Corporate Justice Blog contributor Steve Ramirez has chronicled (for going on three years now) the refusal of U.S. banks to lend cash on hand preferring instead to hoard cash for purposes of balance sheet vitality and deliverance of record executive compensation. This hoarding has been particularly galling when viewed against the backdrop of government corporate welfare in the form of TARP funds distributed to many of these banks and the backdoor lending of trillions of dollars to these banks from the Federal Reserve bank. A new report from Bloomberg indicates that this hoarding of cash continues by Wall Street banks as credit continues to be tight and lending has not been freed up for consumers.
From Bloomberg's report Following the Corporate Cash Hoard:
The financial institutions’ continued practice of hoarding capital only serves to prove the theories that banks, in general, provide no substantial benefit to society other than monetary lending (which can be argued) and the safeguarding of individuals’ financial resources. In terms of financial lending, banks lashed out at stiff regulation proposals following the housing bust, and many predatory lending practices continue to thrive, especially in minority neighborhoods. In terms of financial investment, many bank-sponsored mutual funds underperform the market average and individual bank stocks have not been privy to the recovery of many other sections of the market. Bank-owned certificates of deposit provide an average return of 2.5 – 4 percent per year, at the level of or below the annual level of inflation. Customer service has been decreased as well, with banks eliminating teller positions in favor of automated transactions, increasing transaction and transfer fees, and removing many of the features present in traditional checking and savings accounts. With banks making a habit out of reserving this excess capital instead of contributing to positive growth in any one of the aforementioned areas, the Federal Reserve should change its primary lending function of lending to banks at a pre-supposed rate to an approach that provides incentives and rewards to bank consumers as a means of supporting the economy rather than vaulting resources in preparation for some apparent economical apocalypse. Just a thought…
ReplyDelete-Shannon Kiser