Daily News: August 20, 2012

Banks Use $1.77 Trillion to Double Treasury Purchases

Bloomberg noted in a news post that the gap between U.S. bank deposits and loans is growing at the fastest pace in two years, providing lenders with more funds to buy bonds and temper the biggest sell-off in Treasuries since 2010.

Bloomberg said, according to Federal Reserve data, in the two months ended July 31, bank deposits increased to $8.9 trillion while business lending rose to $7.1 trillion leaving a record gap of $1.77 trillion, the biggest similar-period gain since July, 2010.

Bloomberg noted that banks have already bought $136.4 billion in Treasury and government agency debt this year, more than double the $62.6 billion in all of 2011, pushing their holdings to an all-time high of $1.84 trillion.

Commercial and industrial lending reached a peak of $1.61 trillion in October 2008, a month after the bankruptcy of Lehman Brothers Holdings. As the credit crisis deepened, loans tumbled to $1.2 trillion two years later, before recovering to $1.46 trillion August 1, Bloomberg said.

To read the Bloomberg story, click here.