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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President Nominates Janet Yellen as Fed Chair - What It Means to Savers


President Nominates Janet Yellen as Fed Chair - What It Means to Savers

President Obama has just nominated Janet Yellen to replace Ben Bernanke as the next Fed chair for early next year. She will still have to be confirmed by the Senate, but it’s unlikely that the Senate will block the confirmation.

This nomination isn’t good news for savers who want to see the Fed end its zero interest rate policy (ZIRP). Many believe Yellen is more of an inflation dove than Bernanke. In summary, she’s more concerned with unemployment than with inflation. According to this New York Times article:

Ms. Yellen’s intellectual roots and leadership style both suggest that she would push somewhat more forcefully than Mr. Bernanke to extend the Fed’s stimulus campaign, according to a careful review of her career and interviews with more than two dozen colleagues and acquaintances.

She has expressed greater concern about the economic consequences of unemployment, a stronger conviction in the Fed’s ability to stimulate job growth and a greater willingness to tolerate a little more inflation in order to reduce unemployment more quickly.

With Yellen as the next Fed chair, the FOMC may be influenced to wait longer to taper its bond purchases and to raise rates. However, Yellen does have some history showing that she will fight against excessive inflation. This Washington Post article points out that “she's more than willing to crack down on inflation when the situation requires it.” Hopefully, her inflation dovish attitudes will moderate.

The best hope for savers is that the U.S. economy improves which allows even the inflation doves to support ending ZIRP. However, with the fiscal policy risks coming from Washington, economic improvements may continue to be slow. So ZIRP could continue for a long time.

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Anonymous   |     |   Comment #1
What it means?  Savers stay bent-over were not none with you yet.
Anonymous   |     |   Comment #2
Bernanke is hard to top, but I think Yellen can do it, since she was hand-picked by Obama. How about negative interest rates!
paoli2   |     |   Comment #3
Oh Goody!  A woman!  And she's a senior!  Certainly SHE will have pity on the rest of us seniors.  I am so looking forward to my 6% CD rates!!  What joy.  Even Shorebreak can't have anything negative to post about a woman in the chair. 

Ally   |     |   Comment #4
I find it interesting that she will tolerate a little inflation for lower unemployment. Also she for stimulus.
QED   |     |   Comment #5
Consider the temporal impact of this on savers.  Yellen's term will last one year into the term of the next POTUS.  I don't anticipate the POTUS we elect in 2016 will be any better than the catastrophe we have now.  But if I'm wrong, and if a responsible adult by some miracle should be elected, Yellen will still be in there for the first year of that person's term, printing money like mad.

I do foresee higher inflation with Yellen.  Could it be any more obvious?  She actually WANTS more inflation.  But I doubt interest rates will exceed the inflation rate during her term.  Having Yellen in charge will be tantamount to having Paul Krugman running the Fed.  Could it be any worse?  I don't think so.

In passing, I'm not a fan of Larry Summers, either.  But Summers is not insane and he was President Obama's first choice for the post.  That's why the ultra-liberals in Obama's party worked so hard to ensure Summers would not get the job.  They attacked Summers and campaigned against him without mercy behind the scenes, to the point where the President simply had to jettison Larry in favor of Janet.  Summers would probably not have been great for us savers.  But Yellen is the absolute worst case outcome we ever could have to confront.  What a pity for America.

Anonymous   |     |   Comment #11
#5 Enlighten us with explaining your comment and show examples of why or how you came to this conclusion please--

But Yellen is the absolute worst case outcome we ever could have to confront.
Ally   |     |   Comment #6
Would you rather have someone like Greenspan? 
Shorebreak   |     |   Comment #7
Re: paoli2 - #3, Wednesday, October 9, 2013 - 3:50 PM

"Even Shorebreak can't have anything negative to post about a woman in the chair."

Don't tempt me. 
lou   |     |   Comment #8
The Washington Post article is a joke. The author's face is dirty from kissing her derriere. What ever happen to objective journalism?
Anonymous   |     |   Comment #9
I have given up on CDs and am moving 50% of my funds into municple bonds at 5% tax free!! I am so done!!!
Anonymous   |     |   Comment #28
#9  If you finding muni's at 5% they may be risky.  Do you r homework.  As someone mentioned before high rates may be available for Putero Rico but the commonwealth is close to default.  I have savings in muni's and am very happy.  Please do your homework/research.  I do have some muni's paying 5% and one at 5.75% but they were bought a while ago.  The ones I purchased last year are paying 3.75% and are due in less than 10 years.  I linve in NY
Anonymous   |     |   Comment #10
Well, I am breaking out my dog food cans for a big celebration party. YUM! Get used to it!
Anonymous   |     |   Comment #12
Anonymous   |     |   Comment #13
we will continue to be the victims of the Fed.  This will force most remaining CD investors into more exotic products that are too complicated and too risky.  The Bernie Madoffs of this country will thrive. 
Anonymous   |     |   Comment #14
I would have to agree with #5.  She is the worst of the worst.  For those who know little about this person, I would urge you to review her background.  My view and conclusion have absolutely nothing to do with the integlligence.  She is brilliant.  The problem with her is that she's liberal.  Bear in mind that the objective of the Fed in the beginning was to take away the punch bowl when people started getting too much to drink.  Then employment became a dual mandate.  So long as there is balance between the two, negative consequences are less dire.  BUT, when employment, i.e., lower unemployment, becomes the prime objective, with inflation less emphasized, the outcome is, at least to me, quite obvious.  Looking longer term, the question becomes one of what will ultimately happen when the Fed, headed by someone inferior to Bernacke, begins siphoning the excess funds, which now alone are vast, back into the mainstream.  As brilliant as she is, she is, again in my view, incapable of pulling this off without large doses of inflation.  As for Summers, he would have been my preference.  He also is high in the IQ category.  But he's unpredictable, to say the least, as well as arrogant and very full of himself.  But he would be more incldined to provide better balance than this curse of ours.
Anonymous   |     |   Comment #15
How does her nomination change cd investment for us cd savers? Arer most of you sticking with equal ladders, or are you weighting your ladder for longer terms, and if so, how long is it prudent to go out in view of the antipated inflation??
Anonymous   |     |   Comment #16
How does one buy municipal bonds at 5%?
Anonymous   |     |   Comment #17
Is there really a chance that banks will not give interest but will charge to keep money in the bank or cds instead?
QED   |     |   Comment #19
While I am grateful for the support within the post of #14, and agree with most of that post, I disagree vehemently with one of the assertions there:

