This page has been archived and commenting is disabled.
What Benefits To Savers? Banks Rush To Hike Prime Rate To 3.50%, Forget To Increase Deposit Rate
Someone forgot to give the banks the memo that the Fed's first rate hike since 2006 was supposed to, at least on paper, benefit the savers of America and not so much the, well, banks.. Because the ink hadn't even dried on the Fed's statement and one after another banks revealed that they would promptly boost their Prime lending rate from the current benchmark of 3.25% to the new Fed Funds-implied prime rate of 3.50%.
As a reminder, while generically comparable to LIBOR, a bank's prime rate is the rate at which banks lend to their most creditworthy customers, clients and large corporations. But what makes the Prime hike most important is that it is used as the benchmark for other loans like credit card and small-business loans. In other words, banks wasted no time to serve their indebted customers with the cost of the Fed's rate hike. Banks such as:
- Wells Fargo
- US Bankcorp
- JPMorgan
- M&T
- PNC
- Citi
And soon every other bank.
As CNBC reported, "a change in the federal funds rate will have no impact on the interest rates on existing fixed-rate mortgage and other fixed-rate consumer loans, a Wells Fargo representative told CNBC. Existing home equity lines of credit, credit cards and other consumer loans with variable interest rates tied to the prime rate will be impacted if the prime rate rises, the person said."
The good news: the rates on mortgages, auto loans or college tuition aren't expected to jump anytime soon, according to AP, although in time those will rise as well unless the long-end of the curve flattens even more than the 25 bps increase on the short end.
What about the other end of the question: the interest banks pay on deposits? Well, no rush there:
"We won't automatically change deposit rates because they aren't tied directly to the prime," a JPMorgan Chase spokesperson told CNBC. "We'll continue to monitor the market to make sure we stay competitive."
Bottom line: for those who carry a balance on their credit cards, their interest payment is about to increase. Meanwhile, those who have savings at US banks, please don't hold your breath to see any increase on the meager interest said deposits earn: after all banks are still flooded with about $2.5 trillion in excess reserves, which means that the last thing banks care about is being competitive when attracting deposits.
»
- 173 reads
- Printer-friendly version
- Send to friend
- advertisements -
.
Who needs savers when you can have slavers?
If you didn't get the memo, you ain't in the club...
I'm giddy with delight. Instead of earning 0.025% on my bank account I'll be earning 0.027% interest. That's about cents a year after taxes.
They aren't charging you to hold your money yet, you ungrateful slob.
Yet...
The banksters f#cked us on the first go 'round in '08 - they liked it - and they're back for more.
"Interest on savings is NOT for the little people." - Leona Helmsley
no madder - its been so long since a rate rise none of the sheeple remember that a mortgage/loan rise is even supposed to be accompanied by a savings acc raise
and even if they did raise savings deposit rates, the banks will raise banking /transaction fees to nullify it
Laugh Track Deafening!!
HELOC's (there are still some of those left!?!?) and plastic go up just in time for Christmas!
Parasitic worms always finding an entrance where they can.
Get outta the bankster system and find yourself a nice DEEP lake for those precious things that hold value over time.
And try to choose an area of the lake deeper than that which a child can find your stash for freak's sake, bitchez.
Gold bar found by teenage girl in German lakehttp://www.bbc.com/news/world-europe-33880350
Don't be a rookie about it. ;-)
Holders of ARMs are about to get a painful lesson this Christmas.
Best place for gold bars is probably deep in the septic tank, not in the nearest lake. Nobody's going to go wading around in a septic tank for fun...
There's a club?
You ain't in it!
have mother fuckers ever thought about their own banker....?
real money held outside of the fucking fractional reserve banking system thats fucking u up the ass!!!!!!!!!
Silly bank customers! They have no obligation to pay you!! What, did you think that leaving your excess production of value with someone else would grow wealth? HA!
Hilarious, the savers of the world are never again going to get any real inflation proof interest on their money!
