Monday, August 20, 2012

Banks putting money into Treasuries, not loans

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

Bank money going to Treasuries, not loans. Bank deposits continue to grow, but the money is being increasingly put into buying U.S. Treasury bonds instead of funding loans, Bloomberg reports. While deposits across the industry have grown 3 percent in the first half of the year, lending increased only 1 percent, according to Federal Reserve figures. The $1.77 trillion gap between the two has grown 15 percent.

Asian banks sever ties in U.S. Spooked by Dodd-Frank's impending derivative trading restrictions, Asian banks are increasingly cutting ties with U.S. banks and customers, Reuters says. The rules would require any bank doing such business in America to register as a "swap dealer" and follow U.S. capital requirements.

'Whale' reviewer picked. Former Exxon Mobil CEO Lee Raymond has been tapped to lead a JPMorgan Chase board investigation into its infamous multi-billion trading loss, the Wall Street Journal reports. The review, which could last until winter, could lead to CEO Jamie Dimon's pay being reduced.

Bankers 'unrepentant.' The chairman of the Financial Crisis Inquiry Commission says ongoing legal settlements with big banks are signs that "the unrepentant and the unreformed are still all too present within our banking system," according to an op-ed published on the Huffington Post. Phil Angelides, the former state treasurer of California, calls for tougher penalties and executives being fired.


Anonymous said...

One of the most important rules in banking is to be very very carefull making loans when interest rates are low, because the room for error is reduced as rates decline. Banks will become more interested in making loans after interest rates increase from the historic lows.

Anonymous said...

The Fed itself is bribing banks not to lend by paying them higher interest on the reserves the banks have parked at the Fed. From the Fed's own website:

"The Federal Reserve Banks pay interest on required reserve balances--balances held at Reserve Banks to satisfy reserve requirements--and on excess balances--balances held in excess of required reserve balances and contractual clearing balances."

Since banks are paid interest by the Fed, they have NO INCENTIVE to loan money out into the economy.

You'd think two people who COVER BANKS FOR A LIVING would know this, but that's apparently not how the Observer operates.

Anonymous said...

We have a both a financial and political system that is broken. From the financial crisis to LIBOR there is no accountability and absolute power has corrupted absolutely. Our financial institutions have no intention of making loans while they have access to 0% money that they can use to buy treasury bills with 0 risk thanks to our Treasury Department and your tax dollars. As these faceless entities continue to become bigger (community banks being crushed by regulation)they become even more reckless being too big to fail while serving themselves with no sense of responsibility or community.

Don't get mad at the illegal immigrant, the welfare recepient or even the wealthy banker paying 14% in taxes because they are doing and will continue to do what is in their best interest.

Its this broken thing that desparately needs fixing but my fear is that it's too late ...