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I think it is a terrible that most retail bankers are getting basically no interest in their bank account while the banks are earning nearly 5%. If you are too

I think it is a terrible that most retail bankers are getting basically no interest in their bank account while the banks are earning nearly 5%. If you are too big to fail you should also have a minimum interest rate for deposits that tracks the federal reserve rate. Specifically, this should be regulated more tightly: Bank of America Advantage Savings† Standard Pricing Account Balance Rate % APY % Less than $2,500 0.01% 0.01% $2,500 and over 0.01% 0.01%

JKCalhoun 4y ago
I have an eTrade savings account making 3.75% (I know there are better out there now). But they've emailed to actively solicit me to move money from other banks into my eTrade savings. Sounds like Bank of America (and Wells Fargo, etc.) are going to see cash moving out of their banks if they keep up the BS low-interest rates.
- ghaff 4y ago
  We seem to have this bifurcation between banks and brokerages chasing people who want their "cash" to earn a reasonable return given current interest rates and banks that are fine with basically paying nothing to all the people just leaving in money by default at near-zero returns. I've kept my current bank for various reasons but I'm much more aware of sweeping excess cash into my brokerage account.
all2 4y ago
Wealth front cash accounts net up to 4.8%.
- gresrun 4y ago
  Currently, cash accounts get 4.30%[0] [0] https://www.wealthfront.com/blog/why-is-wealthfront-cash-account-apy-so-high https://www.wealthfront.com/blog/why-is-wealthfront-cash-acc...
  - deleted 4y ago
    [deleted]
jjoonathan 4y ago
Whenever we stimulate the economy, economists trip over each other to explain how giving money to poor people has high monetary velocity and causes maximum inflation, so instead we should give the stimulus to rich people. When we want to rein in inflation by paying people to save, I hear a thundering silence on the prospect of preferentially tackling the highest velocity money to obtain the most inflation control per dollar. Instead, we let banks get away with this (see parent post) and focus on paying rich people to save, when by the previous logic we ought to be doing the exact opposite. Hmmmmmm. It almost feels like the driving force here isn't good stewardship but rather the self-interest of well-heeled economic forces.
- ptero 4y ago
  It is hard to come up with a setup where paying poor people takes that money to savings (i.e., gets it out of the circulation). I am not saying paying poor folks is always a bad idea, I just fail to see a single practical approach where this will lead to a reduction in M2. My 2c.
  - jjoonathan 4y ago
    Encouraging banks to not stiff uninformed retail would be a good start (see: grandparent comment). Capped personal savings instruments would be the next step (see: I-Bonds).
  - toast0 4y ago
    You missed the whole idea "paying poor people to save" If you, say, give people $100 in a year if they keep $1000 on deposit for the whole year, you'd be paying them to save. Sure, the poorer people are going to go out and spend that $100 when it comes in. And if there's no new incentive to keep the $1000 in savings, they may likely spend that too. And you'd need to limit it to one offer per natural person, etc, or people with access to lots of money would endeavor to make many $1000 accounts to get the 2x market rate interest I made up. Maybe $1000 is too much to ask poor people for, but you could scale it down. If you do it right, you get both the policy goal of reducing velocity of money, because you're getting people to save rather than spend some money, and you also get the typical policy goal of distributing money to the poor because even if everyone can get this $100, it's more impactful to the poorer. Or you could do a savings account linked to a lottery. Every $1 in savings up to $X gets you a ticket, if the bank earns about the federal funds rate on the deposit, give half to the individual depositors, and pool the other half to share among the lottery winners. Might be more 'exciting' for some people and encourage more savings that way.
xnx 4y ago
It seems like that is the retail bankers' choice to take a low rate. Viobank money market has 4.77% interest currently.
roenxi 4y ago
There is no reliable process for anyone to work out what a proper rate of interest should be. The best policy is to break banks that are "too big to fail" up until they aren't that big any more. And then stop giving them free money. Pooling huge amounts of resources under the control of people who don't know how to manage it is pure waste, for no good reason. Giving them money on autopilot is even worse. And the whole idea of the federal reserve setting interest rates is bizarre, why is this market of all markets is the one where people want to try central planning? It is the perfect time to try a free market based approach. The US has been fighting the market on the price of money for decades and it is just putting them in a worse and worse spot. Was the fall of the Soviet Union not enough to convince people that economic central planning is a mistake? What on earth will it take.
deleted 4y ago
[deleted]
mise_en_place 4y ago
They can only offer that because their long term 10Y, 30Y treasuries bought back during ZIRP yield around the same. BofA has the highest losses[0] iirc, out of all the banks, with their long term treasury holdings. Edit: linking article (I found it in a spreadsheet passed around Twitter at the time) [0] https://seekingalpha.com/article/4586797-list-of-banks-paper-losses-debt-securities-holdings https://seekingalpha.com/article/4586797-list-of-banks-paper...
- loeg 4y ago
  > They can only offer that because their long term 10Y, 30Y treasuries bought back during ZIRP yield around the same. I don’t think this explanation is plausible. 10-30 year bonds bought during 2020-2022 did not offer 5% yields. They were below 2.5% (30yr) and below 2% (10yr). Hence the “Zero” in ZIRP. Edit: I read the comment wrong but it’s still nonsensical the other way. ZIRP era bonds are already worth less. Banks can offer much closer to the ~5% safe rate than most are. Depositors are just largely insensitive to rates. The concept is called “deposit beta.”
  - mise_en_place 4y ago
    Why would they offer 5%? Deposits effectively form a credit spread between the risk free rate (treasury bond) and what the bank pays depositors. Each additional basis point is netted to the bank as profit no? For example, the yield spread between a 2Y treasury bond w/ a coupon @ 4.25% and a savings acct APY @ 0.01% would be 4.24%.
    - bagacrap 4y ago
      Competition with other banks (as well as non bank places to hold money)
    - loeg 4y ago
      I'm not suggesting banks should offer depositors 5%. Yes, banks love Net Interest Margin.
  - bagacrap 4y ago
lotsofpulp 4y ago
There are a ton of banks offering 4%+. That people do not want to do the 5min of work of signing up for an account online is their choice. https://www.investopedia.com/best-high-yield-savings-accounts-4770633 https://www.investopedia.com/best-high-yield-savings-account...
- deleted 4y ago
  [deleted]
- loeg 4y ago
  There are literally two obscure banks at that link offering savings accounts over 4. I would not call that “tons.” There are a ton offering over 3, sure. Or over 4 if you lock it up in a CD for a few months. Money markets and T-bills are yielding in the 4.7 range. Some <12 month CDs quote 5% or better.
  - cowsandmilk 4y ago
    You stopped at the ads. Scroll down and there’s a text based list with many more including 3 banks paying 5.00% or better.
  - lotsofpulp 4y ago
    It is an ad laden link. Here is a better one: https://www.doctorofcredit.com/high-interest-savings-to-get/ https://www.doctorofcredit.com/high-interest-savings-to-get/ CIT savings connect is 4.5% with no BS, and it is not obscure. https://www.cit.com/cit-bank/bank/savings/savings-connect-account https://www.cit.com/cit-bank/bank/savings/savings-connect-ac...
    - loeg 4y ago
      Quite a few of the Doctor of Credit links are MM, not Savings, for what that's worth. Several savings offerings above 4% but I would argue mostly at small banks you've never heard of. Similarly, I've never heard of CIT Bank -- they appear to be a small regional bank in the bay area.

