About Ken Tumin

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.

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Bernanke Suggests 90% of Savers Benefit from Low Rates


Bernanke Suggests 90% of Savers Benefit from Low Rates

Bernanke was back in Congress this week testifying on monetary policy and the U.S. economy to the House Financial Services Committee and to the Senate Banking Committee. This Reuters article has a good overview of the highlights of the House committee hearing. The testimony was very similar to what we heard last month. One new thing is that Bernanke tried to de-emphasize the impact of zero interest rates policy on savers. Here's an excerpt of what Bernanke said:

From the point of view of savers, for most savers, something less than 10 percent of all savings by retirees is in the form of fixed-interest instruments like CDs. Remember, people also own equities, they own money-market funds, they own mutual funds, they have 401Ks and a variety of things and those assets are assets whose returns depend very much on how strong the economy is. So in trying to strengthen the economy, we are actually helping savers by making the returns higher as we can see in the stock market, for instance

As a reader noted last month, Bernanke overlooks the fact that there are many people who avoid the risks inherent in the stock market.

Bernanke continues to defend the zero interest rate policy as necessary to improve the economy.

It is arguable that interest rates are too high, that they are being constrained by the fact that interest rates can't go below zero. We have an economy where demand falls far short of the capacity of the economy to produce. We have an economy where the amount of investment in durable goods spending is far less than the capacity of the economy to produce. That suggests that interest rates in some sense should be lower rather than higher. We can't make interest rates lower, of course. (They) only can go down to zero.

For the last few years, many pundits and economists have said there's more harm than good by keeping rates too low for too long. In October 2009 Barron's had on their front page "It's Time to Raise Rates, Ben". This Yahoo Finance article describes how this zero interest rate policy should be considered as a crisis policy that may have been appropriate during the 2008/2009 financial crisis, but it's now overkill after the crisis has long ended:

"They need to get out of that crisis mindset," says Jim Paulsen, chief investment strategist at Wells Capital Management, who thinks an about-face on the policy front is overdue. "I mean, do you really think we'd be worrying about Greece in this country if we had a legitimate crisis to worry about? I don't think you can any longer argue that the U.S. economy needs crisis policy."

It's clear that these opinions are not changing the minds of Bernanke and most others on the FOMC. I think the best we can hope for is that the economy will continue to strengthen so that the Fed will finally consider interest rate hikes sometime after 2013.

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Anonymous   |     |   Comment #1
They are doing everything they can to force everyone into the stock markets - even lie, cheat, and steal.
Bozo   |     |   Comment #2
I suspect data can be cherry-picked to justify just about any position, but I'd loved to have been a fly on the wall when the junior analysts at the Fed were tasked to come up with that "10%" number. Is the Fed privy to retirees' IRA year-end account balances now? Or, for after-tax retiree CD holders, their tax returns? And how did they determine retirement status, anyway? I'm retired, my wife is not, and I didn't take any distributions last year. What am I? Maybe this year, on my 1040, I'll change the "occupation" box  from "retired" to "general sloth".

Maybe there was a telephone poll. I do know that nobody called me.
me1004   |     |   Comment #3
Bernanke is on to something. Did you know that 90% of those who have lost their jobs also are better off for it, because they actually own stocks so are only getting richer and richer? And did you know that 90% of those who have lost their homes to foreclosure are better off for it, because they really had a lot more in stocks so actually are just getting richer and richer? 

Frankly, I already thought Bernanke was wearing blinders, but now I am truly terrified that he actually goes beyond that and into outright fantasyland thinking and belief in anything he makes up out of thin air. If Bernanke really believes that most retirees have most of their money in the stock market and are making plenty of money, we are in very deep trouble. Bernanke doesn't seem to give a **** about savers, seems to feel they are the problem and should pay for the economic recovery. He does not have enough vision to see they could be a significant part of the recovery if he would only allow us a decent return on our investments in the banks.
Gregg   |     |   Comment #4
There is much more sinister behind Bernanke speech.
 He ponders to Congress just to get out of the hot sit, but does completely opposite once in his office.
He connects the interest rates to the manufacturing output of the nation, but that is totally wrong and he knows it, and then he pretends to be a guru on the economy and politicizes his policy as an absolutistic gate keeper of the economy.

