[dgrin91]

If I'm a bank why would I want to get X% interest from the Fed when I can instead get X+Y% interest from some other investment option[0]? Yes the risk is higher, but typically only marginally so. Obviously you have big failures like SVB & others, but the reality is that those aren't common.

It also lets the bank pass on the increased rates to customers. The current fed interest rate is ~4.5%, but there are banks out there right now where you can get >5% in a savings account[1]. Your system would remove that option for consumers.

[0] Other option being some regulatorily approved option, not throw it all in the latest crypto ICO

[1] https://www.ufbdirect.com/

[sonthonax]

Banks usually have a regulatory requirement to keep a portion of funds in the Federal Reserve.