Some current features of bank liquidity in the United States

Abstract

“In the United States, bank liquidity has not represented a major problem for many years. During a long period when liquidity became increasingly interesting to academic economists as an apparent determinant of consumer and business behaviour, its significance for bakers diminished. Recently, however, the rush of new lending and the drop of many bank-held government securities below par has somewhat changed the situation. It has compelled bankers to recognise that part of their portfolio has lost some of its earlier liquidity. Increasingly, one hears of individual banks regarding themselves as ‘loaned up’. In this situation, interest focusses on three aspects of liquidity: 1) the liquidity position of individual banks; 2) the liquidity of the entire banking system in its relation to monetary policy; 3) questions arising out of the coincidence of slim capital margins, wider fluctuations, and low earnings”. These three aspects are vividly examined in the present article.

JEL: E51, E52, G21