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Comment by nigamanth | Hacker News Reader

They are doing some work to count the amount of money deposited, the amount isn't that much for the amount of labor that the employee is doing.

Don't you think it's fair for the employee to get paid as well?

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Yeah and a supermarket has to pay electricity and fridge repairs, but you don't see line items for these on your grocery receipt. Banks are massively profitable businesses and we still accept them externalising more and more costs to consumers over time.

> Yeah and a supermarket has to pay electricity and fridge repairs, but you don't see line items for these on your grocery receipt.

That doesn't mean the supermarket doesn't charge you for it. Supermarket too are massively profitable businesses.

I’m not lending money to the supermarket and paying for the privilege of handing it over to them.

First of all, you do not “lend money” money to banks either, banks created most of this money out of thin air in the first place[1]. Here we're talking about asking banks to convert your hard-to-manage-at-scale-central-bank-paper-money to money-on-a-bank-account-that's-more-convenient-to-handle (that's why you do it in the first place). In both case you're the sole owner of the money as, contrary to popular beliefs, banks do not lend your bank account's money to others.

Then, regarding supermarkets you'd be surprised as their business model isn't what you think it is. Since they pay their suppliers quite some time after being shipped (60 days in my country, it varies with the country but AFAIK there's always a delay) while they sell their stock much more quickly, which means the majority of what you buy from them, they haven't actually paid it, but borrowed with an interest rate of zero. When interest rates are high, they can make significant revenues from managing this cash flow alone.

[1]: https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...

You are absolutely lending money to the bank when you deposit it, and they are absolutely investing it and making money off of it.

Why do you think savings accounts have limits on it but you get interest on it? Because it's more stable and more reliable for them.

> Supermarket too are massively profitable businesses.

By "massively" do you mean margins of 2-4%?

I've seen the blazing fast robotic cash counting machines, but when I was a kid in Nigeria in the 80s and 90s, it was mesmerizing to watch bankers hold the bills in such a way that they could count way faster than I'd ever imagine being able to! Due to the exchange rate, you'd literally show up with large sums of cash for significant purchases (literally multiple bags of money for a purchase as large as a car).

dont be disingenuous. they primarily get paid off the net interest margin between the cash i deposit and what they loan out.

Yep, so real question is if it is fine that cash using companies are subsidized by non-cash using companies. If you do not cover the banks' cost of handling the cash in cash fees, then you need to cover it in net interest margin.

Kind of true, but keep in mind that they are allowed to loan out 20x of what you deposit (fractional reserve banking).

During covid they lifted reserve requirements, essentially removing the "limit" of 20x

The reserve requirement is likely the least important restriction on loan to deposit ratio in banking. The reserve lifted the limit because US banks weren’t loaning out _enough_. At the time of the lifting of the limit the loan to deposit ratio was sitting somewhere around 60%. Since it was lifted that ratio has gone up to 62% (during a corresponding increased interest rate environment).

The fed, fdic and occ all maintain a variety of a&l rules that outline what categories of loans can be approved that range the gamut from in state/out state to subsidized loans/market rate loans. Thats before taking into account all the consumer protection frameworks.

All that is to say, if a bank gets to a loan/deposit ratio above .9 they are likely considered insolvent depending on the framework in question. The reserve requirement is no brake on their ability to loan out deposits, but there are lots of other ones that apply.

How is that distributed? Are there banks with much higher/lower ratios? Or are most banks the same for given market (and regulatory) conditions?

I couldn’t find the Fred report on this (I’m sure I’ve seen it before) so couldn’t get a real distribution but generally you’ll see most banks between 70-90%. Prior to 2008 90% was considered about the top end before people freaked out. That number is now closer to 80. You will also see a few outliers at >100 (probably in very bad financial straits) and some in the 40s (probably don’t actually do much consumer lending and the deposits are for some niche usage).

I think the thing that actually moved the fed to remove the reserve requirement was the big banks sitting in the 50-70 range (and of course the covid liquidity crunch). The monopoly we grant banks is in part so they will finance economic activity, if they aren’t doing that we’ve got a structural problem.

In a non-fractional reserve system the banks would compete for deposits so they can earn money from loaning that back out.

In a fractional reserve system where by the Fed allows them to "create" money from thin air that is not needed so they charge to take the deposits

>In a non-fractional reserve system the banks would compete for deposits so they can earn money from loaning that back out.

I understand these words but not how you’re putting them together. If banks are lending deposits, then definitionally, they only have a fraction of those deposits left as reserves.

What am I missing about your hypothetical? What does this non-fractional reserve system look like if lending still exists?

No, I don’t think banks need the money.

They are making billions where I live and they are setting profit records on a regular basis. They make about $1200 per head of population. I’m in New Zealand.

https://www.newsroom.co.nz/taxing-banks-excessive-profits-be...

Currency counting is all done by machine. Sure I guess a teller has to load the machine and push the button, but it takes seconds to count huge numbers of bills.

Someone has to bring the cash from the business to the machine, put it in, take it away from there again, and bring fresh cash to the store. That's not free at all.

None of that is handled by the bank apart from counting the currency and processing the deposit, which is part of a bank employee's normal duties and is covered under their hourly wage.

Depending on the type of business, cash drops are handled directly by employees on company time, or else handled by a cash transport service such as Brinks.

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