… in its quarterly “flow of funds” report on Thursday, the Federal Reserve sharply revised its estimates of how much cash companies are holding on their balance sheets. The bottom line: Corporations have nearly $500 billion less cash on hand than previously believed.
To be sure, companies are still holding onto an unprecedented amount of cash. As of the end of March, nonfinancial corporations had $1.74 trillion in liquid assets on their balance sheets, $12.6 billion more than at the end of the year…
Before the revision, the Fed showed corporations continuing to accumulate cash, with liquid assets rising nearly every quarter since the recession ended and reaching a record $2.2 trillion at the end of last year. Now, however, it appears corporate cash piles grew rapidly through 2009, then leveled off.
Moreover, companies are holding a smaller share of their total assets in cash.
When you’re talking about coporations holding billions in “cash,” it’s not cash. What? Benjamins in the freezer? Even a large checking account could not be immediately liquidated to say nothing of commercial paper, CDs or repos. The idea that somehow this “cash” hoard means anything is fiction. Only a small fraction of it can ever be liquidated. So they use it for those big executive salaries and bonuses, or corporate share buybacks to purchase the stock options they just issued themselves. That’s why the numbers have stopped growing. The thieves are siphoning it off.