FED may try rate drop on bank excess reserves instead of big Qe
Some Fed insiders are pushing for a zero or even negative interest rate on bank excess reserves as a way to spur bank lending. This approach may be favored over a large QE2 as less risky, since QE heavy could crash the dollar. Alan Blinder has pushed for this, and he seems to be winning over some at the Fed, where QE is facing some resistance.
Glad someone is cognizant of the QE2 USD collapse problem. Would rather here this sensitivity from Bernanke, the decider.
If the only objective is to get banks lending, then negative rates for excess bank reserves is fine. As long as that doesn't spill into the banking system as negative returns on deposits. Negative nominal returns on deposits would cause a run on the banks.