Banks don't mark these bonds to market so the fact that the older bonds have lower present value and higher yield (although still much lower than 5% on long bon

Banks don't mark these bonds to market so the fact that the older bonds have lower present value and higher yield (although still much lower than 5% on long bonds as a result of yield curve inversion) is not relevant. These banks cannot afford to pay close to the Fed overnight rate. Not too long ago someone tried to charter a bank that just took deposits and placed them in the Fed overnight, but the charter wasn't approved because the bank wouldn't perform the economic role expected of a bank, which is to make loans that stimulate small business.