The Institutional Risk Analyst

Why does the US central bank need to pay interest on bank deposits at the Fed? Because we have $35 trillion in public debt. The interest rate on T-bills, bank reserves deposited at the Fed and reverse repurchase agreements (RRPs) issued by the Fed must be roughly the same.

Imagine if the Fed had to tell the public that federal deficits were bad for bank safety and soundness? We haven't had a Fed chairman since Arthur Burns who would speak publicly about the inflationary aspect of federal deficits.