One month ago we last checked in to see how Goldman’s brand new FDIC-insured depositor operation was doing: we were surprised to find just how much of a success it had become. As we reported at the time, by mid-August, Goldman has netted $1.8 billion in new deposits thanks to its overly generous 1.05% interest rate which is among the highest on offer anywhere. Some 33,000 people who’ve opened accounts, although since Goldman does not have any retail branches or ATMs, these new depositors can’t write checks from their accounts or take cash out of ATMs.
The immediately following logical question was why does Goldman need this cash? We put forth that “maybe Goldman is simply prudent, and realizes that if the Fed is forced to drain some $2.2 trillion in reserves, bank cash balances will collapse to just a few hundred billions, as we have shown in the below chart netting out excess reserves from bank cash balances.”
To be sure, the moment when the Fed begins selling down its balance sheet and withdrawing reserves is still years away, if it ever comes. Which took us back to the original question:
This post was published at Zero Hedge on Sep 13, 2016.
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