News | U.S. | Banking: US Banks Have Too Much Cash
economist.com America’s banks have too much cash Mar 16th 2021 2 minutes More is sometimes enough America’s banks have too much cash Abundant liquidity is meant to help markets. It might soon cause trouble WHEN BOND markets seized up in the spring of 2020 the problem was a shortage of cash. A global dash for dollars caused bond yields, which move inversely to prices, to spike. It sent the greenback soaring in currency markets. And it caused trading in Treasuries, usually the world’s most liquid market, almost to dry up . Today the opposite problem looms: a surfeit of money. It stems from the Federal Reserve’s response to the crisis last year. The central bank calmed markets by buying enormous quantities of bonds with newly created cash, and has since continued its purchases, at a current pace of at least $120bn per month. The newfound abundance of dollars is causing headaches for banks and investors