Savings in American Banks Reach Record $1.45 Trillion in May
Vittorio Hernandez

June 23, 2011

Washington, D.C.

More Americans continue to save in banks rather than borrow money from financial institutions. According to latest data from the Federal Reserve, savings in U.S. banks hit a record $1.45 trillion in May.

The growing savings has been observed since the global financial crisis in 2008.

A similar trend was observed in Japan, where the gap between savings and borrowing is at an all-time high.

Japanese banks use the money to purchase bonds to help keep yields the lowest in the world even if Tokyo has more outstanding debts than the U.S. and a lower credit rating.

Before 2008, U.S. deposits exceeded loans at an average of $100 billion.

Because of the worst recession experienced in the U.S. since the 1930s, consumers trimmed household debt to $13.3 trillion from the 2008 peak of $13.9 trillion. The reduction resulted in savings going up 4.9 percent of income from 1.7 percent in 2007.

For the same period, banks reduced lending amid over $2 trillion in losses and writedowns. Rather than grant more loans, American financial institutions instead bought Treasuries and government-related debt, which boosted their holding of such instruments to $1.68 trillion from $1.08 trillion in early 2008.

Economists forecast it would take the U.S. and Japanese economies at least a decade to extricate themselves from the mess of being a debt-ridden society.