According to a report from Bloomberg News, the amount of money being kept in bank deposits is reaching record levels. There's a total of $6 trillion now on deposit at American banks, after an infusion of $88.9 billion in the third quarter. That's the highest amount since 1992.
This reflects in part the fact that many investors are still spooked by the stock market. Bank deposits are now offering, on average, annual returns of 0.80 percent, which is the lowest they've been since at least 2000. But, of course, putting your money in the bank is a "safe haven," even if it's not getting you much more return than putting it under your mattress would.
But there's another factor at play here: Banks still aren't lending any money. Outstanding commercial and industrial loans have dropped by $65 billion so far this year. With loan growth flat, banks are taking all those deposits and buying Treasury bills with them: more than $120 billion worth so far in the second half of 2010, after buying $47 billion in the first half. That's a recipe for growing the banks' bottom line, but not so much for growing our economy.
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