[amluto]

In general, higher interest seems good for banks. But I do wonder to what extent high interest rates encourage depositors to move money out of the banking system entirely. Right now, there is no particular limit on the ability of depositors to use those deposits to purchase short-dated T-bills or their money-market equivalents — there’s plenty of T-bill liquidity to go around. (Presumably this results in the banks, on average, holding an equivalent amount less of various agency debt.)

Not doing something along these lines is fairly expensive right now.