The Huffington Post | William Alden
As the economic recovery remains tepid, companies continue to sit on piles of cash, shifting it around internally rather than spending it.
The hoard totals about $1 trillion for U.S. companies,
Reuters reports, citing data from
Moody's. For non-financial companies, the total is about $943 billion as of the middle of 2010, compared to $775 billion at the end of 2008, Moody's said.
Even though revenue decreased in the second quarter, corporate profits in the S&P 500 were up 38 percent from the same period last year, the
Wall Street Journal reported earlier this month. Thanks to massive cost-cutting strategies, such as firing employees, it was corporate America's
sixth highest quarterly profit ever.
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According to the
WSJ, banks didn't
want to prettify their profits. There are rules that say they have to free up cash reserves as soon as it becomes apparent that they don't need them. JPMorgan CEO Jamie Dimon, the
WSJ says, called the rules "silly."
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Charles Evans, president of the Federal Reserve Bank of Chicago, said earlier this month that the U.S. economy is in a
liquidity trap, in which low interest rates don't spur spending. Companies and timid consumers gather piles of money and simply sit on them -- as the
NYT put it, "because they can."