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I own a few CDs. They’re not an unusual financial product.
by ticviking 4y ago
I own a few CDs. They’re not an unusual financial product.
- greenyoda 4y agoBut the longest maturity for CDs is around 5-10 years, while banks loan out money for 15-30 years for mortgages. And most banks probably have much more money deposited in checking and savings accounts than in CDs.
- twblalock 4y agoYeah but I assume you also have money in an account that lets you withdraw it in less than two years? A bank that only offers CDs or other long-duration deposits would be pretty weird.
- PeterisP 4y agoWell sure, but one could theoretically imagine banks which are prohibited to lend money from their customers' current accounts and only make loans based on their CDs - and one aspect of that is that they'd have to offer much better terms for CDs since they would be in much higher demand.
- twblalock 4y ago> and one aspect of that is that they'd have to offer much better terms for CDs since they would be in much higher demand. Why? CDs are insured by the FDIC. That gives people the same amount of confidence in all CDs no matter what bank they get them from.
- ashwagary 4y agoWell, if they can only lend from funds in the CD pool, how else would they encourage clients to put more money in that pool? Better terms right?