removed the filibuster for presidential nominees, Matt Yglesias explains what the future may hold and why that matters for the economy.

“I would think ending filibusters for presidential nominees makes it more likely that a future Senate will curb filibustering of legislation… somewhat reducing the massive status quo bias of the U.S. legislative system. That makes basically any big legislative reform—whether it’s a conservative plan to privatize Social Security or a liberal plan to introduce a public option to the Obamacare exchanges—more likely.”

JOLTS For September 2013

The Bureau of Labor Statistics released the September Jobs Openings and Labor Turnover Survey showing little change from the previous month. This release includes estimates of the number and rate of job openings, hires, and separations for the nonfarm sector by industry and by geographic region.

  • job openings: 3.9 million
  • hires: 4.6 million
  • hires rate: 3.4 percent
  • separations  (turnover): 4.4 million
  • separations rate: 3.2 percent
  • over the 12 months ending in September 2013, hires totaled 52.7 million and separations totaled 50.8 million, yielding a net employment gain of 1.9 million.


Millennials Struggling With Debt

“Total debt among young adults actually dropped in the last decade to the lowest level in 15 years,” according to the Wall Street Journal, “And yet, Millennials appear to be running into more trouble when paying their bills — whether on credit cards, auto loans, or student loans.”

“What Experian’s data suggest is that the Millennials who are in fact borrowing are struggling to do so responsibly, at least partly because of the nation’s 7.3% jobless rate, sub-3% growth and $1 trillion student-loan tab.”