Liquidity Management Quotes

Actions aimed at supporting deleveraging and balance-sheet repair - such as recognizing losses, writing down assets, and recapitalizing banks - carry longer-term benefits but short-term costs.

Cash, though, is to a business as oxygen is to an individual: never thought about when it is present, the only thing in mind when it is absent... When bills come due, only cash is legal tender. Don't leave home without it.

Never take your eyes off the cash flow because it's the life blood of business.

Over time, low rates can put pressure on the business models of financial institutions.

Dodd-Frank and independent actions of banks go a long way in terms of progress on capital, liquidity, transparency, "living wills" (plans for winding down a bank in the event of a collapse) and resolutions.

The RBI is interacting with the banks every day.

The basic theory of bank regulation is that, left to their own devices, bankers would make banks too risky, so regulators and supervisors are there to make banks more boring. A bank is, roughly, a big pot of assets bought with depositors’ money; the bank owns essentially an option on those assets. If the assets go up, the bank gets a highly leveraged return; if the assets go down, the losses are largely the depositors’ (or the taxpayers’) problem. “Heads I win, tails you lose” … So banks have incentives to buy high-risk, high-return assets with as much leverage as possible, and risk-based capital regulation and prudential bank supervision counteract those incentives. The bankers — who own stock in their banks and get paid bonuses for making money — push for more risk and more volatility, and the bank supervisors push back.

The Fed has one power that is unique to it alone: it enables the creation of money out of thin air. Sometimes it makes vast new amounts. Sometimes it makes lesser amounts. The money takes a variety of forms and enters the system in various ways. And the Fed does this through techniques such as open-market operations, changing reserve ratios, and manipulating interest rates, operations that all result in money creation.

Then came the second Amsterdam discovery, although the principle was known elsewhere. Bank deposits...did not need to be left idly in the bank. They could be lent. The bank then got interest. The borrower then had a deposit that he could spend. But the original deposit still stood to the credit of the original depositor. That too could be spent. Money, spendable money, had been created. Let no one rub his or her eyes. It's still being done-every day. The creation of money by a bank is as simple as this, so simple, I've often said, that the mind is slightly repelled.

Money in the bank is like toothpaste in the tube. Easy to take out, hard to put back.

What can you do in order to save your own banks?

You could argue the banks are much better capitalised than they were going into the crisis, and everyone's in a much more vigilant state because they still remember the crisis.

Any central bank should only be in charge of liquidity. Solvency is a matter for the treasury.

When I hear complaints about less liquidity, remember there is such a thing as too much liquidity.

If you don't have ample liquidity, and it's not durable, in times of stress, as you're looking for liquidity, you're forced to sell assets at declining prices, which then eats into your capital position, so it becomes this very, very negative cycle. There's no question that liquidity is sacrosanct.

When they so-called 'target the interest rate', what they're doing is controlling the money supply via the interest rate. The interest rate is only an intermediary instrument.

Indeed, better risk management may be the only truly necessary element of success in banking.

Cash is king. Get every drop of cash you can get and hold onto it.

We want to use cash. The reason we haven't used our cash two years ago, we just didn't find things that were that attractive. But when people talk about cash being king, it's not king if it just sits there and never does anything. There are times when cash buys more than other times, and this is one of the other times when it buys a fair amount more, so we use it.

In the real world, illiquid assets carry a discount.

You cannot take bank interest rates very sharply down: you will lose your deposit franchise.

Monetary policy is like juggling six balls... it is not 'interest rate up, interest rate down.' There is the exchange rate, there are long term yields, there are short term yields, there is credit growth.

At this point, when treasury bills, seven day treasury bills at 1/20th of one percent, it's not because people want to earn 1/20th of one percent, it's because they trust the fact the treasury will give it back to them next week.

Why, just a couple of economic seasons ago, was idle cash considered an indication of bad management or lazy management? Because it meant that management didn't have this money out at work ... Now look. Presto! A new fashion! Cash is back in! Denigrating liquidity has dropped quicker than hemlines. A management is now saluted if it has some cash, some liquidity, doesn't have to go to the money market at huge interest rates to get the wherewithal to keep going and growing. Along with Ben Franklin, my father and your father would understand and applaud this new economic fashion.

In the real world, banks hang onto their money for fear of making bad loans, no matter how many bailouts or stimulus packages Washington passes.