Citi: The price of stability

Bloomberg notes that Citi (C) has built up its cash to impressive levels: $244 billion. That compares with about $130 billion 17 months ago. Whew! The problem is that it needs every cent, which means the cash can't be deployed in ways that would benefit shareholders. This new caution makes sense in the wake of the crash.

The caution makes it more likely that the bank would be able to suffer a massive run on assets. Which makes the regulators breath easier. Banks worldwide have raised $1.4 trillion of capital since the start of the credit crisis in mid-2007, diluting shareholders' stakes while shoring up the buffer that insulates depositors in the event of a failure.

And all the big banks in the U.S. have shored up liquidity, Bloomberg notes. At some point--perhaps now?--would regulators be wise to suggest that some of that cash and near-cash be turned into loans? That would help ease the economic crunch. Especially now with the economy on the mend? One could argue that confidence in the system--thanks in part to the government--has made the chance of massive run unlikely. 

For more:
- here's the article

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