by Jonnelle Marte
(Reuters) – Banks have too much cash on their hands – and they’re running out of places to put it.
Nowhere is this more evident than in the rising popularity of a Federal Reserve program that lets firms stash their cash overnight with the U.S. central bank in exchange for at best a small return. The payout these days: Zero percent.
But usage is soaring to record highs as money market funds and other eligible firms cope with what some analysts are calling a “tsunami” of cash.
The banking system is swimming in nearly $4 trillion of reserves, thanks in part to the Fed’s asset purchases, a fall off in Treasury bill issuance and a rapid drawdown in the government’s store of funds at the Fed. The Treasury General Account, or TGA, has dropped by nearly $1 trillion since last fall, mirrored by the surge in bank reserves.