Friday, October 30, 2015
by: J. D. Heyes
(NaturalNews) Few could
have envisioned it even just a few years ago, but it's happening now, and on an
ever-widening scale. More big U.S. banks are shunning cash, because
the banking system has become so dependent on other "assets" that
large cash deposits actually pose a threat to their financial health, according
to The Wall Street Journal.
State Street Corporation, a Boston-based institution that manages assets for
institutional investors, has, for the first time, begun charging some customers
for making large cash deposits, according to people familiar with the
development.
And the largest U.S. bank in terms of assets — JP Morgan Chase & Co. — has
dramatically cut "unwanted" deposits to the tune of $150 billion this
year alone, in part by charging customers fees.
What gives? What kind of world do we live in when banks no longer want cash?
As the WSJ reported:
"The developments underscore a deepening conflict over cash. Many
businesses have large sums on hand and opportunities to profitably invest it
appear scarce. But banks don't want certain kinds of cash either, judging it
costly to keep, and some are imposing fees after jawboning customers to move
it."
As usual, the problem originated largely in Washington, D.C.
Criminalizing cash?
The paper said the banks'
actions are being driven by low interest rates (set by the Fed) that eat into
profits, as well as "regulations adopted since the financial crisis to
gird banks against funding disruptions," adding in a separate report that a number of large financial institutions
have become more dependent on buying and selling stocks, bonds and commodities
like oil.
The latest round of fees for large deposits stems from regulators' deeming them
risky. They are sometimes dubbed hot-money deposits that analysts believe is
likely to flee quickly in a crisis (think runs on Greek banks recently, which the government eventually curbed).
Agreed upon a year ago in September and managed by the Federal Reserve and
other regulators, the rule covering liquidity coverage ratios forces banks and financial institutions to retain high-quality liquid
assets — like central bank reserves and government debt — to cover anticipated
deposit losses over a 30-day period (creative way for the federal government to
continue financing its overspending — by forcing private banks now
to hold government debt). Under the rules, banks are required to retain up to
40 percent against certain corporate deposits and as high as 100 percent
against some hedge fund deposits, WSJ reported.
"At some point you wonder whether there will be a shortage of financial
institutions willing to take on these balances," Kelli Moll, head of Akin
Gump Strauss Hauer & Feld LLP's hedge-fund practice in New York, told the
paper.
Moll added that the subject of where to actually put cash has
become something of an interesting conversation as hedge funds are turned away
by the traditional banking sector.
Dodd-Frank is to the
financial industry what Obamacare is to health care
WSJ further explained the
phenomenon and fallout:
"Jerome Schneider, head of Pacific Investment Management Co.'s short-term
and funding desk, which advises corporate and institutional clients, said that
as a result of the bank actions, he and his customers have discussed as cash
alternatives boosting investments in U.S. Treasury bonds, ultrashort-duration
bond funds and money-market funds."
"Clients have been put on warning," Schneider said, when it comes to
cash.
The rules essentially criminalizing large depositors of cash stem from the 2010
Dodd-Frank financial "reform" law — a "reform" that did to
the banking industry what Obamacare has done to the health care industry.
The law's two primary authors — Democrats Chris Dodd of Connecticut and Rep.
Barney Frank of Massachusetts, both of whom are now out of Congress — were also
backers of Clinton-era housing rules said by experts to have caused the
2008 financial crisis. So, in
essence, Dodd-Frank is punishing banks for rules that the two of them (along
with most other Democrats and too many Republicans — and Bill Clinton's
signature on the legislation) actually caused.
In the meantime, there appears to be no end to the federal government's
meddling in both the financial industry and just about every other facet of
American life.
Causing more problems than it solves — that's a classic congressional move.
Sources:
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