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Sunday, September 18, 2011

North Dakota Not Only "One" With Lack of Faith of US Economy -- Bank Deposits Soar Nationwide -- Earning Little to No Interest

Link here.
Consumers worried about the economy are pumping cash into checking, savings, and money market accounts. But the banks don't need their money and have slashed interest rates to discourage customers. 

Americans are pumping money into bank accounts at a blistering pace this year, sending deposits to record levels near $10 trillion on escalating fears that the U.S. economy is on the verge of another implosion.

There's no sign that the flood into checking, savings and money market accounts is slowing down. In the last three months, accounts at U.S. commercial banks have increased $429 billion, or 10%, almost double the increase for all of last year.

There's one big problem: Banks don't want your money.
My hunch: folks hate earning all that money on Wall Street, only to have it taxed. Might as well put it in the bank, earn little to no interest, and not worry about taxes.

This is why banks don't want your deposits: it costs them money to "store" your money, even if it's all electronic. Banks need to insure their deposits with the FDIC:
The large amount of cash only adds to expenses such as paying for deposit insurance premiums. With lending standards tight as a drum after the financial fiasco, and demand for loans growing only slightly, banks have been doing everything they can to demonstrate how little they need new cash.

In the most obvious sign, they have slashed interest payments to discourage customers. Wells Fargo & Co., which has the most branches in California, halved its payments on one-year certificates of deposits to 0.1%; Citigroup, which paid 2% in 2009, dropped its payment to a paltry 0.3%.

And in a possible glimpse into the future, one New York banking giant is even charging big customers for the right to park money there. The Bank of New York Mellon is forcing institutional clients to pay fees if they deposit more than $50 million into an account.
And Frank-Dodd won't let the banks loan money if it distorts their portfolio. Frank-Dodd regulates a bank's portfolio mix. Which is no different than parents who give their children an allowance and then tell their children how they can or cannot spend it.

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