Thursday, November 5, 2015
By Paul Martin

Federal Reserve puts negative rates on table to entice lending

Nov. 4, 2015

Federal Reserve Chairman Janet Yellen suggested the Fed might consider negative interest rates, which effectively means financial institutions would charge customers to keep money in an account.

Several of Europe’s ailing commercial banks have imposed the measure in a desperate attempt to reinvigorate the economy. But in the United States, banks have generally tried to entice customers with various interest rate advantages and other banking benefits, such as free checking and savings or even free money to open accounts.

That could soon change.

As Zero Hedge reported: “Yellen says if [rates] outlook worsened, fed might weight negative rates. Yellen says negative rates could help encourage banks to lend.”

Charging customers to keep deposits proved disastrous in Japan, and banks aborted the practice in 2000.

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