WTF?
http://online.wsj.com/article/SB125745028664231567.html
Yes, because bringing in money at 2% and lending it out at 5% is just destroying our poor, underfunded banks. Huh? The cheapest loan you can get is 5% for a mortgage or car loan, personal loans and CCs start at 13+%, and the US Government is stepping in to ensure that banks are kept from this horribly damaging activity. Currently banks that are able to borrow from the US Government for basically 0% interest are offering 0.2% interest on Savings and CD rates. Of course they're not going to offer consumers anything higher, they can get all the free money they want from the Fed. Banks that are trying to capitalize themselves over and above that are willing to offer a HUGE return of 1.6-2.0% so they can turn around and lend out money at anywhere between 5-13%. How is this such a problem for the Fed??
Maybe my tinfoil hat is on too tight, but does this strike anyone else as way way WAY too much interference by the Fed? Obviously weaker banks offering 2% mean that the "healthy" banks are going to be bringing in far less when they only offer 0.2%, but this just shows that the healthy market for a ~12mo CD is somewhere in the realm of 2%. It's not the artificial 0.2% that the Fed is engineering...
So what's the takeaway from all this? If the government is trying to hold down interest rates that banks are paying, are they actually trying to hold inflation in check? If inflation is closer to 2% than the zero that it is now, they'd have a hard time justifying holding the fed funds rate so low. Is the government actually trying to prop up the "healthy" banks that are turning more and more to feed at the government trough instead of actually being capitalized by ordinary Americans? By placing a cap on what weaker banks can offer, it'll cause more money to flow back towards "healthy" banks since the difference in CD and savings rates will be lower... Does this mean that the "healthy" banks really *aren't* healthy, and can't afford the outflow of capital from their own coffers to that of Ally.com, ING, Bankdirect, CapitalOne, etc?
Or have I just been hanging out with RenegadeRick a little too much?
http://online.wsj.com/article/SB125745028664231567.html
Yes, because bringing in money at 2% and lending it out at 5% is just destroying our poor, underfunded banks. Huh? The cheapest loan you can get is 5% for a mortgage or car loan, personal loans and CCs start at 13+%, and the US Government is stepping in to ensure that banks are kept from this horribly damaging activity. Currently banks that are able to borrow from the US Government for basically 0% interest are offering 0.2% interest on Savings and CD rates. Of course they're not going to offer consumers anything higher, they can get all the free money they want from the Fed. Banks that are trying to capitalize themselves over and above that are willing to offer a HUGE return of 1.6-2.0% so they can turn around and lend out money at anywhere between 5-13%. How is this such a problem for the Fed??
Maybe my tinfoil hat is on too tight, but does this strike anyone else as way way WAY too much interference by the Fed? Obviously weaker banks offering 2% mean that the "healthy" banks are going to be bringing in far less when they only offer 0.2%, but this just shows that the healthy market for a ~12mo CD is somewhere in the realm of 2%. It's not the artificial 0.2% that the Fed is engineering...
So what's the takeaway from all this? If the government is trying to hold down interest rates that banks are paying, are they actually trying to hold inflation in check? If inflation is closer to 2% than the zero that it is now, they'd have a hard time justifying holding the fed funds rate so low. Is the government actually trying to prop up the "healthy" banks that are turning more and more to feed at the government trough instead of actually being capitalized by ordinary Americans? By placing a cap on what weaker banks can offer, it'll cause more money to flow back towards "healthy" banks since the difference in CD and savings rates will be lower... Does this mean that the "healthy" banks really *aren't* healthy, and can't afford the outflow of capital from their own coffers to that of Ally.com, ING, Bankdirect, CapitalOne, etc?
Or have I just been hanging out with RenegadeRick a little too much?
