Why should banks pay interest anymore? Its all free $$. In fact, they should CHARGE for keeping the $$ safe.
You know where this is going. Almost as if its been engineered that way.
my point is that banks are “earning” interest on reserves which are based upon (among other things) deposits.
The banks are going to charge for the privilege of depositing money there. 1, because they can’t loan it out anyway (no demand and it’s not long-term deposits) and 2, the banks have to pay an assessment (sort of like an insurance premium) to the FDIC for each dollar on deposit.
The banks are going to pass on that FDIC charge (at the minimum) to depositors. And depositors will likely not balk too much. To them, it’s a small fee for insurance and if the bank goes under, then they get paid by Uncle Sam. That’s a much better deal than anything they could risk it on in the market.