JPMorgan Chase has withdrawn almost $350 billion in cash from its account at the Federal Reserve since 2023, redirecting much of the money into US government debt as it prepares for an era of lower interest rates that threatens to squeeze bank profits. The scale of the move underscores how aggressively the country’s biggest bank is repositioning its balance sheet ahead of further monetary easing.
According to data compiled by BankRegData and reported by the Financial Times, JPMorgan cut its balance held at the Fed from $409 billion at the end of 2023 to just $63 billion by the third quarter of this year. Over the same period, the bank sharply increased its holdings of US Treasuries, boosting them from $231 billion to $450 billion, allowing it to lock in higher yields before rates fall further.
The shift reflects a broader change in strategy after years in which banks enjoyed unusually easy profits by parking excess cash at the Federal Reserve and earning interest while paying little to depositors. That dynamic emerged after the Fed raised its benchmark federal funds rate from near zero in 2022 to above 5 per cent in early 2023. Since late 2024, however, the central bank has begun cutting rates and has signalled that more reductions are likely, with rates this month reaching their lowest level in three years.
“It’s clear JPMorgan is migrating money at the Fed to Treasuries,” said Bill Moreland, founder of BankRegData. “Rates are going down and they’re front-running.” JPMorgan declined to comment and does not disclose the maturity profile of its Treasury portfolio or the extent to which it uses derivatives such as interest-rate swaps to manage risk.
JPMorgan’s approach contrasts with that of some rivals earlier in the cycle. The bank avoided heavy investments in long-term bonds when rates were extremely low in 2020 and 2021, unlike peers such as Bank of America, which later suffered large paper losses when yields surged in 2022. Instead, JPMorgan benefited from a large and relatively stable deposit base, allowing it to earn strong returns on cash held at the Fed during the period of high interest rates.
The latest move into Treasuries has helped soften the impact of falling rates on earnings by securing higher yields in advance. The scale of JPMorgan’s withdrawals has been so large that it effectively offset cash movements by the rest of the US banking system combined. Since the end of 2023, total cash held by banks at the Fed has fallen from about $1.9 trillion to roughly $1.6 trillion, despite more than 4,000 banks operating nationwide.
Banks have earned interest on reserves held at the Fed since 2008, a policy designed to help the central bank control short-term interest rates and liquidity. Those payments have surged in recent years, with the Fed paying out $186.5 billion in interest on reserves in 2024 alone, a figure that has drawn growing political scrutiny.
The practice has become increasingly controversial in Washington. In October, the Senate voted down a bill that would have barred the Fed from paying interest on reserve balances. Senator Rand Paul, who sponsored the proposal, argued that the central bank was effectively paying banks hundreds of billions of dollars to keep money idle. Other Republican senators, including Ted Cruz and Rick Scott, have echoed those concerns.
In a report released earlier this month, Paul claimed that the 20 largest recipients of interest payments from the Fed had received $305 billion since 2013. He estimated that JPMorgan alone received $15 billion in 2024, a year in which the bank reported total profits of $58.5 billion. As rate cuts continue, JPMorgan’s rapid pivot away from Fed balances highlights both the changing economics of banking and the growing political debate over how monetary policy benefits the financial sector.
