Bernanke is killing people who rely on interest bearing accounts for income/retirement. He’s keeping interest rates near zero.
The problem is not the banks.
Their reaction, coming out of the burst housing bubble and with the additional regulatory demands on the kevel of capital they should have on their balance sheet, and with all kinds of uncertainty looking ahead in the face of the Dodd-Frank legislation, Obamacare, executive branch attacks on the producing class, executive branch attacks on the energy sector, executive branch desires to force the banks to take big haircuts on existing mortgages and on existing MBS holdings, all spell caution to the banks.
So, the Fed’s “stimulus” monetary policy is, naturally, not spilling into tons of new consumer and small business debt; its creating large “rainy day” funds in the banks.
And when will that rainy day come? When the tsnami of inflation down the road, building up by the Fed’s policies, finally spills over the Fed’s attempts to delay and control it. Then the banks big reserves won’t look as big, or “buy” as much as they do today.
The real problem is the Fed, not the banks.
Banks are investing more in government (debt) and foreign projects but far less in local loans to individuals for private projects.
This author lost me as soon as he called the “spread” between money cost and money lent as a “profit”. The “spread” historically equates to three to four percent for highly qualified borrowers. Still that.
The Fed PAYS banks interest for their cash holdings for crying out load! I say cut out the middle man and let me go directly to the Fed for money. The hell with it. I can wait while they print it off, no problem.