JPMorgan Chase has significantly reduced its cash reserves at the Federal Reserve, withdrawing over $350 billion and reallocating the funds into U.S. Treasury bonds. The move comes as the Fed lowers interest rates to the lowest levels in three years.

At the end of 2023, JPMorgan held $409 billion in its Fed account. By Q3 2025, that figure had dropped to just $63 billion, while its Treasury holdings surged from $231 billion to $450 billion in the same period.

A Preemptive Strategy to Lock In Yields

“It’s clear JPMorgan is moving money from the Fed into Treasuries. Rates are falling, and they’re getting ahead of it,” said Bill Moreland, founder of BankRegData.

The bank’s strategic shift helps it secure better returns while avoiding the earnings pressure of declining interest rates — a scenario that has impacted peers. Notably, JPMorgan had avoided large long-term bond positions in 2020–2021, unlike Bank of America, which suffered paper losses when the Fed began aggressively hiking rates in 2022.

Earning More From the Fed Than Paying Out to Clients

JPMorgan has long benefited from cash held at the Fed, earning more in interest than it pays to depositors. In 2024 alone, the bank earned about $15 billion in interest from the Fed, while reporting $58.5 billion in total annual profit.

Ripple Effect on the Entire Banking System

The scale of JPMorgan’s shift was so large it outweighed balance changes from over 4,000 other U.S. banks. Total Fed balances across the banking system declined from $1.9 trillion to $1.6 trillion since the beginning of 2024.

Since 2008, banks have been able to earn interest on cash held at the Fed — a tool used by the central bank to manage short-term interest rates. These payments hit a record $186.5 billion in 2024, amid persistently high rates before the recent cuts.

Political Backlash Mounts Over Fed Payments

A proposed bill to ban the Fed from paying interest on reserves was blocked in the Senate in October, but Republican criticism is intensifying. Senator Rand Paul, along with Ted Cruz and Rick Scott, argue that the Fed is paying “hundreds of billions of dollars for money to sit idle.”

Paul published a report earlier this month stating that the top 20 U.S. banks have earned $305 billion in interest from reserves since 2013. JPMorgan alone received $15 billion in 2024.

#Fed , #JPMorgan , #interestrates , #bondmarket , #worldnews

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