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"Households are earning so little from their bank accounts that Bank of America, the largest U.S. lender, has pocketed about twice as much cash this year parking money at the Federal Reserve than it has paid to savings-account holders. " Bank of American paid out $32 million in interest while earning $63 million for depositing money at the Federal Bank.
Banks are bigger and people are still depoisiting at normal rates, so it is easy for them to profit.
What do you think of this disparity between too big to fail banks and American savers? Does this make a good argument for credit unions? Or ignoring the loss to inflation and keep your cash "under your mattress"?
www.huffingtonpost.com/2011/04/21/big-banks-book-easy-profi_n_852123.html
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Well, I'm not really sure why it would be any smarter to keep your cash under your mattress than earn even the meager 0.43 interest rate. But, I think you could certainly make a case for credit unions.
ReplyDeleteI do think it is a bit counterproductive for the Fed to be allowing these banks to stash cash at an elevated interest rate. Aren't we in a bit of a credit crunch?
I agree with the assessment that this makes a great case for credit unions. The profits these banks seem to be making through the Fed and savings seems very sketchy to me. The banks turn around and give our money to the government and the Fed turns around and gives the bank a great interest rate on the money. Then the banks collect their interest revenue.
ReplyDeleteThe Too Big to Fail Banks get a 0% interest rate loan of our money from the Fed but continue to gather interest on our money they keep at the Fed in an account. The entire system seems flawed and I can't say I'm surprised that we are in such a financial crisis.
This seems connected to the earlier article about learning to save. With rates this low there is little incentive for people to save money. Maybe this is part of the Fed's idea, keep low rates which may encourage people to spend our way out of the crisis. However I think having a stronger savings rate would benefit most individuals and the country as a whole.
ReplyDeleteIt's all about profits and that bottom line. Everything else is just show.
ReplyDelete