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Foreign Banks Operating on U.S. Soil Have Just Set a Record

Foreign Banks Operating on U.S. Soil Have Just Set a Record

Thank you, QE-ternity.

Foreign banks operating on U.S. soil have for the first time acquired more than $1 trillion in cashreserves:

But let’s step back for a moment and explain what this means. For an analysis of this milestone, we turn to Zero Hedge.

The bulk of Fed reserves (i.e. cash) have been "parked not with US banks, but with foreign banks with US-based operations,” the Hedge reports.

But how is this possible? How have foreign banks in the U.S. bulked up their cash reserves?

The Fed has been “providing a constant cash injection to foreign banks courtesy of the rate on overnight reserves which is the amount Fed pays to banks that hold reserves with it,” the report notes.

In short, foreign banks operating in the U.S. have been collecting interest.

In fact, the Fed's policies “have led to foreign banks operating in the US holding an all time high amount of reserves, surpassing $1 trillion for the first time, or $1,033 billion to be precise,” the report adds.

So what does this mean?

It means that “the only recipient of ongoing Fed money printing are not US banks, but foreign banks operating in the US,” Zero Hedge notes.

And to help visualize what this means, here’s a chart illustrating cash held by U.S. and foreign banks along with the amount of total reserves created by the Fed since the beginning of the 2008 financial meltdown:

Courtesy ZH.

“And just to prove that ALL the unsterilized cash from both QE2 and QEternity has essentially gone to support offshore banks, here is the conclusive chart showing the change in Fed reserves and cash held by foreign banks:

Courtesy ZH.

And here’s a chart that shows the difference between cash in U.S. banks versus cash in foreign banks operating in the U.S.

Courtesy ZH.

“At $1.03 trillion in foreign cash, the Fed's policies have once again led to more cash being held by foreign banks than all cash held by domestic banks,” Zero Hedge notes.


Follow Becket Adams (@BecketAdams) on Twitter

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