by Calculated Risk on 9/18/2011 09:19:00 AM
Sunday, September 18, 2011
From Scott Reckard at the LA Times: Bank deposits soar despite rock-bottom interest rates
Americans are pumping money into bank accounts at a blistering pace this year, sending deposits to record levels near $10 trillion ...And the Fed might lower the interest rate paid on excess reserves this week.
In the last three months, accounts at U.S. commercial banks have increased $429 billion, or 10%, almost double the increase for all of last year.
The large amount of cash only adds to expenses such as paying for deposit insurance premiums. ... [banks] have slashed interest payments to discourage customers. Wells Fargo & Co. ... halved its payments on one-year certificates of deposits to 0.1%; Citigroup ... dropped its payment to a paltry 0.3%.
[Some banks are] stashing it in a safe but unrewarding place: Federal Reserve banks, which are paying them an interest rate of just 0.25% to tend the funds. Such deposits rose to more than $1.6 trillion at the end of August from about $1 trillion a year earlier, according to the Fed.
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Posted by Calculated Risk on 9/18/2011 09:19:00 AM