Dedicated to Deposits: Deals, Data, and Discussion
About Ken Tumin About Ken Tumin - Founder and Editor

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

Featured Savings Rates

Popular Posts

Featured Accounts

Bernanke: Stock Market Gains Have Benefited Some Savers

POSTED ON BY

Bernanke: Stock Market Gains Have Benefited Some Savers

Yesterday and today, Fed Chairman Ben Bernanke gave testimony before the Senate and House committees in his semiannual testimony to Congress on monetary policy and the economy. As described in this LA Times article:

Bernanke's remarks cheered Wall Street as investors and analysts concluded that the Fed's campaign to stimulate economic growth was unlikely to be slowed or halted any time soon.

One notable exchange at the Senate meeting was between Chairman Bernanke and Senator Elizabeth Warren. The Senator pressed the chairman about the problem of the market's perception that the big banks are too big to fail.

In today's House meeting, several committee members voiced concern about how the Fed's monetary policy is hurting savers and retirees. I have some excerpts below.

First, Rep. John Campbell (R-CA) as chairman of the Subcommittee on Monetary Policy and Trade gave an opening statement that detailed seven risks that he believed are "exceeding [the] now meager benefits of the current monetary policy." His fifth risk involved savers and retirees:

Number five is that savers and retirees are being forced into riskier assets in the search for some sort of yield. When this unwinds, that is going to be a problem for our savers and retirees. We all in economics learned early on as you get older take less risk but now what we find as people get older they are having to violate that principle and in search of some kind of yield are taking much much greater risk which could be a problem in the future.

Since it was an opening statement, Chairman Bernanke did not get a chance to respond to these risks. Chairman Bernanke did respond to questions asked by Rep. Shelley Moore Capito (R-WV). She described how the current monetary policy is "crushing our seniors." Here's an excerpt of that exchange:

Rep. Shelley Moore Capito (R-WV):

Many of us are in that sandwich generation trying to help our parents, and our parents are doing a pretty good job trying to help themselves, but they're relying on their good planning and investments if they have been lucky enough to invest. And the dividend and interest availabilities to them are crushing our seniors as they see their healthcare costs go up. And some of the policies that you put forward I think, and that the Fed has, has caused concern for those of us who are concerned about seniors who don't have the ability to get another job, that's played out for them.

What what can I tell my seniors back home that is going to give them some optimism that they're going to be able to rely on that good planning that they had to carry them through the senior years.

Fed Chairman Ben Bernanke:

Well I would say first that savers have many hats. They may own fixed income instruments like bonds, but they may also own stocks or a house or a business. All those other assets benefit when the economy strengthens and those values have gone up. The stock market is roughly doubled as you know in the past few years.

So for an investment perspective there are alternatives. More importantly though, you are not going to get strong returns in an economy that is fundamentally weak. The best way to get sustainable high returns to savers is to get the economy back to running on all cylinders.

It's somewhat paradoxical but in some ways the best way to get interest rates up is not to raise them too quickly because by keeping rates low now we can help the economy get stronger, we can create more jobs, we can create more momentum in the economy. That's the way to get a sustainable higher set of interest rates.

It's very striking that if you look at every other industrial country around the world, interest rates are about exactly where they are here.

That says something about the fundamentals which are very weak in most of these industrial countries, and until we can get greater forward momentum, we're not going to be able to see sustainable higher returns.

Chairman Bernanke's reply was similar to what he has said in past hearings. He said savers who own stocks and real estate have done well with the Fed's monetary policy and that the only way to get higher interest rates that are sustainable is for the economy to strengthen. Rep. Scott Garrett (R-NJ) pushed back on the premise that higher stock and real estate values should be looked at as a valuable result of the Fed's monetary policy. He asked Chairman Bernanke:

How you can suggest that an increase in the stock market is a positive indicator of your work in a cost-benefit analysis of the rest of the economy?

This was one of several questions asked by Rep. Garrett. He also asked how Chairman Bernanke could give advice that sounded like seniors should move their money into stocks. Chairman Bernanke was quick to clarify that he was not giving financial advice.

