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"Savers And People Living On Fixed Incomes Have No Voice In Washington"

Saturday, August 21, 2010 - 9:39 PM

It is not lost on these consumers that their minuscule returns are a direct result of the Federal Reserve's attempt to shore up troubled banks’ financial standing. Sharply cutting interest rates vastly increases banks’ profits by widening the spread between what they pay to depositors and what they receive from borrowers. As such, the Fed’s zero-interest-rate policy is yet another government bailout for the very industry that drove the economy to the brink.

Todd E. Petzel, chief investment officer at Offit Capital Advisors, a private wealth management concern, characterizes the Fed’s interest rate policy as an invisible tax that costs savers and investors roughly $350 billion a year.


“If we thought this zero-interest-rate policy was lowering people’s credit card bills it would be one thing but it doesn’t,” he said. Neither does it seem to be resulting in increased lending by the banks. “It’s a policy matter that people are not focusing on,” Mr. Petzel added.

One reason it’s not a priority is that savers and people living on fixed incomes have no voice in Washington. The banks, meanwhile, waltz around town with megaphones.

Savers aren’t the only losers in this situation; underfunded pensions and crippled endowments are as well.

cactuscactus51 posts since
Jan 17, 2010
Rep Points: 384
1. Sunday, August 22, 2010 - 4:21 PM
Interest rates are an invisible tax on those of us who have money to invest and it is very hard on those of us who depend on high rates to live. But it is a lot better than deflation. Low interest rates, the stimulus pkg etc. were made to stimulate purchases for those that can afford to buy and hopefully bypass a deflationary period.

It is much easier to stop inflation, though it is very painful, no one know how to stop deflation.  I do not want to be another Japan.
Ally6770Ally6770937 posts since
Jan 16, 2010
Rep Points: 2,727
2. Sunday, August 22, 2010 - 9:45 PM
One solution may be to refinance your mortgage and become a borrower and hope that in few years when rates go up you will be net gainer.

Is is better to be a borrower  than a lender in these times.
adityanmadityanm25 posts since
Jun 5, 2010
Rep Points: 157