Banks Are Becoming Less Safe… Again
“…a safe, conservative bank maintains high levels of cash, especially relative to the total amount of deposits. But that’s not happening in the Land of the Free… cash is falling while deposits are increasing. This is the OPPOSITE of what a responsible bank should be doing.” ZeroHedge, Jun 13, 2017- Excerpts:
“Banks that lack proper liquidity can rapidly run into catastrophic problems, forcing them to fire sale assets in order to raise cash, which in turns could trigger a solvency crisis.
In both of these scenarios, solvency and liquidity, cash is king.
(Note that “cash” can mean both physical currency sitting in a vault, as well as a bank’s electronic deposits at Federal Reserve and other cash equivalents.)
For solvency, cash is about as risk-free as it gets.
Anything that a bank does with your money is going to carry some level of risk. Buying bonds. Car loans. Student loans. Business loans. Residential mortgages.
These all carry certain risk of default. Cash doesn’t.
So a bank with higher levels of cash will typically have much lower risk to its solvency.
Simultaneously, a bank with a strong cash position is also liquid, and hence more likely to be able to honor its customers’ transactional needs.
Bottom line, a safe, conservative bank maintains high levels of cash, especially relative to the total amount of deposits.
But that’s not happening in the Land of the Free.
The Federal Reserve’s most recent report on “Assets and Liabilities of Commercial Banks in the United States” published last Friday showed a continuing trend in the erosion of bank safety.
This is a weekly report, so there’s tons of data. And the trend goes back now at least 2.5 years.
Since late 2014, for example, Fed data show that total cash assets at US banks has been in steady decline, dropping roughly 25% over that period.
But at the same time, total deposits at the banks has actually increased around 15%.
So you can see the issue: cash is falling while deposits are increasing. This is the OPPOSITE of what a responsible bank should be doing.
A conservative bank seeks to INCREASE or at least MAINTAIN the level of cash it has on hand as a percentage of customer deposits.
Banks in the US have been doing the opposite– decreasing their cash holdings while deposits have been rising.
Proportionally, the aggregate cash-to-deposit ratio in the US has fallen by 32% since late 2014.
That’s a steep drop.
The Leviticus 25 Plan changes the game. Entirely.
The Plan grants direct liquidity allocations to U.S. citizens via a Fed-structured Citizens Credit Facility.
This facility would be a mirror image of the half-dozen credit facilities that the Fed erected during 2008 to reliquify Wall Street’s banking sector, including the Primary Dealer’s Credit Facility, Term Securities Lending Facility, Commercial Paper Funding Facility, Term Auction Facility, and other liquidity pipes.
The Leviticus 25 Plan will generate massive debt reduction at the family level, which means that cash will be replacing a meaningful percentage of loan portfolio assets (including distressed and non-performing loans).
Banks will then enjoy a lower risk profile. American families will enjoy a significantly lower level of financial stress. Federal, State, and Local governments will experience vastly improved budget pictures.
There is no other plan that delivers the raw economic horse-power of this plan.
The Leviticus 25 Plan is a dynamic economic initiative providing direct liquidity benefits for American families, while at the same time scaling back the role of government in managing and controlling the affairs of citizens. It is a comprehensive plan with long-term economic and social benefits for citizens and government.
The inspiration for this plan is based upon Biblical principles set forth in the Book of Leviticus, principles tendering direct economic liberties to the people.
The Leviticus 25 Plan 2018 – $75,000 per U.S. citizen
The Leviticus 25 Plan 2018 (2360)