5 ms·

That’s because interest rates were around that level at the time and the bank was also getting paid that much to hold your money. It wasn’t a conspiracy. Consu

That’s because interest rates were around that level at the time and the bank was also getting paid that much to hold your money. It wasn’t a conspiracy. Consumer savings accounts had absolutely nothing to do with the crisis. Like, on the list of “things that caused the crisis,” they would literally be dead last. Did you know your parents had savings accounts that delivered 10% interest at one time? Look up historical interest rates in the US. 4% is like average.

geezerjay 8y ago
IIRC, high interest rates are caused by an economic boom, as raising interest rates is caused by both an increase in demand for cash flows to finance investments and also as a monetary policy to put economic pressure to control inflation. Currently the world in general is very far from an economic boom, and central banks are actually implementing desperate monetary policies to jump start inflation. Thus, we are very far from those times to the point that nowadays a 3% interest rate is considered huge, as the norm is for interest rates to remain below the inflation rate
- deleted 8y ago
  [deleted]
- pembrook 8y ago
  3% is not huge for the US right now (we have been the most aggressive of the developed markets in normalizing). 3% is only a bit above the federal funds rate right now. When you account for the investor cash that will subsidize this service as a loss leader offering, it’s not unreasonable. The only risk is we enter a severe recession and the fed has to drop interest rates to 0 again. In that scenario, robinhood simply has to lower the rate of their offering as well. This isn’t some big existential risk.
pianom4n 8y ago
> Consumer savings accounts had absolutely nothing to do with the crisis. That's just not true. A significant contributor to the mortgage crisis is that banks loan out savings that are backed by the government. Savers deposit their money with banks even if those banks are underwriting risky mortgages
- pembrook 8y ago
  That’s like saying a significant contributor to the mortgage crisis was restaurants, because restaurants pay interest on their loans to banks which the banks then used to underwrite risky mortgages. Not sure I follow your argument. How did savings accounts that offered 4% cause the crisis?

geezerjay 8y ago

IIRC, high interest rates are caused by an economic boom, as raising interest rates is caused by both an increase in demand for cash flows to finance investments and also as a monetary policy to put economic pressure to control inflation. Currently the world in general is very far from an economic boom, and central banks are actually implementing desperate monetary policies to jump start inflation. Thus, we are very far from those times to the point that nowadays a 3% interest rate is considered huge, as the norm is for interest rates to remain below the inflation rate

deleted 8y ago
[deleted]
pembrook 8y ago
3% is not huge for the US right now (we have been the most aggressive of the developed markets in normalizing). 3% is only a bit above the federal funds rate right now. When you account for the investor cash that will subsidize this service as a loss leader offering, it’s not unreasonable. The only risk is we enter a severe recession and the fed has to drop interest rates to 0 again. In that scenario, robinhood simply has to lower the rate of their offering as well. This isn’t some big existential risk.

pianom4n 8y ago

> Consumer savings accounts had absolutely nothing to do with the crisis. That's just not true. A significant contributor to the mortgage crisis is that banks loan out savings that are backed by the government. Savers deposit their money with banks even if those banks are underwriting risky mortgages

pembrook 8y ago
That’s like saying a significant contributor to the mortgage crisis was restaurants, because restaurants pay interest on their loans to banks which the banks then used to underwrite risky mortgages. Not sure I follow your argument. How did savings accounts that offered 4% cause the crisis?