tag:blogger.com,1999:blog-11027528911364475.post1336048249780447174..comments2024-02-18T21:10:05.205-08:00Comments on EconomPic: Banks and the Beauty of Cheap DepositsJakehttp://www.blogger.com/profile/07946497592651234440noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-11027528911364475.post-61080480200654218102009-08-24T16:13:30.613-07:002009-08-24T16:13:30.613-07:00rather than fund operations by issuing debt at 7%,...rather than fund operations by issuing debt at 7%, they can "hoard" deposits at 0%. all else equal, they are profitable. heck, if they invest in 2 year treasuries on their trading side they can earn something (not that i know that they are doing that).<br /><br />more likely they're using the deposit base to finance their previous off balance sheet securities. thus, rather than being forced to sell these securities for a loss, they can continue to hold.Jakehttps://www.blogger.com/profile/07946497592651234440noreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-52113054971750378572009-08-24T08:29:47.717-07:002009-08-24T08:29:47.717-07:00The key component is that they have to lend it out...The key component is that they have to lend it out. Aren't they hoarding it, in which case how are they making money (with deposits)?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-42196410961323638352009-08-24T06:57:27.029-07:002009-08-24T06:57:27.029-07:00@Anonymous: Billion Trillion... same thing :)@Anonymous: Billion Trillion... same thing :)1111http://fwisp.comnoreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-32742013741276116252009-08-22T11:33:37.477-07:002009-08-22T11:33:37.477-07:00Yeah, cheap money for banks is analogous to a low ...Yeah, cheap money for banks is analogous to a low cost mine. Buffet made this point when he bght Fargo at firesale prices.<br />However, eventually credit will have to significantly contract. Its hard to see consumers being in more debt rather than less.<br />However this could take along time to occur and in the meantime the banks will continue to make a mint.<br />If you look at the Japanese banks they actually did quite well from 1990-1996. It wasn't till the second crisis hit (several years later) that they went down the preverbial drainpipe.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11027528911364475.post-13478745870017253322009-08-21T13:53:56.013-07:002009-08-21T13:53:56.013-07:00Just reporting a typo... you said 7.5 billion rath...Just reporting a typo... you said 7.5 billion rather than trillian towards the end of the article.Anonymousnoreply@blogger.com