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The "Big Three" Banks Are Gambling With $860 Billion In Deposits

Tyler Durden's picture


A week ago, when Wells Fargo unleashed the so far quite disappointing earnings season for commercial banks (connected hedge funds like Goldman Sachs excluded) we reported that the bank's deposits had risen to a record $176 billion over loans on its books. Today we conduct the same analysis for the other big two commercial banks: Wells Fargo and JPMorgan (we ignore Citi as it is still a partially nationalized disaster). The results are presented below, together with a rather stunning observation.

First, Wells again - deposits over loans: record $176 billion.

Next: Bank of America: unlike Wells, BofA is not even trying as its deposits are soaring while the loans have been declining for 6 quarters in a row. Deposits over Loans: record $221 billion.

Finally: JP Morgan, or the bank that started it all when the CIO blew up and made it all too clear what happens with the "Excess deposit over loans" cash. December 31 Deposits over Loans: record $460 billion.

And this is how the consolidated deposit and loan data for the Big Three banks looks: some $858 billion, or nearly half of the $2 trillion in total excess deposits over loans in the entire US commercial banking system (speaking of Too Big To Fail).

Why is all of the above important?  Because as we have explained repeatedly in the past several weeks, the "excess deposit cash over loans" is nothing more or less than additional prop trading capital, that banks can use as they see fit. The traditional regulatory explanation is that the cash is to be used for safe, responsible investment. Alas, as the JPM CIO debacle taught us, said cash is used for anything but, and is in fact used to fund prop trading operations deep inside these commercial banks.

But don't take our word for it. Take the word of the Task Force charged with explaining away the 2012 CIO Losses, released yesterday.

JPMorgan’s businesses take in more in deposits than they make in loans and, as a result, the Firm has excess cash that must be invested to meet future liquidity needs and provide a reasonable return. The primary responsibility of CIO, working with JPMorgan’s Treasury, is to manage this excess cash. CIO is part of the Corporate sector at JPMorgan and, as of December 31, 2011, it had 428 employees, consisting of 140 traders and 288 middle and back office employees. Ms. Drew ran CIO from 2005 until May 2012 and had significant experience in CIO’s core functions.19 Until the end of her tenure, she was viewed by senior Firm management as a highly skilled manager and executive with a strong and detailed command of her business, and someone in whom they had a great deal of confidence.


CIO invests the bulk of JPMorgan’s excess cash in high credit quality, fixed-income securities, such as municipal bonds, whole loans, and asset-backed securities, mortgage-backed securities, corporate securities, sovereign securities, and collateralized loan obligations. The bulk of these assets are accounted for on an available-for-sale basis (“AFS”), although CIO also holds certain other assets that are accounted for on a mark-to-market basis.


Beginning in 2007, CIO launched the Synthetic Credit Portfolio, which was generally intended to protect the Firm against adverse credit scenarios. The Firm, like other lenders, is structurally “long” credit, including in its AFS portfolio, which means that the Firm tends to perform well when credit markets perform well and to suffer a decline in performance during a credit downturn. Through the Synthetic Credit Portfolio, CIO generally sought to establish positions that would generate revenue during adverse credit scenarios (e.g., widening of credit spreads and corporate defaults) – in short, to  provide protection against structural risks inherent in the Firm’s and CIO’s long credit profile.


The positions in the Synthetic Credit Portfolio consisted of standardized indices (and related tranches) based on baskets of credit default swaps (“CDS”) tied to corporate debt issuers. CIO bought, among other things, credit protection on these instruments, which means that it would be entitled to payment from its counterparties whenever any company in the basket defaulted on certain payment obligations, filed for bankruptcy, or in some instances restructured its debt. In exchange for the right to receive these payments, CIO would make regular payments to its counterparties, similar to premiums on insurance policies. As described in greater detail below, the actual trading strategies employed by CIO did not involve exclusively buying protection or always maintaining a net credit short position (under CSW 10%); rather, CIO traded in an array of these products, with long and short positions in different instruments.

In other words, JPM's own task force admitted the CIO was using excess cash for prop trading purposes (there is much more in the full 132 page document). This is when JPM had roughly $400 billion in excess cash over loans. JPM now has a record $460 billion and it most likely continues to invest this cash in any way it sees fit. Sadly, when asked to provide details about what the CIO is doing these days, Jamie Dimon provided no additional information.

Because if JPM was/is doing it, everyone else was/is doing it.

And you, dear savers, are the ones who money is being used by the banks to fund precisely this prop trading, which, among other factors (Fed) is what is causing the relentless stock market melt up.


