Why Savers May See Some Better Deposit Rates in 2013
Most savers probably don't know much about the Transaction Account Guarantee Program (TAGP). This program doesn't affect most of us who make sure their savings are earning interest. However, there are some who have large savings and are primarily concerned about keeping all of that money FDIC insured. This is especially the case for businesses which may have millions of dollars in transactional accounts that are used for things like payroll. This is where TAGP comes in. It provides unlimited coverage of deposit insurance for noninterest-bearing transaction accounts. The original TAGP started during the financial crisis, and it was intended to reduce the risk of bank runs. It has been extended a few times. Now this latest TAGP is scheduled to expire on December 31, 2012.
The expiration of TAGP may be good news for savers. In short, it may encourage small banks to raise rates to maintain deposits.
According to this BauerFinancial Jumbo Rate News, when TAGP expires "there could be upwards of $1.5 trillion that could be withdrawn in search of either FDIC insurance or interest/dividends, or both." Not all of that money will be leaving banks. As the article describes, $1.3 trillion of this money is in large banks, many which are considered "too big to fail". So most of the pressure to raise rates to maintain deposits will be on small banks.
That's one reason banks have been fighting to extend TAGP. This commentary at the American Bankers Association website claims that the expiration of TAGP will put community banks at a competitive disadvantage with the large banks.
The banking lobbyists "appear to have lost this battle" according to this WSJ article. They were not able to get the TAGP extension into legislation that passed the House last week. The article warns that the lobbyists will try again following the November elections.
No Change to the $250K Standard Maximum Deposit Insurance Amount
It's important to note that this expiration of TAGP has no effect on the $250K standard maximum deposit insurance amount. This was made permanent in July 2010. So if you receive a notice from your bank that mentions the end of a type of deposit insurance, it only affects those who have over $250K in checking accounts that pay no interest.
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Anonymous/Paoli (anonymous) - #1, Monday, September 24, 2012 - 9:49 AM
Am I actually reading some "almost" good news for savers?? Even if it doesn't turn out, at least it gives us some hope for the future. Thanks Ken. This can actually be a "no Mylanta" morning for me! :)
Anonymous - #2, Monday, September 24, 2012 - 10:47 AM
To Anonymous/Paoli #1,
And how is this a good news?
Now, we, the regular savers will have more competition for CDs, MM, savings and any short term interest paid by the banks.
When $1.5 trillions dollars start to search for better returns, we can not compete with that money inflows into the interest paying instruments, It is a more bad news for the savers.
Anonymous/Paoli (anonymous) - #3, Monday, September 24, 2012 - 11:14 AM
#2 Creeps! Can't you let me live in my "Let's Pretend all is Well" for at least one day? Sometimes intelligent thinking brings on more need for Mylanta. Ken posted "may be good news for savers" and I will just focus on that if you don't mind. Maybe you are just someone who has a negative view of life and what you are posting will not affect savers. We just have to be sure we are "first in line" at the banks if rates ever go up! Thanks for warning me, tho. I will keep the car gassed up and watch all out of town banks when the time is right.
Anonymous - #4, Monday, September 24, 2012 - 11:20 AM
Everythings in uncharted territory, but we have a lot of negative mean spirted people posting. They can't get enough of goverment conspiracies, bank high jinks, whatever makes them feel happy about their bitterness and negativity.
Anonymous - #7, Monday, September 24, 2012 - 1:25 PM
I agree with #2, he/she is correct on the observation of the future interest rates.
Don’t forget, now the banks will have to insure the $1.5 Trillion and pay FDIC insurance on all that money just for seating at the banks. Guess who will pay for it, you and I, in even lower interest rates.
The savers lose again.
#4, man up and stop being so sensitive, reality always prevail, #2 was not mean to anyone.
Anonymous/Paoli (anonymous) - #8, Monday, September 24, 2012 - 1:28 PM
#5/6 You carry on like a raving manic and make it known to the World you want to give OBAMA another 4 years and then you tell people to ignore ME?? Everything you say I am is what your beloved Obama is and it is everything I am against! I am NOT a liberal! I hate these tags we dole out and refuse to accept them. I am for what is best for our country and people.
How dare you say Savers are Hoaders. It is their money. THEY worked hard for it and they can use it for toilet paper as far as I am concerned! You have no right to decide about anyone else's money but your own. You are for the one person who wants Redistribution. I don't think you have any idea about what Obama stands for. I know who I am voting for and it surely won't be for your pal!
Anonymous - #13, Monday, September 24, 2012 - 2:10 PM
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Dear Anonymous/Paoli,
>> #5/6 You carry on like a raving manic
Actually it is you - Paoli - who was/is a raving manic!
Remember the episode where you staked a claim over your husband's Individual Retirement Account, while he was still alive, and (presumably) sane?
After I pointed out multiple times you cannot claim his IRA account, you still kept raving about how you had an "arrangement" where whatever was your was yours and whatever was his was also yours?
That was a classic behavior of a raving manic.
I hope you get better from your "condition".
Yours Truly,
Anonymous
Anonymous/Paoli (anonymous) - #14, Monday, September 24, 2012 - 2:14 PM
#10 :Will you please show me any post I made about Elizabeth Warren? Until recently, I had no idea who she was and am not one of her fans. If you are going to mock "me" please try to do it in a way that you don't show your own ignorance. As for Lincoln, you could be very right in that aspect so maybe you should be careful what you post about me. Maybe I don't read most of this crap before posting because it is so obvious what some of you are going to post that I can answer even BEFORE reading. Don't you wish you were that astute? Now go play with your pet rattlesnakes and leave me alone!
Anonymous - #15, Monday, September 24, 2012 - 2:25 PM
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Dear Anonymous/Paoli,
>>Now go play with your pet rattlesnakes and leave me alone!
Err ... Cannot do that ... On four counts.
1) I don't have a pet rattlesnake
2) You are alone actually, but are seeking company on this blog, and because of your obvious "charming" personality, you're getting plenty of it!
3) You are way more fun than rattlesnake. ... Why? becaue rattlesnake is logical that it hunts the prey and stays away from danger. You do neither!
4) I guess "playing" you is more fun, that playing with a reptile (although I've never played with one).
Yours Truly,
Anonymous
Anonymous - #16, Monday, September 24, 2012 - 2:29 PM
And she rambles on again and again. Maybe she'll get tired and need to take her afternoon nap soon. Then her spouse can hide her PC.
Anonymous/Paoli (anonymous) - #17, Monday, September 24, 2012 - 2:32 PM
#15 The most important lesson we can learn in life is "Know Your Enemies". You can hide behind all the avatars and anonymous numbers you want but you have had one intent since I came on here. That is to drive me off. You can't but now that I know what you are, I know how to avoid you. You may as well get a rattlesnake because your days of taunting me are over.
Anonymous - #20, Monday, September 24, 2012 - 2:58 PM
If she stopped posting her nonsense then this bog would be so boring. Interest rates certainly are nothing to talk about. And everytime someone tries to talk about legimate alternative investments she jumps up and down in protest. She needs to go in the hills of Kentucky.
Bozo - #22, Monday, September 24, 2012 - 5:15 PM
Politics aside, I am always the eternal optimist. History does tend to repeat, and longish (5 years plus) CDs should "eventually" reward those with the laddering philosophy. This is, no doubt, a dark period for fixed-income types. Little to brag about, as it were. But stuff turns, it always does. The point of fixed-income is, and always was, to provide "an anchor to windward" for one's portfolio, not to throw off a huge real return (over inflation). Risk is taken on the equity side of one's portfolio.
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