JKCalhoun 4y ago

I have an eTrade savings account making 3.75% (I know there are better out there now). But they've emailed to actively solicit me to move money from other banks into my eTrade savings. Sounds like Bank of America (and Wells Fargo, etc.) are going to see cash moving out of their banks if they keep up the BS low-interest rates.

ghaff 4y ago
We seem to have this bifurcation between banks and brokerages chasing people who want their "cash" to earn a reasonable return given current interest rates and banks that are fine with basically paying nothing to all the people just leaving in money by default at near-zero returns. I've kept my current bank for various reasons but I'm much more aware of sweeping excess cash into my brokerage account.

all2 4y ago

Wealth front cash accounts net up to 4.8%.

gresrun 4y ago
Currently, cash accounts get 4.30%[0] [0] https://www.wealthfront.com/blog/why-is-wealthfront-cash-account-apy-so-high https://www.wealthfront.com/blog/why-is-wealthfront-cash-acc...
- deleted 4y ago
  [deleted]

jjoonathan 4y ago

Whenever we stimulate the economy, economists trip over each other to explain how giving money to poor people has high monetary velocity and causes maximum inflation, so instead we should give the stimulus to rich people. When we want to rein in inflation by paying people to save, I hear a thundering silence on the prospect of preferentially tackling the highest velocity money to obtain the most inflation control per dollar. Instead, we let banks get away with this (see parent post) and focus on paying rich people to save, when by the previous logic we ought to be doing the exact opposite. Hmmmmmm. It almost feels like the driving force here isn't good stewardship but rather the self-interest of well-heeled economic forces.