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Thu, 01/17/2013 - 19:48 | 3164440 kliguy38
kliguy38's picture

NO they're not........THEY are the HOUSE..........thats not gamblin

Thu, 01/17/2013 - 19:49 | 3164445 koder
koder's picture

Gambling is for suckers....this is a stacked deck. They know what they are doing.....just enjoy the ride ;0

Thu, 01/17/2013 - 19:54 | 3164476 NotApplicable
NotApplicable's picture

I think it's funny that a "bank" would feel the need to state that 'The Firm, like other lenders, is structurally "long" credit.'

Now, just how far does one have to stray from their alleged core business to feel the need to make that statement? LOL

Thu, 01/17/2013 - 20:33 | 3164613 The Monkey
The Monkey's picture

Now, you would expect the Fed to be concerned about risk.  But, we already know their track record.

I don't think they will be able to explain it this time.  Headline is like: Players bid each others books up in an illiquid market, sold what they could to retail, hedged, and then fucked everybody.

Fri, 01/18/2013 - 02:46 | 3165419 Boris Alatovkrap
Boris Alatovkrap's picture

Bank is gamble with Boris' money and wife is spend whatever can be left!

Fri, 01/18/2013 - 02:53 | 3165425 akak
akak's picture

Boris is gamble with money, and Russian wife is greet him with left hook!

Fri, 01/18/2013 - 04:00 | 3165470 boogerbently
boogerbently's picture

Free interest on govt. money, or laughable interest for 30 years????????Gee??????

Tue, 01/22/2013 - 14:47 | 3176242 Boris Alatovkrap
Boris Alatovkrap's picture

No, wife is lose right hand in factory accident, not left.

Thu, 01/17/2013 - 20:33 | 3164592 centerline
centerline's picture

You guys should at least use /sarc.  They are gambling with your money - period.  It is just that simple.

Thu, 01/17/2013 - 23:04 | 3165073 Stuck on Zero
Stuck on Zero's picture

I am reall appalled I was under the impression that the Bak would pak thos excess fund in ultra-safe Treasuries. /sarc


Thu, 01/17/2013 - 19:52 | 3164465 IamtheREALmario
IamtheREALmario's picture

Yes, and a crooked house at that. They get to choose their cards after seeing the cards of the gamblers.

Thu, 01/17/2013 - 20:23 | 3164578 Cursive
Cursive's picture


I doubt Jamie Dimon carries as much weight with the GIIPS as he does with the UST.  Granted, he may only need to dial-up another branch of the international banking brotherhood to make right on his peripherial European debt gamble, but there is the possibility for some of his clout to be "lost in translation."

Thu, 01/17/2013 - 20:46 | 3164666 ultimate warrior
ultimate warrior's picture

Private profits socialized losses.

Thu, 01/17/2013 - 23:07 | 3165078 EscapingProgress
EscapingProgress's picture

= Fascism

"State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management." - Benito Mussolini, 1935, Fascism: Doctrine and Institutions, Rome: 'Ardita' Publishers, pg 136

Thu, 01/17/2013 - 20:47 | 3164672 LongSoupLine
LongSoupLine's picture

and lest we fool ourselves into thinking these assholes don't have it leveraged 1000X with derivatives and black pool ass fucking.


Fuck you primary dealers.

Thu, 01/17/2013 - 21:22 | 3164763 Yen Cross
Yen Cross's picture

Where is EKM?  It's days like this ,that make me go full on " Mad Man".  /sarc/ I'm too old for that shit ;-)

 EKM and L/S/L would have a heyday with this topic!

Thu, 01/17/2013 - 22:13 | 3164923 fonzannoon
fonzannoon's picture

I think this info sent ekm back to the drawing board. Although it lends some credibility that the fed and the banks are going to end up owning the whole market....and then.....

Fri, 01/18/2013 - 10:36 | 3165958 Groundhog Day
Groundhog Day's picture

So your sayin JP Morgan is the chip leader?  Who's holdin the pocket aces and who's bluffing?

Thu, 01/17/2013 - 19:51 | 3164451 IamtheREALmario
IamtheREALmario's picture

Bank deposit = unsecured loan THEREFORE Unsecured loan = bank deposit

So, unless I am missing something with banking 101. ANY unsecure loan to a bank could and probably is considered a deposit. So, the Fed loans to the banks are deposits.... lol.

Thu, 01/17/2013 - 22:20 | 3164951 secret_sam
secret_sam's picture

<in bad Russian accent>: In capitalist USA: a bank deposit is loan that bank owes YOU.

