Credit Union pays people to withdraw money: do I understand this chart correctly?

[Zen$]

http://www.economicpopulist.org/cont...withdraw-money

In the post there is a chart at the end which lists as a source the Federal Reserve. This chart lists the "checkable deposits as a percentage of total assets" which has decline precipitously as a percent over the last 50 years. What exactly does this mean "checkable deposits"?

[mmr]

Re: Credit Union pays people to withdraw money: do I understand this chart correctly?

Checkable deposits are basically total balances in business and personal checking accounts. (See definition of M1.)

There's a couple of factors that cause the decline that you see in the chart-

1) Much faster growth in savings and CD accounts than checking, including creation of new types of accounts like money market savings that didn't exist 50 years ago

2) Banks increasingly borrowed from other banks or securitized their assets if they wanted to grow loans faster than deposits. This "wholesale funding" worked quite nicely right up until 2008, when banks and investors realized they had no idea what they were really lending against and stopped doing so.

[Sharky]

Re: Credit Union pays people to withdraw money: do I understand this chart correctly?

The creation of sweeps was another big factor in the decline of checkable account balances.

Sweeps are where checking balances are swept into a savings account temporarily (maybe just overnight), where they can earn interest.

[Zen$]

Re: Credit Union pays people to withdraw money: do I understand this chart correctly?

"2) Banks increasingly borrowed from other banks or securitized their assets if they wanted to grow loans faster than deposits. This "wholesale funding" worked quite nicely right up until 2008, when banks and investors realized they had no idea what they were really lending against and stopped doing so. "

So by going "wholesale" and securitizied have they effectively decreased 1) the power of standard depositors to put upward pressure on the rates they receive by shopping around 2) the ability of standard depositors to judge (demand better) credit quality through shopping around/moving money?

"grow loans faster than deposits"--that would be to expand credit (beyond the organic growth in the money supply and savings rate) and hence "juice" the money supply? The first cause/original source of borrowing from other banks is chiefly the federal reserve?

So the chart in context is somewhat misleading due to the fact that M1 is not very useful anymore to gauge deposits?