Abstract
THE INrEREST RATES that commercial banks may pay on their deposit liabilities are limited by law in two ways. (1) Banks are prohibited from paying any interest on demand deposits. (2) The Federal Reserve Board and the Federal Deposit Insurance Corporation are empowered to specify the maximum rate that banks may pay on various categories of time deposits the Fed for member banks, FDIC for insured, non-member banks. In practice, the FDIC establishes rates for nonmember banks that are identical with those established in the Fed's Regulation Q for member banks.
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