Thu, 01/17/2013 - 22:26 | 3164967 Bunga Bunga
Bunga Bunga's picture

What, I don't get collateral when I loan money to the bank?

Thu, 01/17/2013 - 19:53 | 3164467 joego1
joego1's picture

My next house is going to have a discount window so I can play too.

Thu, 01/17/2013 - 19:55 | 3164480 NotApplicable
NotApplicable's picture

My last house was full of them. Made heating and cooling extremely expensive.

Thu, 01/17/2013 - 20:10 | 3164534 Mike2756
Mike2756's picture

Not if you have a printer.

Thu, 01/17/2013 - 22:24 | 3164966 Bunga Bunga
Bunga Bunga's picture

Install only the printer friendly discount windows.

Thu, 01/17/2013 - 19:53 | 3164470 Banksters
Banksters's picture

That is ok, the FDIC has about 2 billion to cover it.  lol

Thu, 01/17/2013 - 19:53 | 3164471 donsluck
donsluck's picture

What we will be seeing is a slow movement into physical cash, and thence to physical PMs as citizens make rational decisions with their money. Against all the Feds' efforts, electronic money will not happen, cash will still be used and the whole system will have to be force fed through draconian PM and cash exchange laws.

Thu, 01/17/2013 - 20:00 | 3164502 the grateful un...
the grateful unemployed's picture

remember the best financial advice in the 30's? bury your money in the backyard.

Thu, 01/17/2013 - 20:29 | 3164599 centerline
centerline's picture

funny how they can make it worthless and never touch it or see it in circulation.

Thu, 01/17/2013 - 19:56 | 3164478 Say What Again
Say What Again's picture

I have made it my mission in life to educate everyone in the neighborhood regarding the definition of; "rehypothecation."

We're at the bar and someone starts talking about the fooball playoffs -- and I say; "yes, but do you know that the TBTF banks have hypothicated you deposits?" 

The chicks really dig that shit!

Thu, 01/17/2013 - 22:45 | 3165018 francis_sawyer
francis_sawyer's picture

You must rarely wear underwear... [& when you do, it's something kinky, like a tiger print]...

Thu, 01/17/2013 - 19:56 | 3164481 nmewn
nmewn's picture

Counterfeit money buying the reciepts of spent

Thu, 01/17/2013 - 20:31 | 3164605 centerline
centerline's picture

counterfeit money being used to pay for derivatives of spent capital plus interest on previously spent counterfeit money!  lol.

Thu, 01/17/2013 - 19:59 | 3164491 Water Is Wet
Water Is Wet's picture

But that huge increase in reserves is only inflation in the strictly literal sense.

Thu, 01/17/2013 - 19:59 | 3164492 the grateful un...
the grateful unemployed's picture

this is what FDIC is for, why Goldman Sachs has, even though they have no retail business. if you take the consumer out of the equation - saver puts money in bank - FDIC insurances that money - JPM sweeps money to its prop trading desk, then you have the government stock market.

Thu, 01/17/2013 - 20:02 | 3164508 Yen Cross
Yen Cross's picture

 Banks? Try this one.  The technical definition of banking : Oligopoly - Wikipedia, the free encyclopedia

Thu, 01/17/2013 - 20:29 | 3164601 Cursive
Cursive's picture

@Yen Cross

And it's illegal to issue your own currency.  Hell, it's illegal to accept any currency for payment other than USD.  What does that tell anybody.  America is suppossedly the most innovative and greatest country of all time, but we're stuck with monopoly (literally!) money?  Oh, people laugh about Milton Bradley Monopoly money, but the Federal Reserve Note is the real monopoly money.

Thu, 01/17/2013 - 20:37 | 3164625 Yen Cross
Yen Cross's picture

  Board Walk or park place?   Banks=slum lords!

  Free up the shadow inventory {BAC,C,WFC} You worthless scum, bags!

Thu, 01/17/2013 - 22:47 | 3165026 francis_sawyer
francis_sawyer's picture

 "Hell, it's illegal to accept any currency for payment other than USD. What does that tell anybody?"


Oh, I could tell you... But then you'd have to kill me...

Thu, 01/17/2013 - 20:08 | 3164523 Clint Liquor
Clint Liquor's picture

At this point in time, anyone who put money into these Banks deserves the anal rape they most surely will get.

Thu, 01/17/2013 - 20:12 | 3164541 Banksters
Banksters's picture

I relish .00002 percent interest, don't you?

