Question about the Federal Reserve Downsizing??
Should the Federal Reserve downsize by eliminating district and branch banks? Are there some banking tasks such as check clearing that could be handled by private banks instead?
Answer:
It's an interesting proposal.
The historical reasons for having district banks may no longer apply.
Legend has it that the original districts were created so no bank was more than a days buggy ride from the nearest Fed bank. Physical transport of currency and checks was easier with district banks.
Prior to the Fed, check clearing was a private operation. It was dominated by large banks who favored themselves in the clearing operation (rates, priority, etc).
Clearing checks is recognized as being very efficient operation by the Fed and significant reduces delays over having many private clearing houses.
Today given our electonic monetary economy, there may not be a need for separate district banks. Even checks could be imaged and sent electronically to a central source.
From a practically viewpoint, they would still need distributed offices for auditors and currency stores.
More Questions and Answers:
What is a homogeneous business ?
Suppose you spend 10 bucks for a ticket to the fair and.......?
what are different types of factories?
What are the 2 busiest seaports in the world?
what exactly does "in steady state capital intensity and output-labour ratio remains constant" mean?
use example to justify the statement that 'The Australian Economy is Predominantly a mixed Economy'?
Can anyone give me a dummy's guide to inflation and interest rates...?
Help! economic question:?
what is the actual size of a half-dollar? anyone?
Answer:
It's an interesting proposal.
The historical reasons for having district banks may no longer apply.
Legend has it that the original districts were created so no bank was more than a days buggy ride from the nearest Fed bank. Physical transport of currency and checks was easier with district banks.
Prior to the Fed, check clearing was a private operation. It was dominated by large banks who favored themselves in the clearing operation (rates, priority, etc).
Clearing checks is recognized as being very efficient operation by the Fed and significant reduces delays over having many private clearing houses.
Today given our electonic monetary economy, there may not be a need for separate district banks. Even checks could be imaged and sent electronically to a central source.
From a practically viewpoint, they would still need distributed offices for auditors and currency stores.
More Questions and Answers: