Too much money
"Deposits are flooding into the biggest U.S. banks as customers seek shelter from Europe’s debt crisis and falling stock prices. That forces lenders to raise capital for a growing balance sheet and saddles them with the higher deposit insurance payments. With short-term interest rates so low, it’s hard for financial firms to reinvest the new money profitably."
So says Bloomberg this morning in an article titled "U.S. Banks Seek Relief on Swelling Deposits." Let's see... When the big banks feared they didn't have enough in capital reserves to weather the credit crunch back in 2007-2008, they sought relief from the Federal Reserve. The map above shows the distribution of TARP funds.
Not enough money
Back then, banks were afraid that they didn't have enough money. The taxpayer helped them out. Regulation of capital reserve/ratio requirements were modified to make sure that banks didn't get into that pickle again.
Now they are seeking relief from reserve requirements because they have too much. They're afraid to lend it, though, because the deposits are subject to withdrawal.
My take on this for homeowners and first time home buyers
Money's real cheap right now. The problem is that most of you just can't have any. Risk-averse banks are afraid that you're too big of a risk for them to take.
So... ...what to do with all that money? It's a problem.
I'm Mike in Tucson, your preferred Tucson Arizona Mortgage Lender
SUNSTREET MORTGAGE LLC ~ Correspondent Mortgage Bank
Offices in Mesa, Tucson, Sierra Vista & Nogales