I got a great idea for banks to use all that money: Make some friggin' loans! Help America's economy! America certainly helped their economies!
The European debt crisis is poised to flood U.S. banks with something they don’t want and can’t use: more money.
Cash held by U.S. banks surged 8.4 percent to a record $981 billion during the week ending July 27, the Federal Reserve said in an Aug. 5 report. That’s more than triple the amount firms had in July 2008, before the collapse of Lehman Brothers Holdings Inc. almost froze bank-to-bank lending.
Even more money may be deposited with U.S. lenders if investors pull away from European banks amid concern the Greek debt crisis may spread to Italy or beyond, said Brian Smedley, a strategist at Bank of America Merrill Lynch in New York. Those funds may not be so welcome: With few opportunities to lend them out profitably, U.S. firms may have to slap fees on depositors to keep returns from eroding.
“It becomes a loser to hold these excess deposits,” said Bert Ely, a bank-industry consultant in Alexandria, Virginia. “At the margin they have to think, ‘What can we do with $50 million of deposits?’ The answer is not much.”
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