In an immediate but not useful sense, from your bank, because while the calculations that make them determine this mortgage is a good investment involve other actors, none of the interaction with other actors is instantaneous.
On the time scale of a month (and probably a week), partially from the company who bought your mortgage for its risk-adjusted net present value (let’s just call that V), and the rest from ‘nowhere’, i.e. the amount they’re now allowed to lend by the fractional reserve banking regulations based on the fact that their reserves have just increased by V. Trying to work out which of those portions is bigger is making my head hurt, mostly because I’m pretty sure the relative value of the risk-adjusted net present value of the mortgage’s future cash flow, compared with the reserve fraction and the actual face value of the mortgage, matter, but I’m not quite sure how.
Wat. Is there some more complicated picture, there, where they don’t have to maintain real reserves but they do need to hold something like overnight loans from the Fed as reserves? Because if they’re really untethered from reserves of any kind, they can ‘print’ as much money as they want, which seems...
It’s not necessarily a terrible idea, but it does entail that the central bank give up its monopoly, and that seems like an insane move from the central bank’s perspective.
In an immediate but not useful sense, from your bank, because while the calculations that make them determine this mortgage is a good investment involve other actors, none of the interaction with other actors is instantaneous.
On the time scale of a month (and probably a week), partially from the company who bought your mortgage for its risk-adjusted net present value (let’s just call that V), and the rest from ‘nowhere’, i.e. the amount they’re now allowed to lend by the fractional reserve banking regulations based on the fact that their reserves have just increased by V. Trying to work out which of those portions is bigger is making my head hurt, mostly because I’m pretty sure the relative value of the risk-adjusted net present value of the mortgage’s future cash flow, compared with the reserve fraction and the actual face value of the mortgage, matter, but I’m not quite sure how.
Yes, though the reserve requirement was recently dropped to zero.
Wat. Is there some more complicated picture, there, where they don’t have to maintain real reserves but they do need to hold something like overnight loans from the Fed as reserves? Because if they’re really untethered from reserves of any kind, they can ‘print’ as much money as they want, which seems...
It’s not necessarily a terrible idea, but it does entail that the central bank give up its monopoly, and that seems like an insane move from the central bank’s perspective.
There are complex rules which serve similar functions to reserve requirements. See here for a start.
I don’t know the full picture on that, it confuses me too.