hot money
 n.— «Rather than simply wooing local customers, they have turned to out-of-state brokers who deliver billions of dollars in bulk deposits, widely known as “hot money,” from investors nationwide. In fast-growing regions like this one in central Georgia, the money produced record bank profits and financed whole new communities, built at a phenomenal rate. But the hot money also came with a high cost. To lure the money from brokers, banks typically had to offer unusually high rates. That, in turn, often led them to make ever riskier loans, leaving them vulnerable when the economy collapsed. Magnet failed early this year and Security Bank is barely hanging on. Though few people have heard of it, hot money—or brokered deposits, as it is also known in the industry—is one of the primary factors in the accelerating wave of failures among small and regional banks nationwide. […] But the money is volatile. It can be easily shifted from one bank to another as brokers seek the highest interest rates. Thus the term hot money.» —“For Banks, Wads of Cash and Loads of Trouble” by Eric Lipton, Andrew Martin in Macon, Georgia New York Times July 3, 2009. (source: Double-Tongued Dictionary)

Tagged with →