Displaying my ignorance

[Owlet]

One constantly hears that corporations are sitting on 'trillions of dollars in cash' as the result of record productivity and the reluctance to hire more workers. That I can understand, sort of. But in the next moment one hears that many, if not all, US banks are under-capitalized. Now, my question is, and I'm sure it sounds naive: where are corporations storing all this money? Are they not putting it into banks? Some must be, because I recall reading that Bank of America is now charging some big depositors to leave there money. So where are these mountains of corporate cash? Is there some giant warehouse filled with corporate mattresses under which lies all these greenbacks?

[TygrBright]

1. It's all bookkeeping. Not greenbacks. n/t

[Uben]

2. They put it back in their companies via stock re-buys.....

With the volatility of the markets these days, it is wise for them to buy back shares if they feel the company is solid and on the way up. They can make more money that way instead of letting some banks hold it virtually for free.

[Ineeda]

3. The Cayman Islands, probably. n/t

[Kennah]

4. I share much of your ignorance, but let me offer up this on "undercapitalized".

I'm an IT nerd, but my last gig was working for a bank--actually an S&L.

Anywho, "well capitalized" means a 10% capital ratio. Less than 8% is "undercapitalized".

If a bank makes a loan for $100K, and has $10K in cash assets of their own money (not counting depositors money if I understand this shit correctly), then they are "well capitalized". If they had less than $8K of their own money, they would be "undercapitalized".

[bemildred]

5. Thanks for explaining the metric being used. nt

[proudlib8134]

6. delete