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Banks Seek Relief From Unwanted Deposits! It's A World Turned Upside Down.

TARP Distribution: Mike in Tucson, AZ mortgage lender

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

NMLS #223495

SUNSTREET MORTGAGE LLC ~ Correspondent Mortgage Bank
Offices in Mesa, Tucson, Sierra Vista & Nogales

Comment balloon 5 commentsMike Jones • August 26 2011 12:03PM

Comments

You just ahve to wonder if we are ever going to get to the right place again... no common sense....no leadership... no light at the end of the tunnel... the lending situtation is getting weirder and wierder... we need some sign of stability...Great Post Mike!

Posted by Debra Leisek ( Bay Realty,Inc Homer Alaska) almost 8 years ago

Surprise! Surprise, surprise!

Even when interest rates start with "1." people want their money in American banks!

That is everyone, but Americans! Bank deposits are guaranteed losses! Pity our seniors, all their lives we engorged savings, money in the bank, yet the best we can say for it is American banks are a better choice than Euope's.

Rates have to go back to where Savers and the Banks can make money on the spread not the puntive fees.

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) almost 8 years ago

Mike - this is almost an unbelieveable situation, but I do understand their problem, and I also know that they will find a way to use that money in a profitable way.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) almost 8 years ago

Money is real cheap to borrow but many people are out of work or their hours have been cut so the cannot obtain a conventional mortgage.

Posted by Harry F. D'Elia, Investor , Mentor, GRI, Radio, CIPS, REOs, ABR (RentVest) almost 8 years ago

Indeed we have a strange situation right now, mortgages at a 50 year low and yet banks afraid to lend money. It really makes no sense.

On the flip side, we are seeing South American investors flocking to Florida to purchase property.....cash buyers that seem to think their money is safer invested here in the good old USA.

 

Posted by Barbara-Jo Roberts Berberi, MA, PSA, TRC - Greater Clearwater Florida Residential Real Estate Professional, Palm Harbor, Dunedin, Clearwater, Safety Harbor (Charles Rutenberg Realty) almost 8 years ago

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