A record $2 trillion has been deposited into U.S. bank accounts since the coronavirus first hit the U.S. in January, according to a report by the Federal Reserve Board.
In April alone, deposits grew by $865 billion, more than the previous record for an entire year, CNBC reported Sunday (June 21).
The gains were fueled by the government’s response to the COVID-19 pandemic, with billions of dollars to support taxpayers with $1,200 stimulus checks per individual, $600 in extra unemployment benefits to augment state checks and $660 billion in Paycheck Protection Program forgivable loans for businesses.
The pandemic’s uncertainty has caused households and corporations to save.
“Any way you look at it, this growth has been absolutely extraordinary,” Brian Foran, an analyst at Autonomous Research, a global financial sector research firm with offices in New York, told CNBC. “Banks are flooded with cash; they’re like Scrooge McDuck swimming in money.”
More than two-thirds of the gains went to the country’s 25 biggest financial institutions. First quarter deposit gains were concentrated at the top banks, including JPMorgan Chase, Bank of America and Citigroup, which grew faster than smaller firms, according to company data, CNBC reported.
Last month, the consumer savings rate hit a historic 33 percent in April, as Americans hunkered down amid COVID-19, according to the U.S. Bureau of Economic Analysis.
“There is a tremendous uncertainty and virus fear that is lingering and that is restraining people’s desire to go out and spend as they normally would,” said Gregory Daco, chief U.S. economist at Oxford Economics.
Also in May, Bank of America’s chairman and CEO Brian Moynihan said the average consumer checking balance with under $5,000 in their accounts monthly increased by 30 to 40 percent compared to a year ago.
“That means the stimulus is still in their accounts,” Moynihan said. “We’ll see if that stimulus can hold on long enough until re-employment comes back in, and the confidence continues to build.”
Still, banks which tend to be cautious lending money in the midst of a recession, are running out of uses for their vaults filled with cash, said Autonomous Research’s Foran.
“A lot of banks are saying, `there’s frankly not much we can do with it right now’,” he said. “They have more deposits than they know what to do with.”