Unfortunately, Rep. Garrett tried to cover too many things in the short time he was allocated, but I thought his stock market question was useful. A lot of the stock market gains in recent years have been driven by the Fed's monetary policy. This could be a bubble that's not sustainable. The stock market will likely fall when the Fed starts moving toward tightening. It will probably also fall if the economy fails to improve. As we saw in 2001 and in 2008, stock market gains can vanish quickly. So in my opinion, Rep. Garrett made a good point that the increase in the stock market isn't a positive indicator that should be used to validate the Fed's monetary policy.



Related Posts

Comments
28 Comments.
Comment #1 by Anonymous posted on
Anonymous
"The stock market will likely fall when the Fed starts moving toward tightening."

This of course is dependent if the Fed even starts "moving toward tightening" within the near term.  The hesitency to even consider such an action by Ben Bernanke, along with his possible successer Janet Yellin, is years or possibly a decade away. The assurance given that the interest-free money for the Wall Street banks will continue to flow is just like providing more heroin for an addict.

16
Comment #2 by OldGuy posted on
OldGuy
I thought Senator Corker nailed it when he asked Bernanke whether he and his colleagues ever thought about the "degradation" they've inflicted on the American economy and financial system--and whether they ever thought about how they had become "captive regulators."  I guess Bernanke didn't hear these questions.  They were drowned out by the cheering coming from Wall Street over the Chairman's clear message that ZIRP and QE were here to stay, perhaps forever.

18
Comment #3 by ytytytyt posted on
ytytytyt
.
.

Dear Mr Tumin,
 
Once again I appreciate the measured answers given by the Chairman.
 
A brash Chairman could have easily brushed aside Sen. Moore by stating:

Senator, the seniors are your constituents, and you are answerable to them, not me!  You ought to think of what you need to tell them on your own, rather than asking me.  FOMC's job focuses on the dual mandate of "employment" and "price stability". FOMC, by majority, is executing the monitory policy that will help create jobs.  FOMC is ever mindful of the "price stability".  The inflation measures - compiled by an independent department - the BLS - indicate that it is tame. Therefore, we have "price stability" at present.  FOMC has implemented the "inflation targeting".  As the employment goes up, FOMC will begin tightening.  Until then FOMC remains committed to doing its job, as is required by the law.

>> This was one of several questions asked by Rep. Garrett. He also asked how
>> Chairman Bernanke could give advice that sounded like seniors should move
>> their money into stocks. Chairman Bernanke was quick to clarify that he was
>> not giving financial advice.

Aha ... the seniors again!

Clearly Rep. Garrett erred!  Rep. Garrett must know that the Chairman was giving testimony to the elected reps, and surely not giving financial advice to seniors!  :-)

Yours Truly,
Anynomous

2
Comment #6 by Bob (anonymous) posted on
Bob
Most of the seniors I know, myself included, are nearly 100% invested in CDs Money Markets, and the  like.   The more conservative seniors, which I think are the majority, have little or no stock or bond holdings.  Although the may own some real estate, most live in those homes, so any increase in house value doesn't really help them in their day to day income needs. 

When I retired I had $1.5 million dollars, from which I wanted $60K per year in ultra safe, FDIC insured CDs.  My annual interest is now 1/3 of that amount, and I have to invade principal just to meet expenses.

Bottom line, the economic bail out of the borrowers is being funded by the savers.  Only they and pension plans suffer from the minimal interest rates.  It just doesn't seem fair on any level.  

22
Comment #7 by Wil posted on
Wil
Since people using accounts that invest in equities, bond, mutual funds and the like are generally called "investors" by the media, it is clear enough, at least on this blog, that the term "savers" is applied to people using cash deposit accounts as the principal asset class, or at least a major asset class, for their savings. It is possible that some people are both "investors" and "savers."

7
Comment #10 by Anonymous posted on
Anonymous
To Anynomous #6,   The system we have today is and was caused by companies and their investors who only watched the bottom lines.  If there was a way to lower wages, work people harder or use less employees, cut benefits they did it and when they still wanted more they moved overseas.  It is called GREED, one of the seven deadly sins. And it was done with the governments blessing i.e incentives bringing capitalism to the world.  Making the world more equal, giving everyone the "fair" chance while we continued to create and sustain the handout from the cradle to the grave.

4
Comment #11 by ytyt posted on
ytyt
.

.

