FI's With Very High Online Savings Rates

happyharold4 | Mar 15, 2023 | 388 posts since 2022

My question is---Where can these FI's invest their new $ where they can immediately pay new customers these rates. Most of them if they were to disclose their, " undisclosed " debt would be down rated immediately causing a stampede for the door and as a result be insolvent. It all just seems like the A-Typical Ponzi scheme. Can't cover existing expenditures---Just offer attractive rates to acquire new $ and on and on it goes in a loop until the Fed steps in. Pretty darn scary for folks in cash.

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sams1985 | Mar 16, 2023 | 781 posts since 2022

Well they will use some of these funds for lending purposes-home mortgages, auto loans, personal loans, business loans, etc. Then there's credit card debt which is lucrative cash cow for banks. With the FFR where it is currently, there should be a "healthy" spread between the CD rates and the lending rates. Let's just hope these loans are not in the subprime category or dont begin to default in large numbers..

SVB locked up a massive amount of deposits into extremely low paying LONG term treasuries. They thought inflation was transitory and ZIRP would be around forever. When the FFR shot up they were caught in a huge bind hence the failure.

TheInfoMan | Jun 9, 2023 | 15 posts since 2018

Okay Sam, I got that. But what is the prudent course of action to take?

sams1985 | Jun 10, 2023 | 781 posts since 2022

Stay under the FDIC limits.

MY2CENTSWORTH | Mar 15, 2023 | 436 posts since 2016

I don't really think the current situation is all that new. None of us really know what goes on behind the scene and if Treasury Secretary Janet Yellen said SVB was one of a few banks she was " monitoring very carefully" then maybe she should have acted to close the barn door before the horse got out! No accountability and no discipline....sound at all familiar? We wonder why this country and the whole world is in the mess that it is in.

planxy | Jun 10, 2023 | 140 posts since 2013

Treasury Secretary Yellin had zero control over Silicon Valley Bank. It was state-chartered: not a national bank. It was "regulated" by the Federal Reserve. In which these state-chartered banks own CAPITAL STOCK! The head of SVB was an insider, a director of the Federal Reserve Bank of San Francisco. Which protects its own in secret as long as possible, hiding problems from those pests the depositors and borrowers as long as possible.

JeffinEasternFL | Mar 16, 2023 | 744 posts since 2020

most FUI's, banks, CU's etc., are just using the high rates to "beef up" their capitalization. Loans are the typical way banks make money but, regulations, et all require a substantial liquid asset base and capitalization, the various ratios, yada. Thus, expect short term rates to rise to attract such deposits to fulfill regulatory requirements and cushion against a significant "flight to safety" to major banks of liquid assets.

TheRealMAGA | Mar 16, 2023 | 23 posts since 2023

In this environment you shouldn’t be in cash because you are losing money unless you are in one of those 5% savings accounts. Those are not guaranteed to stay at 5%. Just opened up an Ally jumbo npcd this morning. Effectively locking up 4.75% for 11 months. Good rate insurance without loosing interest from early termination. You got to do the opposite of what the fear monger say. Remember in 2018-19 the rage on here was to lock up 10 yr cd’s at very low rates and now they are stuck.

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