Hoarders

And they wonder why we despise them:

WASHINGTON — The job market is stagnant and the GOP has the federal government tied up in knots, so the country’s short-term economic future is in the hands of America’s titans of industry and finance.

But despite having an unprecedented amount of cash on hand with which to create jobs — more than $3 trillion, nearly four times as much as the 2009 stimulus bill — the corporations aren’t spending and the banks aren’t lending.

“They’ve been making money, and they haven’t been spending it. So it sits there,” said Jared Bernstein, a former economic adviser to President Barack Obama now at the non-partisan Center on Budget and Policy Priorities. “The economy has been growing since the second half of 2009, and the vast majority of households have seen very little of that. It’s got to be going somewhere.”

Think of it as corporate austerity.

“In a more normal economic recession, you would expect business reinvesting to grow,” said Brandon Rees, deputy director of the office of investment at the AFL-CIO, the labor union federation. But instead, “that money just keeps piling up,” he said. “The CEOs just can’t figure out what to do with it all.”


The latest report from the Federal Reserve shows that big banks’ cash reserves peaked in the third quarter of 2011, but are still near their all-time high at just under $1.6 trillion — an astonishing 80 times the $20 billion they held in reserve in 2007 (Table L108, line 28).

Large non-financial institutions’ reserves are also near their all-time highs — more than $1.7 trillion (Table L102, line 41) — although that figure is a bit misleading as many of them also have massive short-term debt.

All that parked money translates directly to lost growth and missing jobs, said Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts Amherst. A recent study by Pollin’s institute found that if America’s largest banks and non-financial companies moved just some of that cash into productive investments instead, that would give the economy a huge boost, creating about 19 million jobs in the next three years and lowering the unemployment rate to under 5 percent.

So why are the big companies and big banks hoarding instead of investing? The most popular theory among economists is that in this lethargic economy, with little sign of growing demand, the corporate bigwigs just don’t see the opportunities for profit.

“If you’re looking to invest right now, you’d be looking at a consumer base that’s super-strapped,” said Heather Boushey, senior economist with the Center for American Progress, a pro-Democrat think tank. “I don’t think there’s a very good sense out there that you’re going to see some sort of consumer boom in the absence of any policy action,” she said. And by policy action, she meant some sort of government stimulus of the type Republicans have vowed to block.