Dear #10,

"Greed is good" is one of the memorable quotes by fictional Gordon Gekko.

I guess you don't quite agree!  :-)

Yours Truly,
- Anonymous

2
Comment #12 by Anonymous posted on
Anonymous
To Bob (anonymous) - #6,

You should call Bernanke and tell him that you are not the one who benefited from his policy and ask to e-mail you a list of the persons who benefited as per his statement to Congress.

6
Comment #13 by ytytytyt posted on
ytytytyt
.

.

Dear #12,

How about posting the number where we can reach the Chairman? 

... No no ... I don't want to tell the Chairman that I did not benefit from the FOMC policy ... Quite the opposite actually ... I'll like to tell the Chairman that I benefited .... I got low rate Mortgage ...

... While at it, I'll pass on my email addrres to the Chairman ... Which in turn can passed on to Senior #6 when s/he makes that call!  :-)

Yours Truly,
- Anonymous

1
Comment #14 by Anonymous posted on
Anonymous
Hi ytytytyt - #13,

This is a savers forum and not a mortgage forum, so your comment does not belong here.

Second, how is the low mortgage rates benefiting me, when my property is worth half than what I paid for it 10 years ago and can not refinance it?

8
Comment #16 by ytytytyt posted on
ytytytyt
.

.

Dear Wil,

Do you have some made-up name for them - Maybe "savestors" or maybe "invevers"?  :-)

While you are parsing the terminology, let me point out a few more terms/words/facts. The firms that supply accounts which can have equities, bond, mutual funds etc in them, are often called as the "brokers", often times the account holders are called as the "traders", and mostly the the regulator is the "SEC",and often times such accounts have an insurance by the institute "SIPC".   ;-)

It still remains a mystery as to who this proverbial "saver" is?  ...  :-)

Yours Truly,
- Anonymous

1
Comment #17 by Wil posted on
Wil
You asked a question, I merely answered it. But the conventional vocabulary used in this country speaks of stocks, bonds, mutual funds, and the like as being "bought" and "sold." We do not use the same terminology for movements in and out of cash accounts, which are spoken of as "deposits" and "withdrawals." The former are therefore spoken of as "investments" while the latter are "savings." Therefore, people who buy and sell securities are "investors," while people who deposit cash in savings accounts and the like are "savers." You may disagree with the terminoloogy as it is conventionally used, and may even have your reasons for doing so; but as the purpose of language is the communication of ideas between people, your disagreement is only apt to lead to confusion. Whether or not you find any of this helpful is your choice. Good night.

7
Comment #18 by ytytytyt posted on
ytytytyt
.

.

Dear Wil,

I do not totally disagree ...

But the fact is that the "brokers" do offer "CDs" that are very much insured by the FDIC ... And sure enought such brokered CDs are "bought" and "sold", and their values do fluctuate.  The regular lots and often times the "odd-lots" of brokered CDs at times are at "premium" and at times at "discount". (And I'm not even talking about the Structured CDs, let alone the other whole lot of trading vehicles.)

I've traded the CDs in the past.  So should this be termed as "saving" or "trading" or "investing"?

 In short the terminology/operation/real-life is much more nuanced than the old garden variety "passbook savings" !!  ... Hence my question, which was directed to Mr Tumin.

... And good night to you as well.

Yours Truly,
- Anonymous

2
Comment #20 by ytytytyt posted on
ytytytyt
.

.

Dear Wanderer,

What you are doing is wring a combination of a little bit of truth, and a whole lot of mud slinging.

Yours Truly,
- Anonymous

2
Comment #21 by Wanderer (anonymous) posted on
Wanderer
ytytytyt,

No mud slinging from this direction. Just unadulterated truth, without pulling of any punches...

1
Comment #22 by ytytytyt posted on
ytytytyt
.

.

Dear Wanderer,

The stuff you've written is like those tabloids where "Invasion from mars", "birth of anti-chirst" sort of things are written without a shread of proof!

e.g.

>> Mr. Bernanke certainly does not have "savers" as his constituency.
>> Indeed, he has only ONE group as his constituency. They are the
>> people who lobbied to put him into office, knowing full well about
>> his printing-to-infinity tendencies. That constituency is the international
>> banking cartel, and none other than that.

Really? ...