Thu, 01/17/2013 - 20:22 | 3164576 Clint Liquor
Clint Liquor's picture

It should come with lube.

Thu, 01/17/2013 - 21:42 | 3164825 secret_sam
secret_sam's picture

You're supposed to put your dough in the bank, but duh.


The thing seems to me that we have a large aging population many of whom can't really think that way at this point.

Thu, 01/17/2013 - 20:20 | 3164571 Dr Benway
Dr Benway's picture

But when the banksters blow the money, they will just be bailed out anyway. So neither the enabler-depositors nor the banksters will be the ones to pay.

The game is now such that there is no possible  comeuppance, no recourse, no hope for justice whatsoever.

Not one of the criminals will ever get what they deserve. And that's the most maddening part of it all.

Fri, 01/18/2013 - 06:54 | 3165550 falak pema
falak pema's picture

PDs (TBTF oligarchy) and CBs hand in hand in money churning that allows assets levitation of WS and this leads to the Squid declaring a 7 billion profit W/O having a deposit bank! Just on sleight of hand and insider trading and BOT HFT derivative plays! 

How the Oligarchy controls the money churning all the while depriving the real entrepreneurs of loans to allow innovation...

We are in a monetary circle were the snake eats its own tail. 

Thu, 01/17/2013 - 20:08 | 3164525 falak pema
falak pema's picture

GS declares over 7 billion AT profits in 2012...they have made a killing. or is it just numbers fixing?

Thu, 01/17/2013 - 20:10 | 3164530 Payne
Payne's picture

This makes sense with the FDIC data,  B of A and Chase have more 90 days late by far than any other bank on 1-4 Family units, they have increased by 3% in the past year.  They are making a choice to not liquidate and gamble the money in the stock market.

Thu, 01/17/2013 - 20:12 | 3164540 Coldfire
Coldfire's picture

I don't get it. With fractional reserve lending, you only need a fraction of the liabilities (such as deposits) on hand. At 10:1 leverage one dollar of deposits creates ten dollars of loans. If you could only create one dollar of assets (loans) for each dollar of deposits, where would the leverage be? What am I missing here? Of course there are other liabilities, such as debt, to create leverage, but shouldn't these also be part of the picture here or are we only talking about demand deposits, immediately due? Wouldn't the excess of deposits over loans need to be multiplied by the leverage factor at the bank to get the full amount of funds used for a banking institution's riverboat gambling activities?

Thu, 01/17/2013 - 20:36 | 3164632 Joe moneybags
Joe moneybags's picture

So now the banks volantarily reign in their fractional reserve lending, to less than 1.0, and Tyler carps.  Which is it, too much lending, or too little?

Thu, 01/17/2013 - 22:06 | 3164875 cranky-old-geezer
cranky-old-geezer's picture



It's all quite simple.  Banks are looting the wealth of America under the banner of QE.  Selling near-worthless "securities" to the Fed at full par value is how they do it. 

It has nothing to do with lending.  It's about LOOTING.

And I'm quite confident it's way more than $860 billion.  Probably 5 times that much.

You see, Tylers have this myopia problem.  They can't see past a balance sheet.

...and perhaps some "moron" mixed in.  They believe what's on that balance sheet.


Fri, 01/18/2013 - 00:08 | 3165204 JeffB
JeffB's picture

"I don't get it. With fractional reserve lending, you only need a fraction of the liabilities (such as deposits) on hand. At 10:1 leverage one dollar of deposits creates ten dollars of loans..."


With a 10% loan requirement they can loan out $90 on a $100 deposit. But the person they are loaning it to doesn't bury it in his/her back yard. They deposit the loan in a bank (until they spend it), and the banking system (not necessarily the 1st bank) counts the $90 loan as a new deposit, and can loan 90% of that deposit... and so on.

Of course, even when the money is spent, the builder, or auto maker or whomever then deposits it in their bank and the process continues until it eventually reaches that 10:1 ratio.

The "money" supply has increased by a factor of 10, but the deposits are at least keeping up with the loans.

Thu, 01/17/2013 - 20:13 | 3164542 Banksters
Banksters's picture

Now, for the sake of argument, what happens if the stock market drops in an uncontrolled manner?   

Thu, 01/17/2013 - 22:22 | 3164960 secret_sam
secret_sam's picture

A lot of people make a huge amount of noise, and various institutions struggle to placate them.  Gummit pisses off absolutely everyone except ONE faction of assholes.

Thu, 01/17/2013 - 23:04 | 3165077 cranky-old-geezer
cranky-old-geezer's picture



It won't.

