Recapping the day's news and newsmakers through the lens of CNBC.
At first glance, it doesn't seem to make sense, but banks are worried that rising interest rates will cause huge withdrawals of deposits—a threat to bank earnings and, perhaps, the prices of your bank stocks. Since bank savings have paid virtually nothing for years, you'd think higher yields would draw more deposits. But no: banks figure customers will pull cash to invest in other assets that pay more as rates go up. As customers favored safety over yield, and found banks paid a smidgeon more than money markets, deposits surged 40 percent between September 2008 and last month, to $9.57 trillion. Much of that cash is now tied up in things like loans, so banks may have to borrow to cover withdrawals.
"Banks were fighting each other for deposits in 2004, 2005, and 2006, but since then, deposits have become easy. I've had bankers tell me, 'I can't turn the deposit faucet off.'"—Scott Hildenbrand, a strategist at investment bank Sandler