Ordering artificial interest rates creates false sense of urgency and keeps the whole nation captive and in waiting for something good to happen so we can continue with our lives as usual, ignoring the fact then we have already waited 4 years.

As long as Bernanke calls all of the shots, we are hostages to his dictatorial mind and unless he is replaced, don’t expect any better times to come.
Anonymous   |     |   Comment #5
A very misleading summary. Ben is talking about 10% vs 90% of portfolios, not people. Though it's also misleading for Ben to act like everyone has the same 10% vs 90% asset allocation.
Anonymous   |     |   Comment #6
Me thinketh "Bernanke doth protest too much!" with a little credit to Shakespeare.  

When I heard about his ridiculous statement about savers, I immediately picked up the phone and called my Congressional representative to let him know that all of my pre-tax and after-tax savings -- were in savings accounts liquid with 0% in the stock market because CD rates were too low.  I made a point also of calling one of the questioners of Bernanke in Washington, D.C., a representative from Michigan by the name of McCotter, Thaddeus.  His question and answer period with Bernanke is about 6 minutes long but towards the end McCotter says to Bernanke, so that 10% of savings that you think people have in CDs is subsidizing the recovery and the recovery as you would like it to be, is just not happening.  So it's a poor use of their money.   At which point, Bernanke says well he doesn't agree and thinks interest rates should be lower, but because they can't go below zero, the savers are actually getting a good deal.  

All of this is basically my own paraprhasing of the conversation as I heard it and replayed again from McCotter's website. Some of you might hear it a little differently so here's the link for the video at his office.  Most of the conversation about the savers is towards the end of the video so just be patient or fast forward to the part about savers. 


Some of you might hear something slightly different.

Each one of us who takes the time to come to the deposit accounts blog has it in our own best interests if we each complain to our representatives in Congress, whether it be by E-mail or phone.  You can go to www.house.gov to find your Representative and www.senate.gov for the Senator (s) representing your state.  Without making ourselves heard, nothing will change.   I told my representative that Bernanke had it wrong when it comes to what savers had in the stock market (for me-nothing).  I also told him that I could not afford to risk either my retirement assets or my life's savings and am angry that the Chairman of the Federal Reserve would be pushing senior to risk their hard earned savings into  the casino stock market.   I also reminded him that savers are subsidizing the borrowers but as McCotter pointed out, the recovery is not happening as Bernanke would like it to.

By calling D. C. at least I get the satisfaction that I did what I could to make a difference.
Anonymous   |     |   Comment #7
#6 - Excellent, excellent, excellent post! Thanks for sharing.
Alen   |     |   Comment #8
The Congress is impotent, Bernanke became “macho” man, savers were taken to the slaughter house.
There is no coming back to a point where we can recover our losses so far.
Real inflation is above 8% and we are served 3% lie and the money from the interest payments went to the same borrowers who destroyed the housing market, instead of us the savers.
Anonymous   |     |   Comment #9
So, by Mr. Bernanke's reasoning, people with money in the bank (evil "savers") would be much better off moving that money into the stock market, presumably selling shares as needed to pay for daily expenses, medical bills, college tuition, etc. Seems to conflict with the "Don't put money in the stock market that you'll need in the next 5 years" dogma. He may be assuming that a portion of the population is living hand to mouth or loan to loan or on credit, and the rest want to be fully invested in the stock market. He forgets that stock market investing meets the definition of "gambling" (consideration, chance, and the possibility of a "prize" without any control of the outcome by the "investor") If not, then will he advocate for a federal program guaranteeing against stock market losses, making stock market investing risk free, similar to FDIC? Doubtful.

