Securities Losses a Liquidity Trap?
As high market interest rates have eroded savings inflows, banks have bid for funds at increasingly high cost in an effort to meet the continued strong demand for loans. But for all the funding problems of banks, there has been no reduction in their holdings of securities. Commercial banks in the United States held $282 billion in securities in September ($95 billion in Treasury securities), compared with $267 billion at the first of the year.