ptero 4y ago
It is hard to come up with a setup where paying poor people takes that money to savings (i.e., gets it out of the circulation). I am not saying paying poor folks is always a bad idea, I just fail to see a single practical approach where this will lead to a reduction in M2. My 2c.
- jjoonathan 4y ago
  Encouraging banks to not stiff uninformed retail would be a good start (see: grandparent comment). Capped personal savings instruments would be the next step (see: I-Bonds).
- toast0 4y ago
  You missed the whole idea "paying poor people to save" If you, say, give people $100 in a year if they keep $1000 on deposit for the whole year, you'd be paying them to save. Sure, the poorer people are going to go out and spend that $100 when it comes in. And if there's no new incentive to keep the $1000 in savings, they may likely spend that too. And you'd need to limit it to one offer per natural person, etc, or people with access to lots of money would endeavor to make many $1000 accounts to get the 2x market rate interest I made up. Maybe $1000 is too much to ask poor people for, but you could scale it down. If you do it right, you get both the policy goal of reducing velocity of money, because you're getting people to save rather than spend some money, and you also get the typical policy goal of distributing money to the poor because even if everyone can get this $100, it's more impactful to the poorer. Or you could do a savings account linked to a lottery. Every $1 in savings up to $X gets you a ticket, if the bank earns about the federal funds rate on the deposit, give half to the individual depositors, and pool the other half to share among the lottery winners. Might be more 'exciting' for some people and encourage more savings that way.

xnx 4y ago

It seems like that is the retail bankers' choice to take a low rate. Viobank money market has 4.77% interest currently.

roenxi 4y ago

There is no reliable process for anyone to work out what a proper rate of interest should be. The best policy is to break banks that are "too big to fail" up until they aren't that big any more. And then stop giving them free money. Pooling huge amounts of resources under the control of people who don't know how to manage it is pure waste, for no good reason. Giving them money on autopilot is even worse. And the whole idea of the federal reserve setting interest rates is bizarre, why is this market of all markets is the one where people want to try central planning? It is the perfect time to try a free market based approach. The US has been fighting the market on the price of money for decades and it is just putting them in a worse and worse spot. Was the fall of the Soviet Union not enough to convince people that economic central planning is a mistake? What on earth will it take.

deleted 4y ago

[deleted]

mise_en_place 4y ago

They can only offer that because their long term 10Y, 30Y treasuries bought back during ZIRP yield around the same. BofA has the highest losses[0] iirc, out of all the banks, with their long term treasury holdings. Edit: linking article (I found it in a spreadsheet passed around Twitter at the time) [0] https://seekingalpha.com/article/4586797-list-of-banks-paper-losses-debt-securities-holdings https://seekingalpha.com/article/4586797-list-of-banks-paper...

loeg 4y ago
> They can only offer that because their long term 10Y, 30Y treasuries bought back during ZIRP yield around the same. I don’t think this explanation is plausible. 10-30 year bonds bought during 2020-2022 did not offer 5% yields. They were below 2.5% (30yr) and below 2% (10yr). Hence the “Zero” in ZIRP. Edit: I read the comment wrong but it’s still nonsensical the other way. ZIRP era bonds are already worth less. Banks can offer much closer to the ~5% safe rate than most are. Depositors are just largely insensitive to rates. The concept is called “deposit beta.”
- mise_en_place 4y ago
  Why would they offer 5%? Deposits effectively form a credit spread between the risk free rate (treasury bond) and what the bank pays depositors. Each additional basis point is netted to the bank as profit no? For example, the yield spread between a 2Y treasury bond w/ a coupon @ 4.25% and a savings acct APY @ 0.01% would be 4.24%.
  - bagacrap 4y ago
    Competition with other banks (as well as non bank places to hold money)
  - loeg 4y ago
    I'm not suggesting banks should offer depositors 5%. Yes, banks love Net Interest Margin.
- bagacrap 4y ago

lotsofpulp 4y ago

There are a ton of banks offering 4%+. That people do not want to do the 5min of work of signing up for an account online is their choice. https://www.investopedia.com/best-high-yield-savings-accounts-4770633 https://www.investopedia.com/best-high-yield-savings-account...

deleted 4y ago
[deleted]
loeg 4y ago
There are literally two obscure banks at that link offering savings accounts over 4. I would not call that “tons.” There are a ton offering over 3, sure. Or over 4 if you lock it up in a CD for a few months. Money markets and T-bills are yielding in the 4.7 range. Some <12 month CDs quote 5% or better.
- cowsandmilk 4y ago
  You stopped at the ads. Scroll down and there’s a text based list with many more including 3 banks paying 5.00% or better.
- lotsofpulp 4y ago
  It is an ad laden link. Here is a better one: https://www.doctorofcredit.com/high-interest-savings-to-get/ https://www.doctorofcredit.com/high-interest-savings-to-get/ CIT savings connect is 4.5% with no BS, and it is not obscure. https://www.cit.com/cit-bank/bank/savings/savings-connect-account https://www.cit.com/cit-bank/bank/savings/savings-connect-ac...
  - loeg 4y ago
    Quite a few of the Doctor of Credit links are MM, not Savings, for what that's worth. Several savings offerings above 4% but I would argue mostly at small banks you've never heard of. Similarly, I've never heard of CIT Bank -- they appear to be a small regional bank in the bay area.