And it's also interesting to note that on October 9, 2007, when the Dow hit its all time high of 14164, the fed funds rate was 4.75%, and one year CD's were over 5%. So a fed funds rate of "between 0 and .25%" does not necessarily translate into a higher stock market. Heck, the FR reduced that rate from 3.5% to 3% after 9/11, then ultimately all the way down to 1.75% at the end of 2001, where it stayed until November, 2002! My point is that even after that tragic event, the FR never reduced that rate to 0-.25%, even though the country was thrown into recession at that time.And Mr. Bernanke thinks that today's interest rates are still too high because???? He forgets his history: that during the late 70's and early 80's when interest rates were at their historical highs people still bought houses, cars, and other big ticket items. The economy did not grind to a halt because mortgage rates were 13%, or because business loan rates were near 20%. Me thinks he is trying to manipulate the economic law of "supply and demand", instead of worrying about inflation as is the FR's mandate.

Everyone should have options as to where they invest their money. It is not the role of the Federal Reserve to decide for us that one option (the stock market) is better than another (savings accounts/CD's). But complaining seems to be falling on deaf ears.
Kaight   |     |   Comment #10
It sounds to me as if Bernanke most likely is on crack.  And while President Obama appointed him most recently, nobody should forget it was George W. Bush who appointed Bernanke the first time and who employed Bernanke inside the Bush White House prior to that.

Even if a Republican like Romney replaces President Obama early in 2013, we are a really long way from relief.  Romney, for example, has promised he would not reappoint Bernanke.  What he has not said is that he would avoid appointing a Bernanke clone.  And goodness knows there are hundreds of them in the northeastern portion of the USA alone.  So to get rid of the Bernanke sickness once and for all, not only do we have to elect a Republican, we also have to elect the right Republican.  Candidly, friends, I don't think it's going to happen.

Anonymous   |     |   Comment #11
What was the purpose of the Congressional hearing?
We heard the same story on the previous and before that the previous and previous again hearing, without any change in the policy.
Reps in Congress are nothing more than a gathering and socializing mob, without any clues to what is happening in the real world.
They put all of their faith in Bernanke and he knows it and because of that, he became ignorant, sarcastic and dictatorial, knowing well that he is the king and the Congress is full of minions. 
Anonymous   |     |   Comment #12
Speaking of Congress, I will ask a simple question:

When was the last time the Congress did something for the savers and what if any?
Hanrod   |     |   Comment #13
One of the very reasons that Bernanke finds it necessary to prop up the stock market is that small investors and savers have, in the last few years particularly, learned just how corrupt and dishonest the entire market system has now become; with offshore and after hours trading, insider trading, "flash" trading and many other sophisticated tools by which the few "professionals" take dishonest advantage of the innocent many; as well as our thirty history of government deregulation that has permitted this. The value of our life savings has now been destroyed in the process. VOTE DEMOCRATIC, RE-REGULATE!
Apache   |     |   Comment #14
Hanrod!  What are you saying?  I can't even retype your words but to vote the way you want means putting "you know who" back in!!  This is not supposed to be a political forum but I assure you voting the "D" back in will destroy what little we have left now.  I am not crazy about the Republican candidates but I will NOT give Obama another 4 years to finish us off!!  You have to be joking!
Hanrod   |     |   Comment #15
[Little omission, meant to add "Year" for "thirty year history", i. e. since RR, who did more LONG TERM damage to the U.S. middle class and the ordinary people (yes, there are such) of our Country than Pearl Harbor or 9-11.] I am seventy-four years old, and have witnessed it all. As to O, it was not him that deregulated and built the bubbles that then deflated, he INHERITED it.

You are right, I did not mean to make this a political post; but the subject, and my brief description of what has happened and is happening to small savers and investors in this dishonest system (which you can't deny, even financial press reports it), leads directly and almost unavoidably into politics.