They banged it down in '08 to get bailouts and QE started.  Financial false flag you might say.

Now that bailouts and QE are firmly in place, no need to bang it down again, pushing it higher and higher is what they want now, "wealth effect", huge bonuses, etc.

Yep, it's gonna be this way from now on, Wall Street gets richer and richer while the rest of America gets poorer and poorer, all thanks to the Fed.


Thu, 01/17/2013 - 20:16 | 3164549 NoDebt
NoDebt's picture

Luke Skywalker (Steve Liesman):  "I don't believe it!"

Yoda (Zero Hedge):  "THAT is why you fail."

Suck it, Steve Liesman.  You're wrong.  It's happening despite all your condescension and arguments to the contrary that "they can't and don't do that."

Game, set, match- Zero Hedge.

You wanna know why Too Big To Fail (aka Too Interconnected To Fail) persists?  This is why.  Just one TBTF goes down and it's game over, insert coins.  A freaking lot of coins, probably of the platinum variety.


Thu, 01/17/2013 - 21:55 | 3164870 whisperin
whisperin's picture


Thu, 01/17/2013 - 22:29 | 3164979 secret_sam
secret_sam's picture

+1, but does everything have to be so personal?  Isn't he just doing a JOB for a very good paycheck?

Thu, 01/17/2013 - 23:42 | 3165149 philosophers bone
philosophers bone's picture

He embarrassed himself when debating this topic, that's all. Nothing personal.

Thu, 01/17/2013 - 20:15 | 3164552 johngaltfla
johngaltfla's picture

No big deal. I'm sure we can all go pick moar cotton bozzman on the Bankster Plantation to cover their losses bozzman.

Thu, 01/17/2013 - 20:20 | 3164565 fuu
fuu's picture

 Any way of telling how many shares of stock each of those banks holds in accounts with each other?

Thu, 01/17/2013 - 20:22 | 3164575 Dr Benway
Dr Benway's picture

Or how much of each other's stock they hold for mutual ramping?

Thu, 01/17/2013 - 20:20 | 3164570 q99x2
q99x2's picture

Arrest Blankfeind and Demon before they make off with the cash.

And that half an uncle Tom in the oval office going into kill the black folk and steal the poor Africans resources.,,I don't know what this world is coming to.

Thu, 01/17/2013 - 20:25 | 3164588 Clint Liquor
Clint Liquor's picture

Black folks make up 12.9% of the US population. More than 50% of the homicide victims in the US last year were black. Mission accomplished, Barack.

Thu, 01/17/2013 - 22:24 | 3164964 secret_sam
secret_sam's picture

Um...but you have to let them keep the money, or else you won't continue to develop the kind of innovation that you can only find in 'Merkin banking.

Thu, 01/17/2013 - 20:21 | 3164573 MFLTucson
MFLTucson's picture

The "Big Three" Banks Are Gambling With $860 Billion In Deposits


Thu, 01/17/2013 - 20:35 | 3164628 Goldilocks
Goldilocks's picture

Antithesis^... Rules are for serfs

Thu, 01/17/2013 - 20:38 | 3164640 nmewn
nmewn's picture

Its been revised my lady...the law is for serfs.

Thu, 01/17/2013 - 22:49 | 3165035 francis_sawyer
francis_sawyer's picture

What?... No song?...

Thu, 01/17/2013 - 20:24 | 3164582 Vegetius
Vegetius's picture

Man cannot go against his nature, these guys think understand the new game better than everyone in their opinion. They created it through their creatures like Bennie boy and the rest of the Central Bankers, but the bubble will burst and they don't have a plan B. My advice to them is get ready to run.

"Homo sum, humani nihil a me alienum puto", or "I am a man, I consider nothing that is human alien to me." 

- Terence

Thu, 01/17/2013 - 20:27 | 3164590 random shots
random shots's picture

As the big banks run out of higher IRR projects (i.e. trading the markets) they will invest in less profitable and riskier investments....lending to people!  Housing Bubble 2.0.

Thu, 01/17/2013 - 20:29 | 3164593 Seasmoke
Seasmoke's picture

When you have lost the first 9 races of the day , sometimes you have to hope you get lucky on the get out last race 20-1 longshot, even if you really don't like him.

Thu, 01/17/2013 - 20:34 | 3164624 WallowaMountainMan
WallowaMountainMan's picture

gotta say payin someone for counter party insurance in the house of cards is like payin a hooker for medical coverage while you're doin their roommate.

