Seniors involuntarily funding financial bailout, thanks administration, you know who you are

[katkat]

http://www.nytimes.com/2009/12/26/your-money/26rates.html

"Millions of Americans are paying a high price for a safe place to put their money: extremely low interest rates on savings accounts and certificates of deposit. The elderly and others on fixed incomes have been especially hard hit...

Indeed, after fees are subtracted, inflation is accounted for and taxes are paid, many investors in C.D.’s, government bonds and savings and money market accounts are losing money...

“The unemployment situation and the general downturn in the economy had an impact, but what’s going to happen now as C.D.’s mature is that retirees and the elderly are going to take anywhere from a half to three-quarters of a percent cut in their incomes,” said Joe Parks, a retired accountant in Houston on the advisory board of Better Investing, an organization that works to help people become savvier investors. “It’s a real problem.”

Experts say risk-averse investors are effectively financing a second bailout of financial institutions, many of which have also raised fees and interest rates on credit cards.

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco.

[Hannah Bell]

1. it's not just seniors, & it's only one of the ways we fund the banksters' lifestyle.

[FrenchieCat]

3. You response is extremely simplistic,

and stupid.

Raise the interest rate to help the yield of low risk investment,
and stand by and watch new foreclosures coming at you like a ton of bricks.

[Hannah Bell]

4. Perhaps you didn't understand: the spread.

But I'm sure you're smarter than this guy.

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management (PIMCO).


The spread isn't an automatic function of how high (or low) interest on small savers is.

[FrenchieCat]

8. A guaranteed spread is directly related to interest rates,

spread
Banking: difference between cost of funds and lending rate.

Banking. The percentage difference between the interest rate charged on a bank loan and the lender's cost of funds. Contrast with Net Interest Margin .

the difference between the cost of money and the earnings rate.
Example: Good Money Savings and Loan pays an average interest rate of 10% to its depositors. It earns an average of 12% on its investments. The 2-point spread is adequate to pay operating expenses and leave some profit.

[Hannah Bell]

10. your cut & paste is irrelevant to the issue.

"spread
Banking: difference between cost of funds and lending rate."


oh, wow, thanks for the heavy info.

[FrenchieCat]

11. Well, we know that you are way smart.....

but you make a statement, and I responded.

Interest rates affect all lending and savings rates, period.
The lower the interest, the lower the return especially to
low risk investments. It isn't that complicated.

[Hannah Bell]

14. your post has nothing to do with the issue in the op. Since you don't seem to get it:

"Banks can obtain money for next to nothing, but they charge 5 percent more on commercial mortgages, for example. According to historical practice, that mortgage rate spread should be 3 to 3.5 percentage points above the federal funds rate, say commercial borrowers. Auto loans average more than 5.5 percent. Moreover, until new rules go into effect, banks still are maximizing the interest rates on credit card balances, and they sock it to customers with overdraft protection charges.

It would appear that with such high spreads, banks wish to reshape the industry for the future, with higher spreads but lower interest rates on savings."


http://www.allbusiness.com/banking-finance/banking-lending-credit-services-cash/13591353-1.html.



The wider *spread* is a *policy decision,* not an automatic result of low interest rates. The *wider spread* means that savers are being drained (against historical precedent) to benefit the finance sector.

They're paying less to borrow our money than their own cost of borrowing, & way less than they make on lending, i.e. they're ripping off everyone.

[galileoreloaded]

7. Talk about simplistic. Yields on 10yr or ^tnx, drive fixed 30's. That's mortgages.

The par and rate should worry you much, much less than the "tail", and even more than that, the new issue roll-over for 2010. Foreclosures???? That is a symptom, not the disease. Fixed income seniors are screwed.

Documented very well HERE:

http://www.zerohedge.com/article/brace-impact-2010-private-demand-us-fixed-income-has-increase-elevenfold-or-else

Here is my PSA: "Please, don't be 50% informed 100% of the time, research!!!"

[katkat]

18. bricks

Yah, the bank pays 1% on savings and charges some people 20+% on their credit cards. I wouldn't mind a business like that, if I had no morals.

And why should Seniors pay to keep idiots from foreclosure? How many brain cells does it take to not buy a house you can't afford, or agree to lunatic mortgage terms?

