Wednesday, February 17, 2010
Bank lending continues falling -- Are buying US Treasuries instead
As you can see from the first graph they are instead following the pattern from the last two recessions and are increasing the US Government securities portfolios while cutting lending to the private sector. Unlike private bank loans Treasuries are very liquid and can be sold immediately if cash is needed. Capital requirements for Treasuries are also much lower compared to a private bank loan. Considering the capital positions of most banks in America (I'll have a post on this soon) are tenuous they need the liquidity and 'safety' of Treasuries.
Posted by Greg Merrill at 12:20 PM
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