Thu, 01/17/2013 - 20:37 | 3164635 Hubbs
Hubbs's picture

The whole story begs the question: Where are all these "deposits" coming from?

Thu, 01/17/2013 - 21:44 | 3164834 secret_sam
secret_sam's picture

Got about 15% of the population that really has some dough.  That's almost 50 million folks.  A fair number of 'em use big banks.

Thu, 01/17/2013 - 20:40 | 3164644 Ben Graham Redux
Ben Graham Redux's picture

This is an insane analysis.  Banks have always had a surplus of deposits over loans.  Most of it goes into plain vanilla fixed income securities.  They can play some games on the margin with their hedging strategies but you overstate the magnitude of their actions.  Keep in mind that these fixed income securities are part of their net interest margin calculation.

Thu, 01/17/2013 - 21:23 | 3164768 NoDebt
NoDebt's picture

Jamie lost $5 billion when his hedgies botched it up.  That's a pretty big margin to play in.  And that's on-balance-sheet.  I don't even want to know what other games they might be playing in the ever-popular off-balance-sheet world.

Thu, 01/17/2013 - 23:08 | 3165082 SKY85hawk
SKY85hawk's picture

Wasn't it a Tempest in a Teapot, originally?

Thu, 01/17/2013 - 21:29 | 3164788 The Monkey
The Monkey's picture

Key word is "part". Anyone looking at the extreme sentiment conditions, bollinger bands, yields, spreads and voatility knows this is an extremely unhealthy market, often with low volume and unusual features such as high A/Ds, extreme trin, etc. The Fed has created another bubble, and considering the settlement conditions with HSBC and Goldman Sachs, where no related criminal charges were filed, it doesn't look really good for the investment banks to be bidding up risk to astranomical prices in front of the election, and again in front of the debt ceiling negotiations. But, I think that is where we are - favors are being returned.

Thu, 01/17/2013 - 21:45 | 3164835 secret_sam
secret_sam's picture

      Banks have always had a surplus of deposits over loans.

How big is that surplus?  Historically?

Thu, 01/17/2013 - 21:57 | 3164879 Ben Graham Redux
Ben Graham Redux's picture

He did it with illiquid credit default swaps with leverage.  The point is that it's not big part of that portfolio.

Thu, 01/17/2013 - 21:57 | 3164880 Ben Graham Redux
Ben Graham Redux's picture

He did it with illiquid credit default swaps with leverage.  The point is that it's not big part of that portfolio.

Thu, 01/17/2013 - 20:42 | 3164652 Yen Cross
Yen Cross's picture

 Tyler talked about(record) deposits, last week. He discussed how those deposits were being appropriated. Welcome to Today>---

Thu, 01/17/2013 - 20:49 | 3164655 logicalman
logicalman's picture

Where does all the interest go?

A loan only creates the principal, so where does the interest come from?

The answer to these two questions pretty much shows how the game works.

Thu, 01/17/2013 - 20:51 | 3164676 Everybodys All ...
Everybodys All American's picture

 Bob Pisani told you retail was getting back in the market.

Thu, 01/17/2013 - 21:17 | 3164746 Yen Cross
Yen Cross's picture

Bob PIssAntI. Fixed it for you.

Thu, 01/17/2013 - 20:51 | 3164677 Goldilocks
Thu, 01/17/2013 - 21:04 | 3164710 Market_Magician
Market_Magician's picture

This article is worthless.


1. Excess deposits are driven by a lack of lending opportunities. What's out there is priced so competitively you may as well not bother. 

2. What do you propose banks do? Start refusing deposits? Let's see how that one goes

3. Banks DON'T WANT YOUR DEPOSITS. They already have a hard enough time with their ROA's without needing to take on the liability of looking after your cash with no where to deploy it.



Thu, 01/17/2013 - 21:10 | 3164729 vintageyz
vintageyz's picture

Really now.  How about all the credit worthy small businesses or individuals who would like to borrow but are shut out by these same banks.  Terminations of lines of credit, massive hoops to get money they "don't want," and pressure for extraordinary profit results when they cannot exhibit results themselves.  Or, perhaps they could lend to equally credit worthy middle class individuals for homes instead of requiring four or five appraisals and then a rate of return and fees that will only benefit the lender (should they choose to be.)  There's plenty of opportunities, it's just that the TBTF banks are using it in the stock market instead. 

Thu, 01/17/2013 - 21:36 | 3164809 The Monkey
The Monkey's picture

If collusion in trading is widespread, it's only because it is being encouraged or worse, rewarded. Don't expect the state department or SEC to be on the case anytime soon. Just BTFD, regardless how stupid it looks.