So these "people" first lobbied President Bush for the nomination/appointment, and then they lobbied the Senate for the confirmation.  And all of this back in 2006 when Chairman Greenspan retired, when not many had even heard of the term "quantitative easing".

Unadulterated truth indeed!

Yours Truly,
- Anonymous

2
Comment #24 by Anonymous posted on
Anonymous
.

.

Dear Wanderer,

What is obvious is that you are a proponent of theory of rampant corruption and conspiracy theory, and hardly possess any experience with politics and much less about the law.

International banking cartel? .... Casino Bankers? ... Sure, I appreciate that you dislike the bankers.

You allege that even President Bush and 60 senators were lobbied to set aside their oath and become a part of a grand conspiracy of money-printing  ... Sure, I appreciate that you dislike the politicians.

Here is another nugget of conspiracy theory:

>> Keep in mind that when I am talking about the banking cartel, I am not describing
>> your average community banker. I am talking about the boys from NYC and London,
>> and a few on the continent, at the top levels of their institutions, who conspire
>> regularly with each other, and with government entities, to manipulate markets.

Yes ... Of course ... :-)

Yours Truly,
- Anonymous

2
Comment #25 by Anonymous posted on
Anonymous
.

.

Dear Wanderer,

>> You can be sure that the banking cartel executives are buying as many gold,
>> silver, platinum bars, and other tangible stores of value that they can get
>> a hold of.

Oh yes  .... I'm sure they are ...

>> The current price attack, against precious metals, is a matter
>> of "working the system", using paper gold in futures markets to falsify
>> the "spot" prices.

Indeed ... those casino bankers ... they'll falsify anything ...

>> Now IS the time to buy. That is not to say prices might
>> not go down from here, but it is impossible to pick the exact bottom.

I'm sure it is the time to buy ... But wait a second Wanderer, since you already have so many details about the conspiracy, manipulation, and falsification, why don't you just ask the "boys" from NYC and London when have they scheduled the exact bottom, and just tell us the date?

Yours Truly,
- Anonymous

3
Comment #26 by Anonymous posted on
Anonymous
And another problem with the stock market is one has to consider the pension plans these companies have.  They are severely underfunded just like the state pensions, so in the future the amount of profit/dividends and chance for growth will decrease.  Just a thought I just had.  If you look since 2007, the value of the stock market is still lower than it was 6 years ago.

2
Comment #27 by Anonymous posted on
Anonymous
.

.

Dear Wanderer,

>> Smart savers need to diversify out of US dollars. I do not suggest
>> investing in stocks at current levels, because eventually the Fed is
>> going to be insolvent, as I have described in detail before, and
>> the stock market will collapse completely once they are forced to
>> stop printing, by the middle of 2017 or before.

Oh no ... no no no ... we don't want stocks, and neither the US dollars!  :-)
Oh yes ... we do remember your description in detail of the doomsday before 2017! :-)

>> In the meantime, the Fed will do what its masters tell it to do,
>> and that means that your retirement nest egg is going to be destroyed
>> unless you start "saving" in hard currencies ie: gold, silver, platinum
>> and/or tangibles like agricultural land.

Right ... Fed and its masters ... Those sleezy casino bankers ... Out to make scrambled egg out of our retirement nest-egg ... We got to be careful ... Got to get gold and silver and platinum and land ... Yes !!!

BTW Wanderer, why would FED stop printing before 2017? ... Who in the world will force them to stop going against the command of their masters? ... Who is more powerful than their masters - the international cartel of casino bankers?  :-)

Yours Truly,
- Anonymous

3
Comment #28 by Wanderer (anonymous) posted on
Wanderer
The American people are more powerful than the casino banking cartel, and always have been. But, this is not just a casino-banker issue. It is an issue of an entire nation filled with debtors who want to live like they have money they don't really have. That is how and why the banksters created this scheme in the first place. Fiat money was created as a way to subsidize bankers while allowing politicians to spend money they don't have. Although, in theory, gold is no better than paper, in practice, a printable currency facilitates corruption.

