(p. 2). In other words, banks can fully collater alize the latter funds for conducting banking business. Compare this with the fact that demand deposits almost uniquely carry re serve requirements; although the article does not make this point directly, this means depository institutions are potentially at a disadvantage vis-a-vis other financial institutions because their available investment and lending cash is truncated.
Additionally, statutory reserve-requirement changes have been enacted since MCA was first made law. The MCA itself manda ted increased Fed authority over all banks, whether nationally or state-charted. Throughout the 1980s the Fed increased reserve restrictions on banks that were members of the Federal Reserve System, while lightening them on nonmember banks, as an incentive for more banks to become a part of the system. "Fedpoint" cites the 1983 actions that eliminated the reserve requirements on non personal time deposits that had been held for longer than 18 months. In 1990, and again in 1992, reserve re quirements on cer tain other deposit categories, including transaction deposits, were lowered, as it was said, to provide "added incentive to lend to creditworthy borrowers" (FRBNY, 1997, p. 2). This lowering of reserve requirements--or, from the point of view of banks, in crease in available cash for loans and investment--represented a marked change from some 30 years previously. In 1958, the reserve on demand deposits was set at 20 percent, but as of 1992 it had been cut all the way down to 10 percent (FRBNY, 1997, p. 2).
Reserve requirements are only one of three components of monetary policy set by the Fed. The other two are the discount rate, which is the name given to the interest c
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