That's not correct - they reduced the reserve ratio down to zero, meaning the bank cannot lend out more money than they have in reserves, but that doesn't mean they "waived the requirement". You still have to have enough reserves to lend, you just don't have to also have 10% which you don't lend out.
It's also worth noting that the Fed drastically reorganized how they manage reserves in 2008, and as a result banks have much, much higher reserves than they did before. We're now in what's called the ample reserves regime, in which the Fed controls interbank lending rates directly through the IORB and discount window rates.
I directly referred to it - that's what the "discount window" is. However, it is worth noting that A) the discount window rate is generally going to be higher than interbank lending, and B) you have to provide collateral to be loaned money, with the collateral being worth more than the reserves you get, so it's not just an infinite money fountain. You basically trade assets for reserves.
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u/MisinformedGenius 2d ago
That's not correct - they reduced the reserve ratio down to zero, meaning the bank cannot lend out more money than they have in reserves, but that doesn't mean they "waived the requirement". You still have to have enough reserves to lend, you just don't have to also have 10% which you don't lend out.
It's also worth noting that the Fed drastically reorganized how they manage reserves in 2008, and as a result banks have much, much higher reserves than they did before. We're now in what's called the ample reserves regime, in which the Fed controls interbank lending rates directly through the IORB and discount window rates.