Steep yield curves usually spell good news for banks. Borrowing at low long-term rates and lending at high short-term rates has been a winning formula historically. But these are extraordinary times, and right now the benefits of low short-term rates are less than would meet the eye. Many banks are actually hoping for higher short-term rates soon.

Breakingviews notes the case of Wells Fargo (WFC). It notes that banks are not lending much and seem to be stockpiling cash. The problem is that short-term rates are near zero, which makes it hard to make money. Not that demand for loans is all that strong in this recession. Breakingviews raises an interesting issue: Banks are waiting for higher rates to make their lending more profitable, but higher rates will hurt the value of their existing credit assets. Vexing indeed. So one issue here is when rates will actually rise to more normal levels--that's unclear.  

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