Honest Services From Bankers? Increasingly Not Likely
14th November 2009
Need more reasons to demand honest services from a banker? Try this list:
1. Congress raised the FDIC insurance to $200,000 to make depositors comfortable leaving money in banks; then the banks passed the insurance premium on to customers – including those that never had $200,000 cash in the bank in their lives and probably never will. Seriously, how much money do you have to have before it makes sense to have $200,000 in cash in a savings account earning 0.25%?
2. Banks can borrow at 0% from the Fed yet they raise the interest rates they charge even their best customers. The bank I use for my company willingly lent me $10,000 last year to open a new office and approved a $7,000 credit card limit. Last month they sent me a letter saying they are raising the interest rate by +1.9 percentage point – though I have never missed a payment deadline.
3. The banks can use our deposits to purchase securities issued by the Federal government, which are yielding better than 3 percent. They pay us about 0.25 percent yet still find it necessary to tack on a multitude of fees – which amount to 53 percent of banks’ income today, up from 35 percent in 1995.