But, still, yes, I do value more individual freedom, and less government regulation -- but only for INDIVIDUALS, and NOT for ORGANIZATIONS, for whom I want to see less and MORE. And I don't care what race the President is, or even where he was born, but only what he might do to help individual citizens --  and yes I know that there is always a price to pay for everything, but it can't be worse than we have already seen. "LIBERTARIAN SOCIALISM - HARNESS THE POWER, EMPOWER THE PEOPLE!" 
CuriousDave   |     |   Comment #16
In effect, what the Federal Reserve has accomplished is an end-run around the consitutional ban on taxation without representation, financing a massive transfer payment propping up the banking system. By forcing artificially low interest rates on fixed interest savers (especially on retirees with limited means who cannot afford to expose their nest-eggs to the risks inherent in the equities markets), the banks are reaping windfall profits. Viola - a tax on fixed income savers forced to accept absurdly low interest income streams (including annuities, whose payment streams are based on the prevailing low interest rate environment), with a  correponding benefit to banks.
Jim Davis
Jim Davis   |     |   Comment #17
 Bernake is a shill for the big money interests. His posturing is as transparent as that toupee he wears.
Anonymous   |     |   Comment #19
Good gracious, so when will Unlce Ben begin advocating that banks charge us for the privilege of keeping our money on deposit with them becasue it would stimulate the economy.  Get real, the only stimulus is to the banks who directly get our money at no cost but do not lend it out on the cheap.  Oh, no, most don't lend it at all and are instead buying no credit risk risk treasury securities and pocketing the interest rate spread which does nothing to support business recovery other than that of the banks themselves.  Huge wealth transfer continues from little old savers to enormous and too big to fail banks.   
Anonymous   |     |   Comment #20
"Helping savers by making the returns higher"?  Well, I have a money market fund that was giving me close to $5000 in annual interest back in 2008.  Last year, that same account (with no money taken out of it) just posted a $20 total annual interest payment.   How is that a higher return???
Apache   |     |   Comment #23
#20:  I can do you one better.  I just saw that my checking account paid me .06 cents on an amount of money I was holding in it to decide what to do!  Guess what?  That bank helped me make my decision real fast.  Get it out!  I suggest you do the same with whatever you were making the $5,000.00 on.  That has to be a goodly sum and you must have it in some money fund or low interest paying checking account for it to drop so low.  If you check out Ken's lists of banks and credit unions, you have to be able to find a place to put your funds that will give you better than $20.00!  Things are bad but it doesn't have to be "this" bad unless we let it, imo.
Anonymous   |     |   Comment #21
I respond to the Bernake mantra about savers evey time I hear this crap. He just donesn't get it. He fails to distinguish between savers and investors. Savers use bank CD's, money market savings etc.

Investors are a differnt class. They use the stock market directly or indirectly thru mutual funds to invest. These ar not savers, they are investors. I can't believe that someone with a PHD in economics can't get the difference. He sure does, but it would not be stock market friendly to say rates should be hgiher as infaltoin is at 2 to 3%.

The country will pay the price for these artificially low rates. However, savers will get theri higher rates when we get higher infltion that sticks.

Anonymous   |     |   Comment #22
WOW.  And he's the fed chairman.  what a sorry state of government
Anonymous   |     |   Comment #24
To #21

I agree with most of your post, however, your posting of the inflation in your last sentence, made me write this response.

The inflation is here, hidden from view, it is actually above 8% and is eroding are savings as we speak. Furthermore, the interest rates will always be lower of the inflation rates no matter how much you will get at a saving institution.

Our purchasing power declined 20% in the last 4 years and the commodity prices are above 20% than from few years back. We will never recover these losses and looking into my crystal ball, I see more of the same for the next 3 years, at which time we all will become much less wealthy and may even qualify for some government handouts.

Destroying the middle class will transform our society into un-sustainable political and economical dependency on a system were our Government will not have the means to care for most of us. This is one of the unintentional consequences that will be realized at the end, but it will be too little to late to do anything about it.

