Brooklyn native Willie Sutton, the prolific thief, is said to have targeted banks because “that’s where the money is.” That truism has never been truer than now.
Banks have been inundated with cash this year. More than $2.2 trillion in deposits have flowed in, according to Federal Reserve data, to a total of $15.5 trillion. JPMorgan Chase alone gathered $400 billion in new deposits in the second quarter.
“They’re like Scrooge McDuck swimming with money,” one analyst marveled.
The flood of cash is another sign of how the pandemic has distorted the most mundane aspects of life.
The flood’s source starts at the Federal Reserve, which to rescue the stricken economy has agreed to provide banks with cash in exchange for bonds and other types of collateral. Another rivulet formed when fearful companies drew down their credit lines and parked the proceeds at their banks. The Paycheck Protection Program has replenished the depleted accounts at small and not-so-small businesses.
But the money-gusher isn’t doing much for the banks. Ultra-low interest rates have constrained how much they can make from lending, and struggling borrowers need loan forbearance, not new loans. Banks typically spend their excess cash on bonds, but high-yield securities don’t offer high yields anymore, and the safe stuff yields barely anything at all.
And so vast sums lie fallow in vaults. They appear to be mostly cash, because Treasury Secretary Steven Mnuchin on Tuesday urged households to empty their change jars and relieve the quarter-and-dime shortage. “Help get coins moving!” he tweeted.
The cash glut means opportunity knocks for this generation’s Willie Suttons. They have been less active for a while, with FBI data showing that bank robberies fell by more than half between 2008 and 2018.
Of course, there wasn’t quite as much money sitting in the banks then.
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August 12, 2020 at 10:12PM
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Banks are swimming in cash they can't use - Crain's New York Business
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