Low risk is one thing, suddenly not even making enough to offset inflation is quite another, if you knew anything about long term interest rates on savings.

Bernacke could have been history.

[FrenchieCat]

2. That's what happens when interest rates are low, Doh!

That's what this article is about,
those who want low risk investments,
and are realizing that as long as the Interest rate stays near bottom,
they can't yield much from the savings accounts and such.

The fact that you are attempting to imply that this administration
is somehow responsible, the answer would be that this phenomenon
has been the case since interest rates were lowered.

The fact that it is seniors who tend not to benefit from low interest rates,
because they may not have a mortgage, but do tend to have their savings in a low yielding,
low risk investment is Economy 101. Everyone can't get what they want, especially
in the economy that we have been left with.

[Hannah Bell]

6. Those quoted in the article are *stating it,* not implying it.

& "interest rates" aren't universally low.

for example, citi is offering less than 1% on savings accounts while charging 11% for personal loans, 22% on credit cards, 8% on home equity loans.


https://online.citibank.com/US/JRS/pands/detail.do?ID=HomeEquityRates

not to mention *they* get to borrow at <0% from the Fed.

[TexasObserver]

5. Recommend

[LostInAnomie]

9. Obama doesn't control interest rates.

The Federal Reserve does. Obama doesn't control The Fed.

[Hannah Bell]

12. "members of the Board of Governors are selected by the President of the United States

and confirmed by the Senate.

There are currently two vacancies on the board of Governors.


The private banks give input to the government officials about their economic situation and these government officials use this input in Federal Reserve policy decisions."

Other federal agencies also serve as the primary federal supervisors of commercial banks; the Office of the Comptroller of the Currency supervises national banks, and the Federal Deposit Insurance Corporation supervises state banks that are not members of the Federal Reserve System.

The Board also issues regulations to carry out major federal laws governing consumer credit protection, such as the Truth in Lending, Equal Credit Opportunity, and Home Mortgage Disclosure Acts. Many of these consumer protection regulations apply to various lenders outside the banking industry as well as to banks.

The Board has regular contact with members of the President’s Council of Economic Advisers and other key economic officials. The Chairman also meets from time to time with the President of the United States and has regular meetings with the Secretary of the Treasury.

Under the Federal Reserve Act, the Chairman of the Board of Governors of the Federal Reserve System must appear before Congressional hearings at least twice per year regarding “the efforts, activities, objectives and plans of the Board and the Federal Open Market Committee with respect to the conduct of monetary policy”.

http://en.wikipedia.org/wiki/Federal_Open_Market_Committee

[FrenchieCat]

13. How many currently there were appointed by this President.....

and are you requesting for Interest rates to go up right now?
Would that do the economy any good?

Who would you recommend to him to fill the vacancies,
and would those you do be confirmed by this senate?

[Hannah Bell]

15. there are two open seats. there are also other channels, as noted in the link, for government to

pressure the Fed.

You don't get it. Your comment about "interest rates going up now" tells me so. Interest rates *are* up now, in some arenas. To benefit the finance sector, with the collusion of this admin & the previous one.

[LostInAnomie]

16. They are appointed every 14 years...

... so they can avoid political influence. Obama has almost no influence over the Fed. Almost no one does (See Ron Paul and Bernie Sanders' critique of the Fed).

[Hannah Bell]

17. Terms are staggered. There are currently two open seats.

The President may remove a governor for "cause".

There are also both institutionalized & informal channels of influence outside the Board appointments.

There is also the legislative tool. For example, Congress, in their recently legislated "reform" of the credit card industry, allowed them several extra years to practice usury. & Obama signed off on it.


or:

Bernanke and the Corruption of Washington Culture
By DEAN BAKER 12/23/09

The Senate Banking Committee overwhelmingly voted to approve Federal Reserve Board Chairman Ben Bernanke for another 4-year term. This is a remarkable event since it is hard to imagine how Bernanke could have performed worse in his last 4-year term. By Bernanke’s own assessment, his policies brought the economy to the brink of another Great Depression. This sort of performance in any other job would get you fired in a second, but for the most important economic policymaker in the country it gets you high praise and another 4-year term.

http://www.counterpunch.org/baker12232009.html