We've noted before that the steep yield curve poses some thorny issues for banks. Short term rates near zero would seem to be a godsend. But demand for loans remains weak, and there's a lot of hesitation given the view that all rates will have to rise at some point. The one bank that has acted fairly dramatically on this is Wells Fargo (WFC).

Bloomberg notes it has scaled back on carry trade opportunities, essentially holding more cash and waiting for rates to rise. It reduced investments in fixed-income securities $34 billion in 2009's second half. There are opportunity costs to be sure. But the bank thinks by foregoing some gains now, it will save much more later when rates tick up. Of course that could take a while. Bank of America (BAC) and Citigroup (C) have continued to load up on fixed-income investments. JPMorgan seems to have taken a neutral stance. We'll see if this works. 

For more:
- here's the Bloomberg article

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