So one thing federal financial regulators and Congress need to examine is why banks can pay virtually nothing in interest rates on standard savings accounts while continuing to charge in the 5 percent range for 30 year mortgages and 6.5 percent and up or so on new auto loans, even as the federal funds rate is very nearly zero in real terms. It strikes me as a hidden corporate subsidy, in a way.
Financial advice gurus are always encouraging Americans to save more money, which is sound advice. It seems likely more folks will want a greater proportion of their money in FDIC insured accounts as opposed to the
Ponzi stock market right now.
But people shouldn’t have to lock up several thousand dollars in a CD for two years just to get a meager 2% return. I mean, if a banks loans money at 5% and pays depositors 2%, the advantage is still with the bank, to be overly simplistic about it.
Sure, there are those who can buy CD’s and do so with tens of thousands of dollars, and good for them, but families who have smaller savings accounts are likely reticent to trade liquidity for a couple hundred dollars a year or less in interest. If we want a higher savings rate as a matter of national policy, people should be encouraged to save.
I think there used to be institutions in this country geared towards ordinary consumers known as “Savings and Loans,” but something happened to them about twenty years ago and they went away, curiously enough during the reign of Bush the Elder.
Not sure the best way to address this exactly, but banks should at least have to pay out more in interest than they charge in fees, over a certain minimum balance. Either that or we bring back savings and loans, and keep everyone named Bush away from them while regulating the hell out of them.
And yes, there are credit unions, which can be a good option as well.