Thread started: Mar 7 2008, 10:45 PM EST
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Commercial banks deposit their reserves in the federal reserve bank, and can also loan money from it to provide loans to its customers. The Federal Reserve bank is thus the banker's bank, as it acts the way a commercial bank acts to ordinary people, except to another bank. As such, it has the power to manipulate monetary policy, as it can control the amount of actual reserves and therefore control the amount of loans that banks can make. However, where does the Federa Reserve get all of its money? Shouldn't there be a banker's banker's bank, and so on and so forth, because all banks have to borrow from someone? How does it work?
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RE: The Fed is the Banker's Bank - what about a banker's banker's bank?
By: ,
Apr 30 2008, 7:37 PM EDT
There is indeed a banker's banker's bank - the Bank for International Settlements:
http://www.bis.org/about/index.htm
<i>"The Bank for International Settlements (BIS) is an international organisation which fosters international monetary and financial cooperation and serves as a bank for central banks.
The BIS fulfils this mandate by acting as:
a forum to promote discussion and policy analysis among central banks and within the international financial community
a centre for economic and monetary research
a prime counterparty for central banks in their financial transactions
agent or trustee in connection with international financial operations
The head office is in Basel, Switzerland and there are two representative offices: in the Hong Kong Special Administrative Region of the People's Republic of China and in Mexico City.
Established on 17 May 1930, the BIS is the world's oldest international financial organisation.
As its customers are central banks and international organisations, the BIS does not accept deposits from, or provide financial services to, private individuals or corporate entities."</i>
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