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CUNA analyzes savings-rate strategies for INY TimesI
WASHINGTON and NEW YORK (12/7/10)--The New York Times, in an article Friday on why earnings on savings may not be keeping up with inflation, turned to Credit Union National Association (CUNA) Chief Economist Bill Hampel to help explain why interest rates on depository institutions' savings accounts are barely above zero. The article notes that people are doing a better job of spending less than they earn but leftover money is going toward paying down debt, not borrowing more. Banks can't lend their deposits out in the quantity they used to, or aren't because of tightened credit policies. Instead, said Hampel, they buy Treasury bills, which don't pay as they once did because of the interest rate environment. Nor do they deliver the kinds of returns banks would get if they loaned money under normal conditions, he said. The resulting lower profits make it harder to raise the rates that savers earn, while lingering losses from loans pose their own pressures, the article said. The article points out that "credit union members putting money into certificates of deposit would love to earn more, and they often do get a bit more than they would from a nearby megabank. But members who are borrowers want to pay less for their loans, and they often do." "Borrowers are owners just as much as savers are," Hampel said. The article, "Why Savings Account Rates Are So Pathetic," also provides a bar graph comparing banks vs. credit unions and citing CUNA as its source. It shows how greater bank noninterest/fee income and loan losses factor into the equation. To read the full article, use the link.
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