The agenda is clear......
http://beforeitsnews.com/conspiracy-theories/2015/12/as-events-spiral-out-of-control-its-time-to-take-a-closer-look-at-agenda-2030-video-2472972.html
If banks couldn't lend enough to keep the ponzi going at 3.25% prime just how are they going to do it with prime at 3.50%?
As for interest bearing accounts, they can suck my wang, their ads for 'high yield savings' at .08 were disgusting.
Typical horse shyt
http://hedgeaccordingly.com/2015/12/sam-zell-interest-rate-hike-is-proba...
Shocked I tell ya! /S/
Did anyone really expect anything, other than a sore, greasy ass?
You got lube! You lucky SOB!
Yep, but they only used it to get the sand to stick...
Deposit rates are set by the supply and demand for deposits. Why is this so hard for you to grasp...
Serious question: does anyone here actually, you know, work in finance? Or are you guys just making this shit up as you go along and trade off on an increasingly worse viewer base?
Its not, its just typical that banks are more than ready to charge more, but will be goddamned if they pay more.
Same as it ever was.
Fair enough, but that doesn't change the facts of the situation. Nor does it change how ill informed and desperate the article was.
The banks have all the money they need. The traditional Fed tools to increase the Fed Funds rate doesn't work now because the banks aren't looking for money. The Fed has said they will now pay banks more for their deposits on the Fed with the hope that banks will increase the interest on loans. The theory is that if the bank can invest risk free at the Fed, then anyone else will have to pay more to borrow. Maybe. I am not so sure. If they all raise rates together, then maybe, but they still have a more fundamental problem of too much liquidity.
Serious question: do readers even read the articles before commenting?
"Meanwhile, those who have savings at US banks, please don't hold your
breath to see any increase on the meager interest said deposits earn:
after all banks are still flooded with about $2.5 trillion in excess
reserves, which means that the last thing banks care about is being
competitive when attracting deposits."
If you read you can't be first.
Upvotes - worth more than bitcoin around here
That's not saying much...
Some people seem to love down votes even more, I do not really care that much, for me is more than enough voicing my opinion. If you like it fine, if you don't you can go to hell I really do not care that much.
Most of us do Tyler ;)
4 times a day!
I do... I read your charts, and charts religiously.
/sarc
I couldn't read the articles during 1:30-2:15 GMT-5 though.
Nice, Nopat pick up your balls at the checkout window.
Tyler,
I do not want to seem dumb, but the articles at time are over my knowledge, so it's difficult to understand what the articles are saying
Same here @ Mattress...pretty complicated shit at times, however, I do google certains terms used in order to better understand what Tyler is explaining...but essentially, it always seems to come down to the same message...we be getting screwed, hard and deep, by TPTB.
ps. no need to dumb it down for the likes of me, Tyler...
They wouldn't be readers if they read. So yes.
He speaks! Glad to have you around (sincerely).
Again, dude, supply and demand.
Precisely: the rate hike was being sold by Yellen as a benefit to depositors, when in reality banks are so flush with reserves they will never hike deposit rates. The point of the article is how savers once again get fleeced.
That is always the point. They may play dumb, but tehy never are, tehy know their system very well.
One of the earlier articles today discussed the FED having to reel in up to $1 Trillion of liquidity inorder to help effect the interest rate rise.
There is $2.5 T in excess liquidity rolling around in the banks.
Hence the FED will have to raise the rate approx another .75% to make deposits at banks valuable to banks. That is when we might see some better rates being offered to savers.
In the mean tim,e make sure to take advantage of the 12.99% interest rate on balancce transfers! /s
Well if all of the Fed printed money IS on deposit at the banks, then the chart of Fed balance sheet versus S&P is kinda junk isnt it? Primay dealers like Douche Bank shouldnt need to raise capital like they are then if they have the cash...
And if it's too little too late and Mt. Yellen has to reverse course and go NIRP into the teeth of a recession, not only will you be paying the bank to keep your money, you're going to have to give them a toaster to open an account.
