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Lending? What Lending? Excess Reserves Really Take Off, Hit New Record Of $1.06 Trillion

Tyler Durden's picture
Submitted by Tyler Durden on 11/05/2009 18:52 -0500



Bank excess reserves increased by $71 billion over the past two weeks, and $140 billion in the past month, to $1.06 trillion. Banks adamantly refuse to lend even one cent and continue hoarding cash instead, investing in safe and risky assets alike without prejudice. After all if anything breaks, Uncle Ben will fix it, and Aunt Jemima will make even the toxicest crap taste mmm, mmm good.

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by cougar_w
on Thu, 11/05/2009 - 19:04
#121547

The consumer middle-class is a risky investment. Why don't they invest in some of those?

If slavery were legal, I bet they would. If they could own you, you'd be a tangible asset, you would. $15K per kidney, some places. Lots more for your liver. Your lifetime bent at the wheel... priceless.

Human rights; regulation that's hurting the markets.

by Anonymous
on Thu, 11/05/2009 - 22:02
#121747

tangible or a fungible asset; either way a commodity.

by spanish inquisition
on Thu, 11/05/2009 - 19:21
#121562

So I guess this is a variation on the Swedish negative fund rate? So it could be used to calculate how long we will be in a recession based on the Taylor rule?

by Tyler Durden
on Thu, 11/05/2009 - 19:24
#121566

At last check per Taylor we are at -7%

by Anonymous
on Thu, 11/05/2009 - 19:45
#121586

"...investing in safe and risky assets alike without prejudice."

How can that be if the cash is on deposit at the reserve? If it's at the reserve, it's not being circulated. What am I missing?

by spanish inquisition
on Thu, 11/05/2009 - 20:33
#121656

Thank you. I did some digging and found this from Taylor.

http://www.bloomberg.com/apps/news?pid=20601110&sid=aagcZb2nSg10

I would like to ask a question. If the Fed is lending at 0% and the banks are reinvesting 100% in treasuries at 3%, this would create a net (-3%) Fed rate. It seems to me that we are now below the new target rate and fueling inflation much like the full GDP version that he discusses. If my hypothesis is correct, the Fed is working off the wrong rate and we could face a liquidity ramp up bubble like Leo K has described. (This assumes the world is run through incompetence and not some all knowing new world order). Anyone know Taylor, so we can bounce this off him?hehe

by Anonymous
on Thu, 11/05/2009 - 19:45
#121589

"...investing in safe and risky assets alike without prejudice."

How can that be if the cash is on deposit at the reserve? If it's at the reserve, it's not being circulated. What am I missing?

by Anonymous
on Thu, 11/05/2009 - 20:08
#121620

You are correct. Banks dont lend out reserves.

Loans in fact create deposits: Step 1. Loan application approved then 2. loan documents put in file cabinet then 3. borrowers account balance credited on the computer...

There is ever decreasing demand for loans right now. Who wants to leverage to buy assets that are decreasing in value? Fed is pushing on a string. Excess reserve levels are a meaningless accounting exercise.

by Stevm30
on Thu, 11/05/2009 - 20:13
#121625

I guess because their excess cash could cover any bad bets - so they're more risk seeking.

by jules from aus
on Thu, 11/05/2009 - 22:03
#121748

banks doing two things:

a) hoarding unprecedented and staggering amounts of cash, and

b) accumulating Treasuries with plenty of long dated in the mix

 

10 year a paying bugger all, about 3.5%

and the Fed pays bugger all on reserves

so why all the accumulation?

I can only think of what happens when things go south:

a) triggers require more cash to be posted, and

b) triggers require more collateral to be posted (think under collateralised RMBSs and CMBSs)

- so all I can see are US banks readying cash and collateral for calls that are to come

all of this is to way off any historical norm or precedent to be called 'business as usual'

- Tyler, I feel a distrubance in the force...

 

good luck

by Anonymous
on Thu, 11/05/2009 - 22:28
#121769

Within 9-12 months, Mugabe Jr. will nationalise the big banks and the lending will start flowing like a river in late spring. Even Deflation Mish will be shocked. Get ready.
PS. I am one of those lucky guys who has seen more paper money used in toilets that toilet paper.

by curbyourrisk
on Thu, 11/05/2009 - 23:43
#121838

Velocity of money continues to slow...deflation continues to grow.

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