Citigroup, Bank Of America Among Companies Hoarding Cash

Call it the Great Cash Hoard.

The Wall Street Journal reports this morning that, in response to the financial crisis, U.S. companies are hoarding more cash than they have in the last 40 years.

Among these corporate cash-savers are banks like Citigroup and JPMorgan Chase, two institutions are holding onto funds "as if another financial crisis were on the way," reports Bloomberg. Citigroup has almost doubled its cash reserves since Lehman's fall last year, a move which seems to be very popular move among Wall Street's mega-banks:

"The four largest U.S. banks by assets -- Bank of America Corp., JPMorgan, Citigroup and Wells Fargo & Co. -- have increased their combined liquidity by 67 percent to $1.53 trillion as of Sept. 30 from $914.2 billion in June 2008, before Lehman's collapse, according to the companies' third-quarter reports. The amount equals 21 percent of the banks' total assets, up from 15 percent."

In fact, as Bloomberg points out, Citigroup's massive cash holdings are more than five times great than those held by Warren Buffett's Berkshire Hathaway. Here's one particularly striking quote from Bloomberg:

"In my 44 years in the business, I have never seen a company with remotely as much cash as this," said Richard X. Bove, an analyst at Rochdale Securities in Lutz, Florida.

For its part, JPMorgan is maintaining what has been called "a fortress balance sheet," with $456 billion in liquidity. JPMorgan's cash holdings have shot up to 22 percent of its total assets, up from 9.5 percent before the financial crisis took hold.

The WSJ points out that the trend isn't just happening on Wall Street:

"In the second quarter, the 500 largest nonfinancial U.S. firms, by total assets, held about $994 billion in cash and short-term investments, or 9.8% of their assets, according a Wall Street Journal analysis of corporate filings. That is up from $846 billion, or 7.9% of assets, a year earlier.

The trend appears to have continued in the third quarter, despite an improving economy. Of those 500 companies, 248 have reported third-quarter results. Their cash increased to 11.1% of assets, from 10.1% in the second quarter. Companies as diverse as Alcoa Inc., Google Inc., PepsiCo Inc. and Texas Instruments Inc. all reported big third-quarter increases in cash holdings."

Interestingly, one of the most well-funded companies mentioned in the WSJ's piece is Google, which has short-term investments and cash equal to 58 percent of its total assets. That's a whopping $22 billion in cash, if you're scoring at home.

Perhaps Google should start a lending business...

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Comments

[gsteinum]

get rid of them - all of them - now.

[hansard]

ah yes, like the squirrels prior to the winter, gather, gather,gather, the ' winter of their financial
discontent ', is upon them, oops baghdad as they used to say , not looking good for Joe Citizen, is it, hey.......!!!!

[BobsNotWorking]

Another crisis on the way? What about the one we've got underway?

[givesflack]

The reason they are hoarding money is because they are trading it on Wall Street right now in anticipation of making money on it before then next collapse.
Commercial R E
Student Loans
CC Debt
They see nowhere to spend it on business or job creation because there is none and hasn't been any since 2005, effectively way inside the Bush administration to lead even Palin to recognize the hypocrisy of her party. The investment firms will continue to suck the liquidity out of every business standing as well as the Treasury following Goldmans lead and we'll all have nothing but stones in our stockings this christamas with our debt printed on each one and our citizenry owned.

[azdisabledsci]

we are looking at a well orchestrated total collapse of the dollar. it is not just a coicindence that all of these things are happening at once. gold over $1080.00. The USA has 53 trillion in unfunded debt. trillions of dollars that have not been accounted for by the treasury or the FED. wake up....see the movie zeitgeist if for no other reason than to learn how the fed is illegal & has manipulated the currency for 100 years.

[ImmanuelGoldstein]

There is another crisis on the way, actually two crises. First the coming commercial real estate slaughter, second the next wave of adjustable mortage resets which is just begining.
Add to this the fact that many financial institutions are only solvent because of 'mark to fantasy' valuations on the real estate on their books and thus are in reality insolvent.
Given these factors they would be fools not to be hoarding cash right now.

[Okiewan]

I have read several stories about this and I still just don't understand the gall of these Exec's. They accept a hand out to save their "too big to fail" companies, give themselves a record breaking bonus, then admit that they are doing the opposite of what I thought the bail out was for.
In the last year my available credit balance was cut off on all my credit cards, and I have good credit! My company is cutting costs everywhere which means that I DONT get a bonus and my wages have been cut slightly, thank God I wasn't laid off like many of my co-workers.

These Exec's pretend to be Capitolists but they are not. No Capitolist would use the term "too big to fail," they would use the term monopoly. We need to demand that these too big to fail corporations are cut up like Standard Oil was.

Humans are basic creatures. We naturally horde what we can. Sometimes we can be taught to give generously but that is not our nature. This is why trickle down economics doesn't work. If you give a man a dollar he will go out and spend it, if you give him $100 he will spend the one then bury the $99 in the backyard.

In 2000 years kids in school will study the rise and fall of the United States and Trickle Down Economics will be one of the front running theories.

[MyWhiteHouse]

WHERE ARE THE JOBS YOU PROMISED, OBAMMI?

good articles: http://financeopinionss.blogspot.com

[truthmatterstoo]

no sheet Shirlock, doesn't take a genius to figure that one out!

[hulagirrrl]

there is another crisis around the corner, Christmas, and oh my, all these workers who need to get a bonus...

[Brian Englert]

Wouldn't it be great if CITI made at least ONE payment on the $45B they owe the taxpayers?

[MarcusT]

Financial stocks faltered briefly after Jon D. Greenlee, the Federal Reserve's associate director for banking supervision and regulation, told lawmakers that "significant stress and weaknesses" remain in the financial system and that banks face more heavy losses on loans.

[CDCtrading]

Economic policy needs to change. For the past 30 years only the top 1% of earners have been the major beneficiaries of economic recoveries while everyone else lags. We need policies and programs that will hlpe low and middle income people. More shovel ready projects. Universal health care

good articles; http://financeopinionss.blogspot.com

[Layman23]

Bailing out these parasites was a big mistake. Should have let them wither and die.

[jsgaetano]

"as if another financial crisis were on the way".

Considering ShittiGroup is going bankrupt, it sounds like there IS another financial crisis on the way. For them, anyhow.

All these banks mismanaged their way into this mess. It's a shame conservatives pushed trillions of dollars at them, and told them to mismanage their way out of it.

Which is not to say that conservative ideology has ever been anything except a scam created to loot the American taxpayer.

[EinChicago]

CIT is not Citi. Seriously. How difficult is this concept?

[jsgaetano]

concept  [kon-sept] –noun
1. a general notion or idea; conception.
2. an idea of something formed by mentally combining all its characteristics or particulars; a construct.
3. a directly conceived or intuited object of thought.

How difficult is it to use words properly?