Meanwhile, the American people are very busy sleeping. WHen they finally wake up, they will realize that the current foolishness will help only a few banksters, but not them. No one can live off the proceeds of other people's wealth, because those who produce the wealth will eventually stop doing so, or vote with their feet and leave. The American people will force a stop to the printing and close down the Federal Reserve, but that won't be before it causes an economic implosion which, per my calculations, should happen before the end of 2017.

As to asking the banksters, themselves, when, if ever, they intend to have the Fed stop printing money... well, that might work for a writer paid by the cartel to put propaganda into blogs, but, probably not for them either. Such people are very low on the totem pole, and would not have access to that kind of information, even if such a decision had already been made, which it probably has not been. Moreover, it would be the same as asking a burgler when he intends to rob your house, and when he intends to leave, after robbing it!

In the interim, how much financial damage to the innocent will happen? How much wealth will be transferred from honest hard working people who save, to speculators and banksters who don't?  How far will the biggest heist in the history of the world be allowed to run? Will the US government become insolvent first, when the printing ends, and before its Congress agrees to reduce spending? Will NYC/London banksters ever be punished? If so, how severely and in what manner? Will the American people, instead, be duped into replacing the Fed with another inherently corrupt institution?

There are a lot of open questions...

4
Comment #30 by Wanderer (anonymous) posted on
Wanderer
ytytytyt,

Your imaginary cartel is quite interesting. What else can they do?

The real banking cartel is simply a group of market manipulators who are experts at market fakery, and follow in their father's footsteps in a very inbred industry. They have managed over several generations to place "Trojan horse" appointees into power at most regulatory organizations, and in virtually every Treasury department and Finance Ministry in the western world.

They are nothing more than that. Their power in Congress and elsewhere comes from stealth, cunning, market manipulation in response to Congressional acts they don't like or which they want to encourage, and nothing else. Similarly, they often con the American people into buying and selling various assets in ways that maximize their personal profits, at times of their choosing, as they are doing with precious metals right now.

Fraud and fakery are powerful tools when skillfully employed, and are more than enough. Most elected representative I've known, and I knew quite a few in my day, are not overtly corrupt. The problem is that they have no understanding of finance. The banksters get their ear because they've got the money for the $1,000 per plate dinners, aa well as providing funding for unlimited spending out of "independent" entities that propagandize for or against particular candidates.

Regulators who sell out to these people are a different matter from elected representative. Certainly, by any definition, the Trojan horses placed into top positions at the behest of the banksters do their bidding. Some are banksters themselves. Such people can be deemed corrupt even though they will rarely, if ever, take overt bribes. Their payback comes from extraordinary bonuses and salaries before and after leaving government service.

1
Comment #31 by Anonymous posted on
Anonymous
In order to tackle the present economic conditions, Federal govt has to take atleast one serious action viz, Oil exploration. Many fiscal and monetary reforms and adjustments are tried. Our economic problems are so deep that monetary and fiscal adjustments can not solve. In order to solve, we have to just use atleast a part of NATURAL RESOURCES, that is oil. Billions of dollars are paying to other countries for the import of oil. If we can save that dollars we can use it in our economy. That will give a boot to our economy as well as the world economy. Atleast positive sentence from the President will increase the investment value.

1
Comment #32 by ytytytyt posted on
ytytytyt
.

.

Dear Wanderer,

Got to admit ... It is all imagination on my part ... You see, I lack the sort of first-hand hard-evidence based knowledge that you've got  :-)

>> The real banking cartel is simply a group of market manipulators who are experts at
>> market fakery, and follow in their father's footsteps in a very inbred industry.

Right ... I think I get it.  But what's with "father's foot-step"?  ... Don't they let women hold higher positions?  ... Do they simply use the women to conduct their "inbreeding" program? ... Guess I get it! ... Who are some of the families?  ... Please share names of some of the prominent godfathers in these cartels in whose footsteps their sons will follow.

>> They have managed over several generations to place "Trojan horse" appointees
>> into power at most regulatory organizations, and in virtually every Treasury
>> department and Finance Ministry in the western world.

Oh yes ... several generations of fraud and fakery ... Ha ... but it will come to an end before 2017 ... Thanks to your calculations ... Right? ...

Cool ... You are introducing so many familiar terms in different contexts ... International Cartel of Casino Bankers ... Trojan Horse Appointees ... Great!