So I was right?
Thanks?
ps: give everyone my best. Sincerely!
Yes you were spot on...if your point was that you didn't read the article.
Dude, do you actually believe that bank need deposits? Not like they run out of money.
Loans create deposits.
Banks by issuing loans are the largest source of money supply expansion. You literally borrow money into existence.
But they told me I am a, "Valued Customer."
No?
Banks create customer deposits by making loans, they do not create their own "deposits", i.e. Fed Reserves, on which the banks are now paid 50 b.p.. When a bank lures a customer deposit from a competing bank, the transfer of Fed reserves comes with the customer deposit in the settling process if the customer deposit is made by check (otherwise it is bank vault cash that gets transferred). Banks should start competing for customer deposits, though perhaps not quickly or aggressively for reasons I stated above.
Sounds like the "BIG-4" in Australia.
I've just been dealing with both ANZ and NAB on refinancing a mortgage. It was the most painful experience I've had in a long time. If there is one thing I'd like to see before my time is done on this blue sphere, it's the big 4 broken up into 1000 little lenders and Coles and Woolies to have another 20 competitors.
So I wasn't lost in space, when I said earlier that "The Fed is there to enrich its Shareholders, and that all else is PR or a circle-jerk." ?
Except unless the banks are a perfect oligopoly/monopoly they should compete with each other to get the 50 b.p. now being paid on Fed reserves.
Stick to the cartoons and awesome Lego videos
Skull and Bones! This is what Treason looks Like: https://www.youtube.com/watch?v=KBpft6pQClY AIPAC (5 minutes of captured video showing US politicians on their knees for Israel)
Oh I think it is worst than that, because there is so much credit out there in all itds forms and glories, they will make you pay an ever increasing "compettitve" rate. We know that "quality" education is a must, so most will try to get it through credit in a low market liquirity high interest pay.
But to be honest I don't read all the articles fully some I skim through quite quickly, but I do appreciate them non the less even if they sometimes lose my interest at the beginning..
Now that we have your attention, can you please tell me how many Tylers are there? It just seems like a shit load of york for a single person. I am new here (at leas ast an every day several times a day reader) so I do not knwo how it works.
Except unless the banks are a perfect oligopoly/monopoly they should compete with each other to get the 50 b.p. now being paid on Fed reserves. When a bank lures a customer deposit from a competing bank, the transfer of Fed reserves comes with the customer deposit in the settling process if the customer deposit is made by check (otherwise it is bank vault cash that gets transferred). Banks should start competing for customer deposits, though perhaps not quickly or aggressively for reasons I stated above.
supply and demand? like in a free market?
you're shitting me, right?
and yes, a shitload of people here work in finance. asshat.
how much ioer has the fed paid out to the maggots in the past seven years? and how much of that did the actual depositors get?
supply and demand. fuck off.
Buzz, please be nice to Nopat, he doesn't know much as he just joined here YESTERDAY!
Well, I successfully worked in finance my entire career, so I'll answer your question, and I'll let you insert the expletives anywhere you like. The Fed paid out 25 b.p. on IOER annually and the bank depositor got about 5 b.p.. Now that the Fed is paying out 50 b.p. on Fed reserves the banks should start competing a bit more to get that 50 b.p., and they gain Fed reserves by luring customer deposits from other banks, so nopat is right that market forces should lure customer rates up over time.
So at what points in your career did the Federal Reserve have a policy of ZIRP and QE?
Could it be that this is like no other time in your career? Most things in finance have not changed?
The question was not whether this was like any other financial point in time, but rather given current circumstances whether banks would start competing for deposits now that the IOER and the prime rate has been raised. You could use the straw man argument that it is like no other period ever to assert any crazy position whatsoever.
And you can act like banks need our money while offering paltry interest rates on deposits.
I'm sure they will rise quite soon though. /sarcasm.
My bank lowered its rate before they hike the rates. Now if they raise the raises they could say they raised rates with the Fed. They are still offerring the same horrible rate.
