Skip to comments.US banks warn Fed interest cut could force them to charge depositors
Posted on 11/25/2013 3:35:11 AM PST by markomalley
Leading US banks have warned that they could start charging companies and consumers for deposits if the US Federal Reserve cuts the interest it pays on bank reserves.
Depositors already have to cope with near-zero interest rates, but paying just to leave money in the bank would be highly unusual and unwelcome for companies and households.
The warning by bank executives highlights the dangers of one strategy the Fed could use to offset an eventual tapering of the $85bn a month in asset purchases that have fuelled global financial markets for the last year.
(Excerpt) Read more at ft.com ...
Not hardly. Try for the last 4 years, easy. This has been going on for a long time. It is what brought back the stock market and keeps propping it up.
What the banks are naively admitting...is that they are as close to failure....as they were in 2008. Nothing has changed.
The government is just standing there with no idea of how to recover from the illogical Fed rate. The journalists are doing their best not to investigate the banks. Bank CEOs just sit and grin during interviews and avoid clear answers. We are still at the front door of 2008....nothing changed...just waiting for the collapse to come sooner or later.
At this point, it seems a good place to put some money is in stuff....homegoods, clothing, long-term repairs, a new car, appliances, to create a situation in which no purchases are necessary in the forseeable future.
Must register to read the article.
It sounds like the final evidence many need to heed in order to ready themselves for a big crash!
Get out the jars and start burying it in the back yard.
Bad enough getting no interest when they star charging my money is coming out.
What’s particularly worrisome here is that if banks start charging depositors many people will want to pull their money out, at which time they will discover that due to fractional reserve lending most of that money isn’t actually there.
Any savings in US dollars are not safe.
“Bad enough getting no interest when they star charging my money is coming out.”
Me too. I ought to pull it out anyway. The risk/reward ratio is already to high as things stand now. Mattress would safer.
So yeah, if my banks charge me for borrowing my money, out it comes.
Reminds me of when Jeb Clampett’s banker kept all Jeb’s millions in his bank for free, didn’t dharge old Jeb a dime.
So banks return zero interest but lend money at 4% for 30 year mortgages? Wow.
The Zero Interest Rate Policy (ZIRP) shortchanges savers by providing cheap $$ to the Government and Business at the expensive of interest payments on Mom & Pop deposits. Negative Interest Rate Policy (NIRP) is just a continuation of the same policy, with the illusion of interest totally stripped away. Both are wealth taxes, but the latter is nakedly so.
The best part for the politicians is that this is being done without any explicit action on their part—thus they still have plausible deniability.
I'd think all kinds of stuff will be done to create an illusion of safety, thereby "kicking the can down the road". I could imagine withdrawl fees or percentages happening with withdrawls over a certain amount. I could see a restriction on how quickly money can be withdrawn.
A banker told me (to try to scare me into an annuity) that if a bank goes under, FDIC deposits up to the insured amount have to be paid out, but over something like a 30-year period. (I told her that at my age it would be a better deal than an annuity. She was confused.)
The thing is, no one really knows how this mess is going to turn out. Because of technology moving financial transactions so quickly, there's just no precedent for knowing how things could happen.
First Bank of Sealy
I am afraid you are right.
So, depositors take their money out of savings accounts, banks further tighten mortgage requirements, resulting in fewer mortgages, less income for the banks.
The banks begin to fail, and obama nationalizes the banks.
Another notch in his pistol.
I’m not an economist, but I did stay at a Holiday Inn Express.
If they continue 0% interest rates...retirees get hammered. Pumping $85 billion a month props the markets, but slowly takes America further into a hole.
The feds financial strategery of borrowing and or monetizing our own debt is lunacy. Eventually, we will default and begin the process of intentional devaluation of our currency in an effort to wipe away debt. Don't believe it? Take a look at Venezuela, Zimbabwe.
Just 1% rise in interest rates will add hundreds of billions to the national debt. Interest payments alone will continue to sap the life out of our economy. Well passed 100% debt to GDP ratio means all our economy can ever hope to muster in our current model cannot produce enough to dig our way out of this financial hole.
Isn’t that interesting.
Consider that moving your money to a bank outside the US is near impossible now due to all the laws and regulations placed our Congress.
Foreign banks won’t consider an American depositor.
Consider the bail-in’s and the template proposed by the IMF, already seen in Cyprus.
Consider the fact that your money is not considered your money. We have heard from various members of Congress that money is theirs, not yours, “The bottom line is were not broke, theres plenty of money, its just the government doesnt have it, Ellison continued.”
Where do you put money to work? Why, the equities.
They rise, until of course, they don’t.
Wrong on so many levels, the reality of the situation is that the banks are saying that we are for profit companies and we won’t just sit here and make nothing.
Not typically, most banks don’t hold mortgages on their books, some but very few. That’s where Fannie and Freddie come in, even then they don’t really hold them either, they sell them to investors.
What about credit unions?
Don't you mean, "we are for profit companies and we wont just sit here and make nothing no matter how badly we screw up, because we're too big to fail"
The banks are only surviving because of the ‘free money’ that the Fed keeps sliding over to them. Every American....from a retirement prospective...is suffering because of bad CD rates and easy cash for the banks. The difference between now and 1929....we’ve kept the banks functional with the Fed money and the rate. We would have done quiet well in 1929, if we’d attempted this same gimmick....at least for a couple of years until reality sunk in.
The elevator charges me money to store my grain that really isn’t there. Why shouldn’t the bank not be able to charge me to store my money that really isn’t there?
Galactic historians will reflect on this era as the last besdt chance at turning around this solar system,, but with a dying sun (albeit slowly) and an acidifying ocean of water and a sea of vapious beliefs. But, sometimes even the gods know when they are licked and its time to move on.
We could have been contenders, instead, we will likely never even make it out of the celestial race gate formative years.
Do that and I will stop depositing. Of course that means the police will take my cash and accuse me of dealing drugs, but at least that it open corruption.
Free money? How do you figure that?
So were low interest rates in 2002-2003 also the result of saving the banks from failing?
How does low interest rates save the banks? A key indicator of how well banks are making money with our money is something called net interest margin. It’s been falling for years. For all the “free money” they have they are also loaning that money out at really low interest rates. The banks are making less money now in this free money environment then they were making in 2007.
Your theory doesn’t hold water.
Every bank that was going to fail was bought out by another bank that wasn’t going to fail. Citigroup might be the only exception. Bank of America was asked to buy assets to prevent them from failing. JP Morgan and Wells Fargo scooped up assets on the cheap because they were failing.
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