The Labor Day weekend is the traditional starting point for general election campaigns so this is a good time to let our representatives know about how savers have been unfairly punished. A reader just emailed me her thoughts and recommendations on this issue. Here's an excerpt from her email:
I am simply outraged that we, as savers, (the bankdeals blog followers), are just sitting back and not expressing our outrage about being shortchanged by the Federal Reserve Board, including Ben Bernanke, and his wish supposedly to help the economy by helping banks and mortgage borrowers by giving them a better deal --- refinancing --- at our expense.
[W]e all need to express our own personal feelings on the matter of "interest on our deposit accounts" literally being "stolen from us" by the Federal Reserve Board headed by Ben Bernanke in the name of helping the economy. My spouse and I have worked hard for many many years and just as we are on the verge of retirement, we get hit with the bill for all the excesses of a younger generation who has led the so-called "good life" enjoying everything. Now, we have to take less on our savings so they can save more on their mortgages to try to get out of debt. We have no debt and we are told we have to pay the price for their excesses.
This is wrong! Plain and simple. We need to tell our representatives in Congress what we think!
Since the banks are apparently in good financial shape, it's time for the Fed to consider the needs of the silent majority -- the nation's savers -- and raise rates so that they can become healthy, too
The syndicated columnist Scott Burns described the problem in this Boston Globe article:
our totally unrepentant financial system is being rebuilt while savers are punished with yields that guarantee their savings will lose purchasing power.
It's not only an issue of fairness. Many argue this policy of ultra low interest rates is actually bad for the economy. There's even one FOMC member who thinks this way. Thomas Hoenig has been voting against this near-zero rate policy all of this year. This Kansas City Star commentary reviewed the economic problems with ultra low rate policy. Here are some excerpts:
Hoenig sees that the Fed’s near-zero key interest rate puts the next dangerous bubble just over the horizon.
Obviously, savers are getting practically no return on savings. Thus, many consumers have less to spend without eating into principal.
Similarly, pension plans, foundations and trusts have to make up for slack returns by making higher contributions.
Perhaps the most perverse effect is with banks. They can borrow from the Fed at the near-zero rate and make an adequate return by investing almost risk-free in government or investment grade debt
Tell our representatives what we think!
As the reader who emailed me stated, we can let our government know what we think. The US House has a Write Your Representative Service. And here's how to contact your senator. The Federal Reserve has this contact form which allows you to send a message to the Board Members.
I still think the US needs an organization like the UK's Save Our Savers which campaigns against any "issues that are unjust and unfair to savers." It's probably going to take an organized movement like this to make real progress.