Episode summary
Why Cash Is King in the Era of Higher Interest Rates | WSJ’s Take On the Week
The Journal
· · Hosts: Telis Demos, Miriam Gottfried · Guests: Gary Zimmerman
Summary
Higher interest rates are changing how investors think about cash, bonds, real estate, private equity, and bank deposits. The hosts argue that cash is no longer dead money: with rates up, it can generate real yield, but only if savers pay attention to where it sits and whether it is fully insured. They also note that higher rates are pressuring commercial real estate deals, mortgages, and private equity, while altering the economics of bank balance sheets and deposit pricing.
Gary Zimmerman of MaxMyInterest says the biggest mistake is treating cash as a passive afterthought. He argues that roughly $20 trillion of bank deposits in the U.S. are often under-earning, and that many households keep too much cash in accounts that pay too little or exceed FDIC insurance limits. His company tries to automate the process of spreading cash across banks so savers can chase better rates without handing over login credentials.
Zimmerman also pushes back on fears that AI agents will trigger a bank run. He says the real issue is human inertia, awareness, and apathy, not technology. In his view, banks can use higher rates and better online distribution to attract deposits, while individual savers can improve returns and reduce risk by being more intentional about deposit allocation.
Key takeaways
- The hosts say higher rates are making cash, bonds, and deposits worth rethinking, while also pressuring commercial real estate and private equity.
- Gary Zimmerman says U.S. bank deposits total about $20 trillion and are often "under earning or underinsured or both."
- Zimmerman argues FDIC insurance makes savings accounts safer than many people realize, but only up to the coverage limits at each bank.
- Zimmerman says bank deposit shopping can be automated without sharing passwords, using account-opening workflows instead of direct access to logins.
- He dismisses the idea that AI agents will soon trigger a bank run, saying the bigger barrier is human inertia, not technology.
Notable quotes
“There's $20 trillion of cash sitting in US commercial banks and almost all of that cash is under earning or underinsured or both”
“the beauty of FDIC insurance coverage is that it basically turns every bank, at least as it relates to a savings account, into a pure commodity”
“our three biggest competitors as a company are not other companies. They are actually three human traits, which are awareness, apathy, and inertia”
“the biggest risk in banking is uninsured deposits”
How the episode opens
There's $20 trillion of cash sitting in US commercial banks and almost all of that cash is under earning or underinsured or both. How could it be that such a massive asset class is so poorly managed and can we make the market more efficient in a way that benefits depositors and their advisers and banks as well?
Hi Miriam. — Hi Telus. Today we are going to have a conversation about cash, — My favorite topic.
And not not Johnny Cash. Uh and not necessarily like cold hard dollar bills type cash. We're talking about cash conceptually.
And in an age of high and potentially rising interest rates, you can earn a lot on your cash these days. And that is having a big impact on investors and how they think about their portfolios and their money, but also on the financial system, on companies, companies that either lend or borrow. High interest rates really change the economics for a lot of those businesses.
Yes, I think I, as a holder of a high yield savings account, have experienced this myself for a while. You know, in 2022, I saw the rate on my high yield savings account all of a sudden begin to rise and then it started to cool off a bit and I thought, okay, maybe this phase is over. But now it's going up again.
And that's starting to make me think, is there a place that I could be putting it where I could earn even more?
Yeah. And we're going to have a really interesting conversation with somebody who's been thinking a lot about that for for for several years uh to kind of kind of talk through some of the mechanics of that, but also as an investor, the rest of your portfolio, your bank stocks, your real estate investment trusts, what's going on.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- high interest rates
- cash yields
- bank earnings
- commercial real estate
- ai in banking
Companies and tickers mentioned
- JPM
- GS
- MS
- JPMorgan Chase
- Goldman Sachs
- Morgan Stanley
- MaxMyInterest
Watch the episode
Watch “Why Cash Is King in the Era of Higher Interest Rates | WSJ’s Take On the Week” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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