Date Added: Nov 2009
The impact of low cost demand deposits on the U.S. financial system cannot be overstated. They create liquidity in the economy and enable banks to generate profits as well as comply with statutory reserve regulations. In a January 2008 move that can only be termed prescient, Wachovia launched an incentive program to encourage deposits at a time when personal savings rates in the U.S. were at record lows. The financial crisis broke soon thereafter, driving money from stock-markets and real-estate to safer havens, namely bank deposits.