Over 100 Billion Dollars Disappears from U.S. Banks in One Week from U.S. Banks in One Week from banks during the first week of January. Why? Where did it go?
The 25 largest banks in the country had a rather exciting first week of January. According to data released by the Federal Reserve, depositors withdrew an astounding $114.1 billion during the week ending January 9. A significant portion of this withdrawal can be attributed to the expiration of the Transaction Account Guarantee (TAG) program.
The TAG program provided extra insurance protection for depositors, ensuring their balances, in case their bank becomes insolvent. Extending TAG was part of the fiscal cliff negotiations, but it didn’t make it into the final agreement.
TAG-related withdrawals only account for a portion of the disappearing $100-plus billion. Only a portion of this money was reinvested in the next-safest investment, namely U.S. Treasuries. A significant portion was likely spent on year-end expenses, with another portion going toward investments that may provide greater returns as savers grow wearily of tiny interest rates.
Banks aren’t exactly crying about this loss. With loan demand and loan approvals at such low levels, having too much in deposit costs the banks money, as they must pay for FDIC insurance on the balances and pay depositors interest, as miniscule as it may be.
About Mike Periu
Mike is a seasoned executive with experience in small business finance and management. He is the founder of Proximo, LLC a leading provider of corporate, consumer and small business education and training services with an emphasis on finance and technology.
Mike Periu is also a leading national voice for individual empowerment through financial education and entrepreneurship. He has been interviewed over 500 times in national and international media, including NBC, Univision, CNN en español, Telemundo, HITN, TVE, RTE, SBS, MegaTV and others.
Mike writes regularly for American Express OpenForum, Yahoo! Finanzas and is a Huffington Post contributor.
Mike has degrees in Finance and International Business from Georgetown University. He is on the Board of Directors of the Council for Economic Education and was a Fellow at the Kauffman Foundation’s Labs for Enterprise Creation.