Something to think about! 
Anonymous   |     |   Comment #25

This is Anonymous # 20

The account was a six figure balance account that was jointly owned by several family members.  The rate plummeted to 0.01% and it probably would be a negative return had you factored in the cost of maintaining the account.  The other family members had the primary control on the account since it was opened.  I persuaded them to move the whole thing out to another local bank that is offering 2%.  They agreed since the yearly interest at that rate will provide a couple of thousand dollars of interest per year. Well, if bank rates all drop to near zero percent, then I guess I may have to move this money to the mattress!
Hanrod   |     |   Comment #26
I'm #13 amd #15, above. More beating this, probably dead, horse: The economic and financial environment has changed in the last thirty or forty years, such that THERE IS NO SUCH THING AS INVESTING any more (except in your education, your career, or your personally owned business or property); THERE IS NOW ONLY SPECULATION, due to greater, and more globalized, competition and greed, aided by technology and "value free" business and market ethics. Without great RE-REGULATION, which, yes, will slow things down and trim some of the immense profits that have been obtained by some of the sharp players, and may even temporarily "dampen" the economy overall; this will self-destruct, possibly into anarchy, as our people become aware of what is being done to them. Hope for the VOLKER RULE, and then some! 
Georgette   |     |   Comment #27
My local bank just reduced the money market acct. rate from 0.01% to 0.005% (half).  Was it really necessary to do that? $100,000 would earn $5 a year in interest!!! The old rate would have earned $10 (Am I right on this?).  You can bet that we are moving most of our liquid funds to one of those 2.5% long-term 5/7/10 yr. CD's very quickly.   This is petty @#$#! on the part of our bank and we will take our business elsewhere.
Anonymous   |     |   Comment #28


Dear Mr Tumin,

Well ... you already know that Chairman Bernanke heads the organization whose dual mandate does not include "Helping the Savers".  He is doing what his organization is mandated to do.  You also know that this mandate is given to the FEDs by the Congress, which of course was elected by the voters of the USA.  ... So you know where the blame, if any, has  to go.

Anyways one positive point I see as a result near zero rate, is that some Credit Unions have started offering 0% APR for balance transfers with $0 in balance transfer fees.  e.g. Navy FCU had a promotion till 2/29/2012, and Alliant sent me a "pro-approval" yesterday.  ... So I can do a balance transfers to Navy, Alliant from my Pen Fed, Andrews cards and then from there do a "cash advance" to my checking accounts - again at $0 fees for cash advance.  So I get some money to use for free which I put in Reward Checking and get about 3%.

 ... Yes ... I know ... it is quite a bit of efforts, and whatever I get in Reawrds Checking, I got to pay ordinary tax on it ... So it's not much of money, but it is surely greater than $0.

... I wish there were many other Credit Unions / Banks like Navy FCU and Alliant FCU ...

Yours Truly,

Anonymous   |     |   Comment #29
I'm in the same boat as a lot of you. I do remember though, when 6-month CD's were paying over 20% and 30 year UST bonds were 14%. (yes, I know,  I'm old) BUT, remember that what goes around, comes around. When rates begin to rise, and they will, they may increase at a faster pace than we can imagine now. When things pick up, the banks and cu's will raise their CD rates in order to get some cash to lend out....most of us will be leary to invest in longer term CD's so long as it looks like rates are going up, so, the banks will have to increase CD rates more and more at an ever increasing rate. Sound to good to be true?...just wait and see. The truly bothersome part though is that, as rates increase, how in the world will the US be able to pay the interest on the national debt. Stay tuned, and note to Ben...throw away the textbooks, brush up on history, put your ego on the back burner and use your God given common sense.    
Bob   |     |   Comment #30
The low rates are helping me?  Is Bernanke delusional.  Prices are rising on the consumer level, and those of us who actually prepared for retirement are being "financially raped to bail out everyone but ourselves".  This is not new, it's been going on since Greenspan who lowered rates to deal with the internet bubble aftermath, and what did it bring us, a housing bubble.  Now Bernanke deals with the housing bubble, preparing us for the breaking of the Gold Bubble.

I don't mind being taken advantage of, but tell the truth Bernanke, you do conservative savers nothing but harm
Anonymous   |     |   Comment #31
Watched C-Span this morning and they had a economics reporter on from the WSJ who said business is investing in new equipment, new buildings, and in making old buildings more efficient etc  but are not ready to do massive hiring as yet as we have seen in the past. There is no market for their goods when people are paying down debt or have no jobs and they have no jobs why?
Maecl   |     |   Comment #32
Started Social Security in Jan.  The recent years leading to retirement have been awful for building up a nest egg  in savings, CD's, and bond mutual funds.  The Fed is killing us.
Anonymous   |     |   Comment #33
Why is it my fault because I haved saved a little extra money each week throughout my life?