BTW, Good call on the Fed today Buzz.
Banksters fleecing the sheep? This catches a grand total of 0 people on ZH by surprise.
Nopat, worse viewer base, by one, only since yesterday -- when you joined here.
How quickly and aggressively will bankers compete for retail customer deposits so they can get the 50 b.p. paid on Fed reserves? My guess is not very.
Money market funds won't be competing with the banks for customer deposits ... even with the 30-35 b.p. expected to be paid to MMFs on the overnight reverse repurchase agreements the Fed will sell to the MMFs in an effort to get short rates up 25 b.p., the MMFs previously waived management fees will eat up all of the interest rate rise, so MMF shareholders won't see any increase in yield.
Institutional deposit yields will likely see more competition right out of the gate assuming the Fed is successful in getting short rates up 25 b.p..
"Institutional deposit yields will likely see more competition right out of the gate assuming the Fed is successful in getting short rates up 25 b.p.."
That is not their goal. Giving the people a false sense of security that the economy is finally improving is their goal. When the economy tanks in Q2 or Q3 the Fed will cut interest rates back to 0%.
Hey horses ass, when your FED does nothing all day but pump $$ into (insolvent) banks then that pretty much alters the supply demand curve...doesn't it!
If you avoid talking at all about the elephant in the room then I suppose you could pose the question you did and come to the conclusion you did.
As for whether we read the article, yeah, I read every one of them before posting...so thhhbbbt!
banks to retard customers: we won't jack with your fixed rate mortgage.
well, that's mighty white of them. i'm sure they didn't know that. /s
@buzz
We won't touch your fixed rate loan.
I saw that too. Mighty generous of them, don't you think?
Jaimie's Christmas present to the serfs.
No Nazi gold train either. http://www.bbc.com/news/world-europe-35104117
Disinfo? They may not be Brits but I'm sure Polish intelligence would see the value in at least trying to spread it.
They didn't even dig...
But on Tuesday, Professor Janusz Madej from Krakow's AGH University of Science and Technology said its geological survey of the site had found no evidence of a train.
"There may be a tunnel. There is no train," he told a press conference in Walbrzych.
-------------------------------------------------------------------------------------------------------------------------
Then how the fuck do you know there isn't a train in the tunnel? Someone needs to superglue a shovel into the professor's hands.
if all banks pays 0% .. that means they are competitive. everything is awesome!
Old bloated people like, ]Jack Walsh[ scare the shit out of me.
That fossile is just just protecting his progeny.
*Sorry for watching the blowhorn
*disclaimer
in every picture of him i see he looks like he needs to take a massive dump
BIG TIME...
He sounds like a "blow-up" whoopee cushion--- ass gasket.
Let the guy die in peace, "arm-in-arm" with Warren Buffett.
I think Tyler needs to look out for all those " Black Helicoptors" he's been preaching to us about.
The most brilliant financial site getting shut down by server overloads, during the most important macro financial disclosure in an decade?
Tyler needs to find some new friends, or upgrade his servers.
Still can't spell his name correctly? No hint for you this time, but two letters are incorrect of the five in his last name.
Hang 'em high.
All of them.
the deposit rates at smaller banks will surely leak a bit higher. they would rather pay long term depositors another 20 bps rather than having to pay jpm et al +25 bps on the overnight.
And when interest rates are cut, within one day I get a message from the bank that deposit rates are cut.
Heads I win, tails you lose!
They're not called BANKSTERS for nothing...
Banks that I dont use.
But they still use you. (Thank your CONgressman!)
LoL! Didn't you know that these are the same fuckers that caused all this mess? Don't expect anything but more fuckery.
It's an Elite club, busy self-dealing in legalized stealing.
It's a small, elite club. And you're not in it.
You can either join the club (for the few), join another one, form your own, or forage on your own in the Wilderness.
Y'all are missing the ominous nature of the hike.
