{"id":4592,"date":"2011-08-06T05:47:17","date_gmt":"2011-08-06T11:47:17","guid":{"rendered":"http:\/\/www.jasonapollovoss.local\/?p=4592"},"modified":"2018-09-21T02:04:47","modified_gmt":"2018-09-21T06:04:47","slug":"applauding-bny-mellons-move-on-excess-cash-balances","status":"publish","type":"post","link":"https:\/\/jasonapollovoss.com\/web\/2011\/08\/06\/applauding-bny-mellons-move-on-excess-cash-balances\/","title":{"rendered":"Applauding BNY Mellon’s Move on Excess Cash Balances"},"content":{"rendered":"

 <\/p>\n

Late Thursday night there was a potentially important development in terms of righting the U.S. economic ship.\u00a0 Bank of New York Mellon (BNY Mellon) moved to charge extra fees on its clients that hold more than $50 million in cash deposits with the bank.<\/span><\/p>\n

Why is this significant?\u00a0 As I have been tracking on the blog for some time (see last year’s “It’s Chickens That Sit On Eggs<\/a>” and more recently “Cash On Balance Sheets Is Big Concern<\/a>“), U.S. corporations are not spending their profits.\u00a0 Instead they are socking away extra cash in large commercial banks, like BNY Mellon.<\/span><\/p>\n

In business school they teach you as a business executive that you should always be in search of the highest possible return vs. risk on your assets.\u00a0 That U.S. corporations cannot find something better to do with their money than earning ~1% is a sign of many bad things:<\/span><\/p>\n

    \n
  1. They don’t have new growth areas that they feel will generate greater than 1% in returns.<\/span><\/li>\n
  2. They don’t feel that their own stocks are worth buying in a stock repurchase program.<\/span><\/li>\n
  3. They don’t feel that their own debt is worth paying off with the excess cash.<\/span><\/li>\n
  4. They don’t feel that shareholders can do better on their own if they paid out that cash in the form of stock dividends.<\/span><\/li>\n<\/ol>\n

    I have been talking privately about this problem with friends and family for many, many months.\u00a0 One solution that I felt would help, but would never, ever, ever see the light of day was the U.S. government (or state governments) passing a one time “excess cash” tax.\u00a0 That would lead to businesses freeing up some of those massive cash amounts.\u00a0 That would pump money into the economy and hopefully prime the pump, especially now that the U.S. government is tapped out from issuing more debt.<\/span><\/p>\n

    The Wall Street Journal is reporting<\/a> that BNY Mellon’s decision is being driven by the fact that they don’t have assets in which they themselves can invest their customers’ cash.\u00a0 WSJ reporters also state that the fastest growing U.S. bank asset this year is cash, having grown 83% (up by $890 billion) to $1.98 trillion!\u00a0 By comparison, consumer loans are reported to have only grown 0.2%, or up by $1.7 billion.\u00a0 That is a 1,000x difference in absolute dollar amount!<\/span><\/p>\n

    It is believed that other commercial banks may follow suit.\u00a0 I hope that they do.\u00a0 Effectively, this would put in place the very tax for which I have been hoping.\u00a0 That would result in a large amount of economic stimulus and hopefully jump start the economy.\u00a0 Yes, it’s possible that it could also jump start inflation, but I would gladly trade a couple of points of inflation at this points for a couple of points of gross domestic product growth (GDP), or a couple of points of improvement in the unemployment rate.<\/span><\/p>\n

    I will continue to monitor this situation as this is one of those “little” stories that has the potential to be the “big” story.<\/span><\/p>\n

    Jason<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

      Late Thursday night there was a potentially important development in terms of righting the U.S. economic ship.\u00a0 Bank of New York Mellon (BNY Mellon) moved to charge extra fees on its clients that hold more than $50 million in cash deposits with the bank. Why is this significant?\u00a0 As I have been tracking on […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-4592","post","type-post","status-publish","format-standard","hentry","category-the-blog"],"_links":{"self":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4592","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/comments?post=4592"}],"version-history":[{"count":0,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/posts\/4592\/revisions"}],"wp:attachment":[{"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/media?parent=4592"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/categories?post=4592"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jasonapollovoss.com\/web\/wp-json\/wp\/v2\/tags?post=4592"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}