Are you familiar with Narrow Banking? If not, grab a coffee, sit down with me and get ready to leave the room more pissed off with the Fed that you were before coming in.

You are most probably familiar with the Fed's interest rate. When the rate is positive (which used to be the normal thing until recently), banks can safely store their own cash at the Fed and earn a return determined by the interest rate.

But you can't do that. You can't simply deposit your money at the Fed and get a nice return with the most secure entity on the US. Only selected banks can do it. As George Carlin said, "It's a big club, and you ain't in it".

The issue is infuriating, right? Why the heck can they do it but we, simple mortals, can't? This sparked the idea of The Narrow Bank and it's service proposal, which was dubbed Narrow Banking. The idea of this bank was very simple: to provide you access to the same deal banks are getting. You would deposit your money in the Narrow Bank. They, in turn, would deposit it at the Fed to earn the interest rate. That would be paid back to you, minus a tiny service fee. End of story.

It sounds like a great deal, doesn't it? From a safety point of view, it's unbeatable. The Fed is the lender of last resort, so there is nothing safer than having your money there. It is quite a difference from depositing your money in a regular bank that gets involved in all sort of complex and risky financial operations to earn more. Plus, you earn interests. There are strong arguments to support the idea that a bank going the narrow way would have plenty of customers and business going on.

The Narrow Bank asked to open an account at the Fed to start operating. The Fed rejected their application. The reason? They fear it would take away funds away from regular banks. The Fed is literally forcing you to take risk by working with regular banks and preventing you from accessing the safe accounts it does offer to them. Remember: it's a big club, and you ain't in it.

I'll leave some links here for you to read and get more pissed off.

https://www.tnbusa.com/ https://www.bloomberg.com/opinion/articles/2019-03-08/the-fed-versus-the-narrow-bank https://www.federalreserve.gov/newsevents/pressreleases/bcreg20190306a.htm https://en.wikipedia.org/wiki/Full-reserve_banking https://www.econlib.org/why-does-the-fed-oppose-narrow-banking/ https://www.chicagobooth.edu/review/safest-bank-fed-wont-sanction