The Simple Truth About Why Banks Are Not Lending

The "now you see it, now you don't" risk on bank books.

I have taken off my robe;
How can I put it on again?
—Song of Solomon

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At the end of the following piece we learn banks have a trillion dollars of excess reserves they could be lending...



Truth is banks could blow through this trillion dollars in "excess reserves" in less than a week were the many more trillions of toxic assets on their books suddenly at risk of being marked at distressed prices. Were not the probability of such a markdown extraordinarily high, then banks, indeed, would be lending.

Likewise, were I exaggerating by calling such risk "extraordinarily high," then the Fed would not be in such a contentious, panicked state, now would they?

—Tom Chechatka