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Just to clarify.. Banks Reserves & Cash is the exact same thing. No difference.
A picture is worth 1,000 words. 
The gap (cash) in the Post GFC loan/deposit ratio is sitting locked up at the Fed in favor of banks that are subject to Basel/DF HQLA liquidity requirements. That gap didn’t get created by $XLF but by one entity alone - The Fed.
There’s a popular and completely incorrect argument that banks didn’t lend it out coz they got IOER. The reason they didn’t lend it out coz the Fed wanted liquidity buffers & if banks lent all that out.. how would the Fed have ever Unwound its B/S?
See how with QT and Sterilization Banks Reserves & their Liquidity (LCR) has reduced in tandem 2 honor deposit (cash) outflows. Now imagine QT outflows.. & if $XLF had to sell those illiquid loans “lent out” concurrently to get cash to honor QT deposit outflows - Depression 2.0.
Fed heads are highly intelligent & thot about all this stuff.. but there’s a backward bending curve between intelligence & success...intelligent people tend to do very stupid things esp when they are validated with early success (Crisis $DXY) w/o viable exit strategies.
