Very easy answer to your question. Banks have been GIVEN trillions by the Federal Reserve. We KNOW they are not lending it to consumers because consumer credit is going DOWN not up for the first time since 2003. We know they are not lending it to homeowners, because foreclosures are still rising. We know they are not lending it to business, because businesses are laying off people, not expanding.
Where do you think the banks are putting this money? They are putting into stocks for one simple reason. The only way they can get out of the pickle they are in is to raise the price of their shares and thus increase the amount of equity they have. A rising stock price does exactly that. The banks are in essence investing inthemselves in order to make themselves look more healthy. This is all being down with the full blessing of Ben Bernanke and his buds at the Fed. The stocks of financials have risen more on a % basis than about any class of stocks, ask yourself how banks on life support a year ago are now suddenly healthy.
On a side note, gold and silver stocks are flying. This is merely GS and JPM and others hedging their bets in case USD collapses because Chinese tire of our games.
Actually, I think you are wrong about this. I believe banks are parking their TARP cash in U.S. Treasury bills -- which explains why interest rates in the U.S. are so low these days even though the Federal government is running an enormous budget deficit.