Comments on: America’s soaring deposit base

By: Don the libertarian Democrat

Don the libertarian Democrat — Fri, 21 Aug 2009 19:26:50 +0000

Drewbie,

Thanks.

Don

By: drewbie

drewbie — Fri, 21 Aug 2009 16:22:29 +0000

Don, to answer your question of how banks store money: Depending on the branch location, it will ship its excess money out daily or weekly to a main branch. The main branches ship extra money to the Fed weekly. There’s no need to build extra storage for the extra money, which probably only accounts for a few cubic feet of actual bills per branch anyway.

I don’t see how increased deposits lead to increased fixed costs of building/staff maintanence. Even if some of these people were opening new accounts, that’s still not much extra work for an individual branch, and certainly wouldn’t require hiring a new teller.

By: Rick Kane

Rick Kane — Fri, 21 Aug 2009 15:08:55 +0000

The interest on credit card balances seems to range from a low of 9% to 27%, with the high range dominating. And of course the default on new credit cards balances is rather low given the new, tighter, underwriting standards.

By: GaryD

GaryD — Fri, 21 Aug 2009 04:44:11 +0000

If a bank lends money at 7% but 12% of loans default, do they still make money? You’re still operating in a 1995 mindset of zero default rates and profits without risk for bankers. It’s a very different world now. Loans can go sour in a few months now.

By: scott

scott — Fri, 21 Aug 2009 03:01:08 +0000

Pretty shocking misunderstanding of Econ101.

By: Mike

Mike — Fri, 21 Aug 2009 01:54:36 +0000

The only people who save and then invest are those with taxable investment accounts, a small minority. Most individual investors have 401(k)’s, through which they save and invest (almost) simultaneously. Either they invest in the market through these tax-deferred vehicles (or through a Roth IRA), or they don’t invest at all. Most people view their deposits as rainy day money, or as the “conservative” portion of their portfolio.

By: Don the libertarian Democrat

Don the libertarian Democrat — Thu, 20 Aug 2009 20:30:50 +0000

On the one hand, if the costs are fixed, then you should definitely make more money by doing more business.

On the other hand, if these deposits are physical money, such as coins, gold, and bills, then you will need a bigger space and more workers to store it and move it around I suppose. Of course, when you have less deposits, you’ll have a lot of extra space. Maybe you could rent it out then. Is this how banks store money? I’ve no idea.

Maybe I’m just misunderstanding the point, and it depends upon how one understands the use of “big” and “hefty”.

By: Gari N. Corp

Gari N. Corp — Thu, 20 Aug 2009 20:25:57 +0000

I suspect that it would be fairly easy for the banking sector to squander $500 billion. For one they could start buying each other again.

By: Unsympathetic

Unsympathetic — Thu, 20 Aug 2009 19:57:52 +0000

Felix, even if people are saving more, banks are NOT lending that money out. Hence the well-documented rise in bank reserves.

You should re-institute the Ben Stein watch, Felix.. but with a new label: Wall Street Journal watch.

You’d have a lot of work to do, and you could team up with Dean who runs herd on the Washington Post.

By: KenG

KenG — Thu, 20 Aug 2009 19:48:36 +0000

So the big banks have to lease or buy more buildings, hire more staff, and buy more computers, just people are saving more? Unless more accounts are being opened, as opposed to people putting more money in their existing accounts, the WSJ analysis doesn’t make any sense. Not that they normally do.

The next thing he’s going to say is that lowering tax rates will increase tax revenues.