Thu, 01/17/2013 - 21:21 | 3164758 Ben Graham Redux
Ben Graham Redux's picture

Excess deposits have always existed and they've always been between 10% and 20% of deposits.  Normally, banks invest in bonds.  This stuff is so basic that I'm shocked that zerohedge put this article up. 

Thu, 01/17/2013 - 21:40 | 3164823 Market_Magician
Market_Magician's picture

I know, it's absurd. Banks don't lend to your stupid small businesses because they're not credit worthy. It's as simple as that. Damned if you lend to them, damned if you don't.

Thu, 01/17/2013 - 21:50 | 3164856 secret_sam
secret_sam's picture

They can't lend at appealing rates, you mean, because of the Fed policy?

Thu, 01/17/2013 - 22:02 | 3164899 Ben Graham Redux
Ben Graham Redux's picture

If you go back and look at bank balance sheets over the past 30 years, you'll see that their investment portfolios have always been large.  Historically, it was a way to diversify risk but today it's because they don't want to lend.  The point is that this is nothing new.

Thu, 01/17/2013 - 22:49 | 3165031 DR
DR's picture

30 years ago we had Glass–Steagall.

Thu, 01/17/2013 - 23:35 | 3165130 YC2
YC2's picture

If they historically had a different motive for holding reserves, and historically invested in vanilla fixed income investments but now are blowing up $5B losses in derivative trades with a risk profile that is positively correlated with the risk they were supposedly hedging, then it is something new.


Read the article before trying to show off that you took Financial Institutions 101 and recognize some of the terms

Fri, 01/18/2013 - 08:13 | 3165615 SmallerGovNow2
SmallerGovNow2's picture

It is new as the percentage of excess reserves is increasing dramatically as can be plainly seen in the graph...

Thu, 01/17/2013 - 22:00 | 3164891 YC2
YC2's picture

the point is the trend in deposits over loans, and jpm explicitly stating that the whale trade, which was not a hedging trade (and apparently didn't have to be per the above statement) and came from this growing source of funds.

the article does not say deposits over loans is a new thing or that banks should loan more.  

Fri, 01/18/2013 - 02:27 | 3165396 Tyler Durden
Tyler Durden's picture

See if you had only clicked on one of the hyperlinked articles above, you would have seen this chart...

... which not only immediately refutes your "argument", but would have prevented you from coming off as not only a raving lunatic hell bent on gettting his typing heard despite having no idea what the facts are, but also being utterly clueless when it comes to finance.

Better luck next time.

Fri, 01/18/2013 - 10:01 | 3165805 Ben Graham Redux
Ben Graham Redux's picture

I'm not a troll but I was a bank analyst in the 90's.  Look at the period in the early '00's - 10% to 20% in fixed income was the norm, as it was in prior decades.  Today it's outrageously high because the Fed is creating money and the banks aren't lending it because our economy is effectively in a depression and because banks have been benefiting from front-running Fed actions by buying duration and risk.  The reason the whale tail trade was such a horror show is that it points out that the major banks have been playing on the margin with instruments that are supposed to act as hedges instead of gaming the markets but the majority of that money is in fixed income vehicles.  There is no doubt in my mind that the whale tail trade pushed the S&P higher a year ago but there are limits.  In that case, someone had to take the other side of the trade.  Today, would you take the other side of a JPM cds trade?  The fewer traders dumb enough to take the other side of the trade means that there are fewer "hedging trades" available to move the markets.  Since banks are restricted by law from buying equity with this money, the only thing I can think of that would allow them to push the markets around is if they are lending to SIV's that are pledging equity positions as collateral.  But if this money was really funding equity futures, would volumes in the markets be falling? 

Thu, 01/17/2013 - 21:50 | 3164845 secret_sam
secret_sam's picture

You're dead-on with #3, anyway.  Deposits are liabilities.

I just remembered--I considered opening an account at a commercial bank a few weeks back and they wouldn't tell me how long they thought it would take.  I'm kinda thinking that's a subtle approach to "declining deposits."  It only takes about 4 minutes to "get membership" at a check-cashing joint.

Fri, 01/18/2013 - 02:30 | 3165400 Tyler Durden
Tyler Durden's picture

Ok, instead of commenting on stuff one is totally clueless about, but doing so with confidence to make it appear legitimate, how about simply clicking on the provided links which explains everything one is so clueless about. Such as this one.

