Frustrated with low bank rates? Understandable, but as you think about alternatives, take a careful look at recent signs that the stock market might be in for another dive. If so, it could make those meager bank rates look like a real bargain.
Last year saw a tremendous recovery for the stock market, after the steep declines of 2008. Sometimes, though, stock markets overreact on both the downside and the upside, and it is entirely possible that stocks got a little ahead of themselves by the end of 2009. Certainly, market participants have been showing signs of buyer’s remorse of late.
The reason for concern is not in the recent economic news itself, but in the stock market’s reaction to that news. For
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Bank Rates, Rates
As the banking industry weighs its options for fighting the proposed federal tax on large institutions, it’s worth looking at one of the underlying issues which prompted the proposal — executive bonuses.
Ostensibly, the purpose of the tax is to recoup some of the money spent on rescuing the banking industry, and in doing so start to address a federal budget decificit which has ballooned over the past decade. Poli
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Bank, Bank Rates
President Obama intends to impose levies on up to 50 large banks that benefited from taxpayer bailouts.
This may be a good idea for other reasons, but it’s very difficult to see how this will not be a negative for CD rates, money market account rates, and savings account rates.
Jamie Dimon, CEO of JPMorgan Chase, said it best when testifying before Congress about this matter:
“All businesses tend to pass their costs on to customers.”
One of the prime ways to “pass on the costs” of new bank levies is for banks to continue to pay extremely low interest rates on deposits.
Without a doubt, this new program is a troubling development for people who rely on bank interest income for living expenses, such as senior citizens who have saved all their lives in hopes of living off bank interest in their golden years.
Also at issue is whether or not, as Obama senior staffer Valerie Jarrett argues, “it’s clear that financial institutions have rebounded.”
That is in fact far, far, far from clear. Banks are still ve
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Bank, Bank Rates
An encouraging report on the U.S. job market sent stocks higher last Friday. In the long run, continued good news on the employment front could help push bank rates higher as well.
What does a job report have to do with savings account interest rates, money market accounts, or CD rates? Well, the impact may be somewhat indirect, but it could be important under current circumstances. Improvement in the job market has been the next sign that economists and policy makers have been looking for as confirmation that the economy is turning around. Not only does economic strength generally bolster interest rates, but in this case the government has been taking extraordinary steps to keep interest rates down to try to stimulate the economy. An
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Bank Rates, Rates
A generation of depositors is currently seeing the lowest bank rates of their lives onCDs, savings, and money market accounts. As those rates approach zero, the natural assumption is that things can’t get much worse. Or can’t it?
It may be a little mind-bending to think about negative interest rates, but the concept does exist. The Swedish central bank recently pushed its deposit rate into negative territory, and a Financial Times columnist suggested that more central bankers should include negative interest rates in their bag of tricks.
Why would anyone sign up for a negative interest rate? Two reasons. One
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Bank Rates, Rates
