Friday, November 14, 2008

If Banks Are Supposedly Not Lending...

...why are they competing so aggressively for new deposits?

From today's WSJ:

Banks across the U.S. are engaged in a heated competition for deposits as the battered industry tries to shore up its funding sources.

From giant Citigroup Inc. to tiny S&T Bancorp Inc. -- which is based in Indiana, Pa. and has just 55 branches -- banks are responding to uncertain times by sharply increasing the interest rates paid on deposits.
Bottom line, if you are a good credit, you can get money. Banks aren't chasing deposits so that cash is piling up in their vaults. The frozen credit markets are just more Paulson propaganda.


  1. “Bottom line, if you are a good credit, you can get money.”


    During the 700 billion bailout the proponents were running around pointing out that not everyone who previously was getting a loan could get a lone now. They made this out to be a bad thing but since much of the problems of today comes from people and corporations getting loans they should not have, so a tightening of loans to those who can actually pay them off is part of the solution not the problem.

    We can’t get out of a crisis created by bad economic practices by using massive government bailouts to continue bad economic practices. We are just kicking the can down the street.


  2. Maybe they're simply looking to boost liquidity due to money outflows by their depositors? Kind of like WaMu offering 5% CD's before they were merged in Chase...a sign of deperation?

  3. @annoymous 2

    Interesting point but,

    Barney Frank is up in arms because the banks have TARP money and are supposedly not loaning it out. Whatever the reason for the banks paying high interest rates,it is certainly not because they are sitting on cash as Frank would have you believe.