Fri, 01/18/2013 - 02:34 | 3165406 akak
akak's picture

Good for you, Tyler, but I wish you would exercise your take-no-prisoners approach to some of the regular trolls here as well, and more often.  It would really spice things up!

Fri, 01/18/2013 - 10:37 | 3165969 secret_sam
secret_sam's picture

Hey!  I wonder if Tyler himself could be one of the serial junkers?

(I read that article when it was posted, bud, not sure what you're bitching at me for, or what makes you so sure I'm clueless on the basis of THAT comment...)

Fri, 01/18/2013 - 05:17 | 3165511 Clowns on Acid
Clowns on Acid's picture

sam is a obama bot moron. I've had to expose him in other posts.

Fri, 01/18/2013 - 10:40 | 3165981 secret_sam
secret_sam's picture

Please, Clownboy, PLEASE "expose me." 

You don't know a fucking thing about what I believe--I just make you mad and you call me names.  That you consider that some kind of political debate perfectly summarizes why you're so pathetic.

Thu, 01/17/2013 - 21:15 | 3164742 Downtoolong
Downtoolong's picture

Don't worry. There's probably some schmuck over at AIG holding the bag for all the risk for a few million bonus.

Thu, 01/17/2013 - 22:00 | 3164881 Goldilocks
Goldilocks's picture

with or without,
douchebag immunity   /?/

Thu, 01/17/2013 - 21:22 | 3164764 Kreditanstalt
Kreditanstalt's picture

None of them are "banks"...they're subsidized and backstopped HEDGE FUNDS.

Thu, 01/17/2013 - 21:25 | 3164772 Yen Cross
Yen Cross's picture

 Under performing 2& 20's?  Mutual funds rebranded?

Thu, 01/17/2013 - 21:51 | 3164860 secret_sam
secret_sam's picture

Of course.  Shareholders deserve their returns, don't they?

Thu, 01/17/2013 - 21:59 | 3164888 TheMayor
TheMayor's picture

Bought more BAC today at 11.30.

Will buy more, again, if it hits 11.00.

Banks like BAC ARE the government and the government isn't going out of business anytime soon, despite the wishes of some.

All the billion dollar settlements and past hand wringing mean nothing, the price of the stock can only go up, up and up this year.

The game is the game and you are either in the game or you are not.  So, buy the fuck'in dip!

And, I thank you.

Thu, 01/17/2013 - 22:51 | 3165040 francis_sawyer
francis_sawyer's picture

Yu should change your username to 'TheMeyer'...

Fri, 01/18/2013 - 02:30 | 3165401 akak
akak's picture

Welcome back, RobotLemming.

Quislings of the world, unite!

Fri, 01/18/2013 - 08:07 | 3165609 SmallerGovNow2
SmallerGovNow2's picture

BAC at 11?  Get serious.  A year ago it was diving under 5!!!  It is the most inflated POS of all the inflated stocks out there...

Thu, 01/17/2013 - 22:02 | 3164896 youngman
youngman's picture

If this goes on for a few years...and it will....the banks will have trillions and WILL own most of the equities and things of value...the housing stock...the businesses...real estate...and of course the we as the little people will still have the guns and the nmbers....and some of the PM´s...should be interesting

Thu, 01/17/2013 - 22:32 | 3164987 cranky-old-geezer
cranky-old-geezer's picture



Actually the Fed will own all that stuff.  Banks will have all the cash from those sales.  

And that's the plan.  Foreclose on everybody, getting property at pennies on the dollar, sell it to the Fed at mark-to-fantasy value, banks reap trillions in profits.

Banks don't want the stuff.  They just want the cash.

Thu, 01/17/2013 - 23:21 | 3165103 desoto
desoto's picture

And to top it all off, my company just transferred $1.3 Billion dollars of 401K assets from Vanguard to Wells Fargo and my monthly interest income dropped 77%!!!  No joke.  The employees are livid about it but what can you do?  If you call them out on it they fire you.


Thu, 01/17/2013 - 23:23 | 3165104 desoto
desoto's picture

Oh, and would you care to guess WHY they moved those assets it to Wells Fargo???

Thu, 01/17/2013 - 23:27 | 3165111 Keegan11
Keegan11's picture

Awesome! I (heart) banksters!!!

Thu, 01/17/2013 - 23:36 | 3165133 Richard Whiskey
Richard Whiskey's picture

Give a man a gun and he can rob a bank, give a man a bank and he can rob the world.

Fri, 01/18/2013 - 10:51 | 3166026 clokey
clokey's picture

I love it. This is exactly what I have written about on Seeking Alpha over the past week.


Thanks Tyler

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