US Firms Hoarding $2 Trillion

June 8, 2012 | By
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President Obama was criticized by Mitt Romney and the media when he said the private sector is doing fine.

However, there are many articles last year and the year before about the money US firms are hording.

US firms hoarding $2 trillion- August 6, 2011

Corporate America is sitting on a colossal $2 trillion in cash — $1.4 trillion in the S&P’s top 20 alone — but that does little for the public.

Depending on whom you talk to, it’s either a huge rainy-day fund if the economy heads for a double dip, or it’s top executives feathering their nest in order to grab huge year-end bonuses.

“It’s enormous by historical standards,” Howard Silverblatt, senior index analyst at S&P told The Post, describing the staggering scale of the unspent corporate bundle. “The $963 billion is more than the recent government incentive and stimulus spending.”

Excluding customer-deposit-rich financial institutions — which need to have assets to offset deposits — an astounding $963 billion is held in cash and cash-equivalents (money market accounts and T-bills, for example) alone at the S&P 500 industrial companies.

Either way, with unemployment at 9.1 percent, the top corporations are not using it to hire workers or expand benefits.

American corporations are in a sweet spot, according to some. They have a motivated work force , and with muted demand, no need to expand and hire more workers.

The sums at stake have triggered alarms.

“Companies should be using the cash to either invest in new products to allow them to grow, or to make acquisitions if they are not good at research and development,” said Peter Cohan, a management consultant and venture capitalist. “Alternatively, they should use the cash to pay back shareholders in dividends.”

That big, liquid pile is accumulating at a record pace: ten consecutive quarters of growing cash on the corporate sidelines, according to Standard & Poor’s. That’s despite America’s jobs crisis and a faltering economy.

Read more: New York Post

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Category: COMMERCE, POLITICS

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