Originally published March 26 2015
Negative interest begins: U.S. banks begin charging customers to hold their deposits
by J. D. Heyes
(NaturalNews) Since the Great Recession of 2008, something strange has been happening to the country's financial sector, and banking in particular. As in, there is little about the sector that resembles "banking" these days, at least in the sense that most Americans understand it.
Even before 2008, Americans were being given fewer and fewer reasons to deposit their money in banks. For example, the amount of interest you could earn on your deposits has been falling for decades.
Now, following years of Federal Reserve- and taxpayer-driven bailouts, as well as cumbersome new financial regulations passed in 2010, the banks have had established a revenue flow outside of normal banking activities such as earning interest from loans -- so much that they figure they can begin charging for services that define their existence in the first place.
As reported by The Wall Street Journal, some big banks like JPMorgan Chase & Co. are going to start penalizing bigger clients for bothering to use them as a place to stash their money. What's more, the action is liable to cost the big banks a lot of money -- money that they apparently can afford to lose because, again, they're getting fed more by the Fed these days than by customers [not to mention that they don't need deposits, since they create new money for loans]:
J.P. Morgan Chase & Co. is preparing to charge large institutional customers for some deposits, citing new rules that make holding money for the clients too costly, according to a memo reviewed by The Wall Street Journal and people familiar with the plan.
Banks penalized for taking deposits?
The paper further noted that the bank, the largest in the U.S. based on assets, is looking to reduce the amount of deposits by $100 billion by the end of this year, as per information put out during a recent bank presentation.
The decision is the latest in a series of actions being discussed by large global banks over the past few months as a way to discourage deposits due to low interest rates and new regulations.
Those steps being taken by JPMorgan Chase are among the broadest and most detailed, WSJ noted. Sources who spoke with the paper said the bank's annual strategy was to be revealed a few days ago during a meeting with investors.
"Among other points, the bank is expected to stress alternatives [that] customers affected by the deposit moves can use for their excess cash," the paper reported.
Retail customers of the bank are not expected to be affected by the new policies. However, high-dollar customers like financial firms, hedge funds, foreign banks and private equity companies are going to be impacted most, the memo said, according to the WSJ.
At issue: The bank wants to shed $200 billion in what it has determined to be "excess" deposits from other financial institutions. That's out of some $390 billion of total deposits from those institutions.
"We are adapting to a changing regulatory environment across our company," the JPMorgan memo, sent Feb. 23, said. It was signed by the bank's asset-management, commercial-bank and corporate and investment-bank heads, WSJ reported.
Those holding the brass ring will wing
The new federal rules, embodied in the Dodd-Frank financial reform legislation signed by President Obama more than four years ago, makes holding deposits -- in an era when doing so was less profitable -- more risky.
The rules state that banks can be penalized for holding onto deposits that are at risk of fleeing in another financial crisis. And being one of the world's largest banks, JPMorgan Chase is going to be affected first, and in a big way, because it's businesses are diverse and complex.
Left unsaid, however, is what the government would do to ordinary Americans who might only have $10,000 or $20,000 in an account -- but who would seek to nab it during a financial crisis. There has been some speculation that one of the government's many financial regulation agencies could swoop in and prevent that money from being taken, or allow the banks to take a portion of deposits to remain solvent, as happened in Cyprus in 2013.
The American financial sector is changing rapidly, before our eyes, and all due to government meddling and/or influence. It's a safe bet that those who hold the keys to the brass ring, however, are going to be the ones who come out on top (again) during the next crisis.
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