Fees and commissions from investors desperate to cash out of stocks when the shutdown arrived, then just as desperate to buy back stocks when the markets rallied, added 32 percent to investment banks’ revenues in the first six months of this year, according to data compiled by Coalition, a financial industry research firm.
The Fed’s flood of cheap money also has set off a borrowing boom among companies seeking to survive the shutdown and its aftermath. New corporate debt has risen 29 percent globally by dollar volume through August and 72 percent in the U.S.
All of that borrowing and lending also generated fees for big banks.
During the first half of this year, fees related to products tied to interest rates, such as corporate bonds, yielded $55 billion in fees for banks, up 56 percent from the same period in 2019. JPMorgan Chase alone reported earning $11 billion in trading and lending fees in this year’s second quarter.
“The Fed created a bubble where life could go on,” said Yousef Abbasi, a strategist at investment bank StoneX Group. “That explains the disconnect we see between the market and the economy.”
Now, with hundreds of companies struggling, merger and acquisition activity is beginning to revive, promising even more fees to investment banks.
