Corporate Lines of Credit: ATM’s for Business
[Note to Readers: The views expressed here are solely those of Ross Kaplan, and do not represent Edina Realty, Berkshire Hathaway (“Berkshire”), or any other entity referenced. Edina Realty is a subsidiary of Berkshire.]
To understand the stress on the financial system now, start with millions of people rushing to their ATM’s to stock up on cash.
If 100 million households each withdraw $500, that equals $50 billion.
$50 Billion vs. $500 Billion
Now, imagine 100,000 U.S. businesses each maxing out their lines of credit with the various banks they do business with.
If each company has, on average, $5 million in available lines of credit, that comes to a cool $500 billion.
Call it, wholesale vs. retail demand for cash.
Can’t quite make sense of it all?
Fortunately, the Federal Reserve can — and under Chairman Jerome Powell, appears to be capably responding to the crisis (at least, the financial part) . . .