Like many other prudent people out there I tried to plan ahead, but currently I'm being victimized by a crowd who supports underpinning those who blew every bit of money they have ever earned!

Bernnie is  drinking his own kool-aid, a buffoon, creating a false economy by forcing people into the stock market....I hope a new administration will replace him before this newly created scam of a bubble pops.

 I have never liked the idea of being burdened by those who can't don't or simply won't take care of their own personal fanancial well being....why should I be responsible for millions of Americans who blew all thier money on ego items such as fancy cars and "McMansions"?

Anonymous   |     |   Comment #34
For all of us who simply cannot undertstand the rationale of Bernanke's statements, everyone should be reading the David Stockman interview posted in the Deposit Accounts Forum from the Business Insider.  It is eye-opening!   You don't have to agree or disagree with everything he said.  I find it comforting --- as I'm one of those "all in cash" he has referred to.  He says he's "not going to take any risk." 

After a while, it seems like a lot of years now, one has to wonder if he/she is missing out as Bernanke pushes the stock market up.  And his continued comments knocking savers do not help any either.  It's at least heartening that in addition to the inciteful thoughts  of some of the commenters to the Blog, to find a well known known economist, Ronald Reagan's former Budget Director, confirming what we all know at heart -- and that is --that capital preservation should be our number one priority and that it is simply not worth the risk to be in the stock market if what is holding the stock market together is "bailing wire and bubble gum,"  as Stockman points out.

His answers to one of the questions posed by the interviewer of the Business Insider was: "I wouldn't touch the stock market with a 100-foot pole. It's a dangerous place. It's not safe for men, women or children."  And this commenter agrees!
Anonymous   |     |   Comment #35
This note is to Ken Tumin..  What ever happened to the petiton (or whatever it was called) that you were going to put together for us to sign regarding zero interest rates ?
Apache   |     |   Comment #36
#35  I have asked Ken this same question many times regarding the Petition.  The last response I got from him was that he was going to get a "consensus" on it from us and then put one together as I understood  it that week.  That was at least a couple of weeks ago and I am wondering if he has decided against it now.  I do know there are people on this forum who seem to want to sign one if he will just put it up.  If you get a response from him in a PM or off the thread, would you let me know?  A Petition coming from a group like this could do a lot of good to at least make Washington know we are serious about this.   Thanks!
Anonymous   |     |   Comment #37
An on-line petition is not worth the paper it isn't even printed on. Unless maybe you're expecting to have a million or more "signatures" from verifiable living individuals. Estimate how many people read this excellent blog/site, and feel free to err on the high side. Then check the most recent estimates of the current US population size. Droplet, meet OCEAN. Yes, congress-critters will tremble at our mighty combined voices like a whale fears a tadpole.

Participate in an attention-getting (but peaceful) protest against Wall Street greed & corruption, and against Bernanke's wrong-headed policies. Contact your senators and representatives, by all means, and make your voice heard. Just don't expect on-line petitions to do more than get your email address added to somebody's mailing list for future fundraising efforts. Gee, do I sound cynical? Or perhaps I've merely opened my eyes.
Apache   |     |   Comment #38
#37:  It's people with your "it won't do any good attitude" that is the reason we can't get anything done when problems arise.  Maybe we have already written to our senators, Bernanke, Obama, and the rats who live in that hole called Washington, and we have sense to know that a Petition with no matter how many signatures from a site like this can have more of an impact than our solo letters!

If more groups put up Petitions maybe we could have an impact.  Sitting  on our hands and whinning all day is certainly NOT the answer.  If the Founders of our once great country had a defeatist attitude like yours, we'd still be in Britain!
Anonymous   |     |   Comment #39
#37 - I thought your post was very well presented and hit the nail square. Seems like the more straighrforward a person tries to be, the quicker the flamethrowere are lit. It's hard to 'tell it like it is' anymore without someone crawling out of a hole and being offended. Oh well......