Monday, December 06, 2010 12:21:14 PM
NEW YORK - In a column titled "Why Savings Account Rates Are So Pathetic", CUNA's chief economist Bill Hampel explains to the New York Times (Dec. 3) why profits are low at banks and why credit union members are prospering.
In its list of seven things getting in the way of high savings account interest rates, the article cites banks' lower profits as a top culprit. Because people are doing a better job of spending less than they earn, and using the money left over to pay down existing debt, banks aren't lending out as much as they used to. Instead, they buy Treasury bills, Hampel explains, which don't pay out as much as they once did and don't compare to what banks would earn under normal conditions.
These lower profits make it more difficult for banks to raise rates that savers earn.
As for credit unions, Hampel points out, because they exist to serve members rather than shareholders, they're paying more out to savers than the megabanks. And members who are borrows are also paying less for their loans. "Borrowers are owners just as much as savers are," explains Hampel.
The article is available in its entirety at http://www.nytimes.com/2010/06/26/your-money/26money.html?_r=1.