What a Problem to Have: Too Much Cash

Banks tell consumers: We don't need your stinking deposits! Okay, that wasn't exactly the headline but it's the gist of a story published by our sister publication, American Banker. AB reported that with "attractive lending opportunities hard to come by" depositories are doing what would have been unthinkable just two years ago: discouraging deposits. It appears that most large and regional banking companies are drowning in deposits, raising concerns that excess liquidity could be a drag on earnings in coming quarters. It's a crazy mixed up world, indeed. Of course, we keep hearing plenty of stories about self employed and jumbo mortgage customers that need loans but go wanting because mortgage lenders (depositories, that is) are just too tight with credit. Jumbo loans tends to have short maturities. So, if a bank is paying 1% for money and lending it out at 5% that translates into a 400 basis point spread, before costs are factored in…