Question

Why might banks in the mid-1930s have been holding reserves for "reasons of safety"? Banks were holding reserves to guard against Group of answer choices A)competition. B)bank loans. C)inflation. D)bank robbery.

Answer 1

The banks have been belongings reserves for rationale for welfare in the mid - 1930s because banks want to enlarge the required reserve correlation . This is the only the course of action that the banks could reinstitute the holding of surplus reserves . During that period , many banks had ached hefty losses and had a strong inclination to remain liquid . Nominal engrossment rates had also promiscuous to very low levels , which lessened the right set of circumstances cost of estating reserves at the Fed .

The global financial crisas neignited the interset of policy makers and academics in acesseing the impact of bank competition on a stability and rethinking the role of the state in shaping competition policies . Some think that increasing financial innovation and competition in ceratin markets like such - Prime lending contributed to the recent financial turmoil .

Bank reserves are the slightest amounts of cash that banks must remain on hand in case of unforeseen ultimatum . Overindulgence reserves are the auxiliary cash that a bank keeps on hand and disdaines to loan out . These superfluities reserves be apt to rise in bad times and fall in good times .

The new authority to pay absorption on reserves permits the Fed to mitigate inflationary coercions from surpluses reserves . When the money multiplier is up end running , there are miniature reserves in the banking structure . The large amount of excess reserves that we are discerning now designates the multiplier sequels is immaterial at this time .

Although deposits in a bank are rapped from loss by the FDIC(Federal Deposit Insurance Corporation) , much of the money taken in a bank caper is only wraped through a bank's private insurance . Often , These policies approach with a high candid , and asserts made in opposition to the policy can raise a bank's premium . This grants the bank a strong incentive to avert bank robberies from sceneing in the first place . Banks can institute a number of computes to stop robberies before they materialized .

The most fundamental step that a bank can take is to documentation the pursuits on the main floor of the bank . Cameras should be highly detectable , so prospects  bank robbers will know that their image will be seizured .

Hire safety personnel . Reliability , like the cameras , should be highly detectable . Make sure the guards eroded uniforms and are stationed in localities in which they can see everyone and everyone can see them . If possible , hire off-duty police officers or other guards authorized to carry artilleries .