Perhaps it is time to diversify for these cartel inbred families into East ... Tokyo ... Beijing ... New Delhi ... While at it maybe they ought to expand the gene pool to include some breed (brides?) from Russia and Brazil as well ... No?

Yours Truly,
- Anonymous

2
Comment #33 by Wanderer (anonymous) posted on
Wanderer
ytytytyt,

It is a growing waste of time responding to you, and I won't deal with all of your nonsense, but I will make one major correction. I never said that the banksters will be destroyed before 2017. On the contrary, it is the US economy that will be "destroyed" in the sense that huge numbers of citizens will be impoverished by the collapse of the US and, probably, a few other major world currencies. The banksters, to be sure, are already preparing, and will be well-prepared way ahead of time, for a massive restructuring of the financial world. It will be the innocents who continue to trust in their paper who will be the primary sufferers. Indeed, even one or more, or even many of the bankster institutions may go belly-up, but that won't affect the personal portfolios of the banksters themselves.

But, "...the best laid plans of mice and men often go astray." So, in fact, the banksters may also be dooming themselves, in spite of their preparations. There is no guaranty, for example, that eventual economic collapse will not usher in a French or Russian revolutionary mentality among the common people, or worse. We already know what happened in the 1930s Germany, after a similar episode in history, from 1919-23. Remember, Hitler was duly elected when his party received a majority of votes, and this event was, in large part, a response to what a group of German banksters did to that country's middle class during the Weimar period. Hitler brought even greater evil upon innocent people than banksterism. In short, the aftermath of severe episodes of economic instability, akin to what is ahead for America, is quite unpredictable, even for banksters. When greed and avarice combine to cause such an environment, you are playing with fire.

2
Comment #34 by ytytytyt posted on
ytytytyt
.

.

Dear Wanderer,

Alas ... I was having so much fun ... Too bad that you won't be responding to me.

Yes ... 2017 ... "destruction of US currency" ... because of findish plot of the "inbred" international cartel of canino bankers and their "trojan hourse appointee", in virtually every finacial/treasury position of power in western world ... Indeed ... We all know it now!!!

Yes ... Maybe America will have have French or Russain style revolution followed by German style dictaroship ... But you don't guarantee that ... Only two things come with Wanderer's gold-back guarantee: (a) Gold at 2500 before Feb 2014 (b) Destruction of US Dollars by end of 2017. ...

Great entertainment Wanderer ... maybe if you comeup with some more (ill)logic in future, we should do this again!  :-)

Yours Truly,
- Anonymous

2
Comment #36 by Wanderer (anonymous) posted on
Wanderer
There is little question that the eventual reckoning will be dire. But, unlike the Federal Reserve, CFTC and Comptroller of the Currency, the FDIC appears to have been spared the intense lobbying for appointment of Trojan horses. Both the previous and the current Chairman of the FDIC are respectable people.

Perhaps, the FDIC is not considered critical enough, because it is not the one that facilitates sale of hundreds of trillions of dollars worth of inherently fraudulent derivatives. The cost of corrupting government agencies is not small, and when the cost exceeds the benefits, the casino banks will, apparently, leave them alone.

Furthermore, now that Elizabeth Warren, and a few others, have been elected, we have a few folks who are knowledgeable enough to be effective in opposing the corruption. Dr. Ron Paul was smart in a general sense, understood the situation, and was an honest forthright politician. But, he was not knowledgeable enough in the details of the banking cartel's shenanigans to be effective.

In short, the outlook for the western world's middle class, over the next 5-10 years, is bleak, given that their national financial direction is being so badly corrupted by the casino bankers. But, we do have a few rays of hope, and, I am sure, will have more as the years unfold.

2
Comment #38 by Wanderer (anonymous) posted on
Wanderer
GirlonHorn,

Unfortunately, the depression of 2008 was merely placed into temporary "remission", as illustrated by the fact that, in order to keep faking the value of stocks and bonds, the Federal Reserve must continually print endless reams of new money. In doing this, it was raiding the store of value represented by previously existing dollars, without consent of the victims of the covert theft. It has used their money to "stimulate" and/or reward others. Now, because of what the Fed has done, when the printing stops... and, even more so, if they never stop printing until forced to do so, the final reckoning will be far more brutal than it ever would have been 5 years ago.

1