It somehow implies that the FED is "cash starved"...
I was expecting private banks to hike rates next July
in a cash starved environment. But this is the FED!!!
Depositors need not feel too left behind...
I got a feeling wealth ( your cash ) is about to become king
in an environment where the FED has lots of debts and
very few credits... and $2.5Trillion in "reserves" means diddly
if it isn't on the "credit" side of the ledger there ... Tyler...
!
Fuck the banks
Too late. They already fucked us long ago.
A rate hike and no free toaster.
If you have the cash in the bank, withdraw it, go to Walmart and buy a toaster -- help the $15/hr crowd get a break.
If you are deep in debt, deposit rates don't matter. Pay down some debt.
Either way, follow the economic incentives -- and stop listening to the idiot central planners in Washington. And for &^*( sakes, don't take financial advice from a certain deadbeat columnist at the NYTimes
I am laughing to those mortgage herds in San Franc.
More syphoning from the massess wealth, or at least what is left of it, coming soon near you at ever bank and broker there is.
Remember when...
Passbook savings accounts paid (a seemingly never-ending) rate of 5.25%...? And opening up one at the local Stagecoach was a right-of-passage (humiliation actually, but that could be construed as the same thing back then as upbringings were quite different from today...) for a young kid, to help teach them the 'value' of savings and prudence...?
Yes, this nation is F'ing Upside-Down...
Welcome to Switzerland, without the Matterhorn.
Put down the keyboard and mouse and pick up an AK-47.........................
http://www.bbc.com/news/world-europe-33880350
Which one of you German 'hedgers lost your gold in that "boating accident?"
Despite the bullsh!t on CNBC and the Wall Street advertisers (not strategists) that lied on CNBC... the US has not de-levered since 2008. At least not in aggregate. System wide, debt levels have increased.
Since there was WAY too much debt back in 2008, and even more now, obviously the cost of that debt (and the risk of lending) is going to stay high, if not go higher.
Hence, 99% of borrowers were not paying ZIRP yesterday. And today, they will be paying more.
The only crime I see is that the crooks in Washington won't be hit with increased costs (at least not yet). Stealing growth from the future and calling it a war or health insurance is just fraud.
.
And if you were running a bank, would you really want to pay higher interest to non-US depositors (the ones with jobs and savings and competent leadership)? I didn't think so.
Peer to Peer lending!!!!!!!!
Right on Tyler. This is about the banking sector getting solvent and squeezing for all they can.
Anything in there about returning excessive monies charged due to Libor rigging scandal?
Perhaps the fine print.
*
I carry no debt other than the mortgage on the house. So I don'tgivafuk what interest rates on personal debt do do. But I do care about interest on savings. My 85 year old mother is having to spend her principal to live, because she doesn't get shit for her deposits. She's going to live to be 100, I hope her savings make it. That I DO care about.
Enough of this bullshit. Get those helicopters in the air and spread that currency around. They can print $14 trillion for Eurotrash central banks and JP Morgan, but they can't print a single dollar to help the people in the USA.
That will be their downfall.
Greedy fucks... Earnings, Earnings, Earnings!!! Imagine that!
With my silver and gold, I will smite myself a hammer...
Find yourself a boat with a hole. You're gonna to need to let the man with the government ID know what happened to your gold.
"My apologizes, I spent it on whores and booze."
The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.The big four banks – Bank of America, Chase, Wells Fargo and Citibank – all offer loyal customers 0.01% interest rates on savings accounts.
The saver is Spalding and the Fed is the judge.
https://www.youtube.com/watch?v=0f6l1QljpMo
At first I thought that Janet Yellen would not raise rates. Then I thought, what if she announces a rate hike and it has been so long since they implemented one at the FED that they have forgotten how. This applies especially to the big banks. Its been so long since they had to attract money from borrowers that they may have forgotten how.
What's even more awesomer is that the IOER, i.e. the banks' deposit rate at the Fed, went up. All hail the two for me, none for you raping called the US economy!