Janet Yellen is not brilliant.  This is because liberalism and brilliance are mutually exclusive.  If she were brilliant, Yellen would not be a liberal.

Quod Erat Demonstrandum
paoli2   |     |   Comment #20
#19  Unfortunately IQ has nothing to do with political standings.  Some of the people with the highest IQs can be of any political persausion and make the same stupid mistakes as a dodo!  Being brilliant just means she won't have to think as much about the decisions she makes.
Anonymous   |     |   Comment #21
There are plenty of Puerto Rico muni bonds, even general obligation, that pay over 5%.  However, there is a reason for this high rate =high risk of default!
Anonymous   |     |   Comment #22
Sorry, #19, but your statement defies logic.  You've vainly attempted to connect liberalism and stupidity as being 100% associated with each other.  Such is anything but true.  Were you to state that they are sometimes related, then that would be logical.  Some liberals are stupid.  So are some conservatives.  (I am a conservative, but I'm not stupid, and while I'm well above average in IQ, both real and associated, I'm not brilliant).  I again repeat:  Although she is very clearly liberal, she is also very clearly brilliant.  She is simply more empathetic than some others. 
psjf   |     |   Comment #23
#22 - Might you have a different definition/interpretation of the word 'brilliant' than does QED?   
paoli2   |     |   Comment #24
#23:   "Brilliant" per Websters has several meanings but to most I think it means "exceptionally intelligent".  How one uses that intelligence decides, imo, whether he/she is a liberal, conservative, moderate etc. etc.  Being "brilliant" does not mean they will always make the right choices especially if they are in politics.
Maecl   |     |   Comment #25
Lets look on the bright side.  If we have inflation we may receive an additional dollar in Social Security payments next year.
Anonymous   |     |   Comment #26
5 words: Ken Tumin for Fed Chair
paoli2   |     |   Comment #27
#26  5 words: Ken Tumin for Fed Chair

Thank goodness I know that you must be kidding.  First of all, why would you want to put him through the insanity of being a part of that political scene?  Second, Ken will be the one person who won't raise interest rates for us.  He will do what's best for our country unfortunately at this time in our history and raising interest rates could destroy us even faster! They have to make us fiscally sound so that we can afford to pay our debt and then and only then will we see higher savings rates.  I think 2% rates (if we can continue to get it for longer) will be the rate to catch for a long time if we are lucky to get that!
Anonymous   |     |   Comment #29
I'm not worried.  I'm comfortable in my bunker.
Anonymous   |     |   Comment #30
Anything over 3% interest will make our nation default. Yellen is just a tool to fool the masses with false hope.
Anonymous   |     |   Comment #31
Fir those uniformed about Puerto Rico.
I just came from there and can tell you only this, they are in much much better place than we are.
The banking system is in good shape, services and retails are good, municipalities are good and paying their bonds on time.
Second, a Commonwealth can not file for bankruptcy ever, it is not allowed by the international laws.
Third, the only concern is the promised pensions for government workers that can not be full-filed in 20 years, but that is already fixed by paying into the system with bigger percentage of the salary for smaller future benefits.
Fourth, they are trying to make S&P remove the negative rating that was put on them last year for unrelated reasons and make those bonds come down on USA level.
If you have extra money to put in there, now is your chance before the negative rating is removed.

Anonymous   |     |   Comment #32
#31  Every investor has to make their own decision and do research.  Some facts:

1. 12 straight annual budget deficets

2. 14.2% unemployment rate

3. 87 Billion in debt if you inculde pension obligations.  For PR's 3.7 million residents that comes out to $23,000 for each man, woman and child.

4.  86% of it's pension liability unfunded.  If PR was a state that would make it last.  The worst of the 50 states is Illinios at 46%

5. 44.9% poverty rate.


  The new govenor is making great strides.   Investing is all about risks.  I would not at this time buy PR bonds.  And we are in uncharterd waters if PR defaults.

Ally   |     |   Comment #33
This from Sept 19, 2013. Mississippi has the worst poverty rate of all the states and that is 24.2%. Puerto Rico has 44.9% poverty rate.

Puerto Rico’s poverty rate is nearly double that of Mississippi, the most impoverished state in the US.
Anonymous   |     |   Comment #34
This week's Barron's list the condition of the states debts.  Puerto Rico is on the bottom of the list as the worst debt problem of all the states.

As a percentage of of the state's GDP:

Debt: 52.2%

Unfunded Pension Liability: 35.7%

Debt & Pension Liability: 87.9%

Bond Ratings: Baa/BBB-
Anonymous   |     |   Comment #35
Correction on above on bond ratings: