bank rates

More Record Lows For Short-Term CD Rates This Week

Although short-term CD rates drifted down to new record lows this week, longer-term rates held their own.

While short-term CD rates continued to move lower this week, long-term CD rates may have stabilized.Returns on 24-month and 60-month certificates of deposit may have bottomed out and perhaps short-term CDs will join the trend over the next month or so.

But it’s time to start talking about how we can stop the Federal Reserve from punishing savers every time the nation’s banking industry goes on a bender and needs to be bailed out.

Bankrate’s weekly survey of large banks and thrifts taken Aug. 19 found the average annual yield for a:

3-month CD declined to 0.48% from 0.49% the previous week. That’s the lowest average since Bankrate began tracking 3-month CD rates in March 1989.

Average 3-Month CD Rates

6-month CD fell to 0.74% from 0.75% — the lowest average since Bankrate began tracking 6-month CD rates in January 1984.

1-year CD fell to 1.05% from 1.06% — approaching the record low of 1.03% set in July 2003.

2-year CD held at 1.51% for the fourth-straight week after declining to 1.46% in June, the lowest average return on 24-month CDs since August 2003.

5-year CD rose to 2.17% from 2.16% after declining to 2.15% in July, which was lowest average rate since Bankrate began tracking 60-month CDs in January 1984.

Of course you can earn more than that if you use our extensive database of CD rates to search for better-than-average deals.

But the sorry fact is that the best rates you’ll find right now are lower than the average rates we were enjoying last summer and fall.

The most encouraging trend is that we’re now 10 weeks removed from the low-point for 2-year CD rates and five weeks out from the low-point for 5-year CD rates.

Finding the bottom in this terrible market is almost certainly the best we can hope for this summer.

The Federal Reserve has been pushing interest rates artificially low as part of its effort to rescue the banking industry from its reckless lending binge of the early 2000s and the recession it created.

To do that, the government-controlled bank has dropped what it charges commercial banks to borrow money to rock-bottom levels — 0% to 0.25% for overnight loans.

With the government providing so much cheap money, the banks can pay next to nothing on certificates of deposit, money market and savings accounts.

When the Fed’s interest rate committee met last week it reaffirmed what we all feared — raising the overnight loan rate, the first step towards higher CD rates for savers, isn’t even on the radar screen.

The Fed’s willingness to punish savers for as long as it takes to save the banks — and primarily the big banks — is why we need to get serious about changing the nation’s central bank.

We can’t let the Federal Reserve and its Chairman Ben Bernanke off the hook for allowing this crisis to happen on his watch.

The Fed has always acted as the protector, not the regulator, of the nation’s biggest banks. If the Fed had been acting in our best interests, it would have stopped the irresponsible lending long before the banking industry was on the verge of total ruin.

It’s willingness to repeatedly punish savers in the pursuit of protecting the big banks is unforgiveable and rarely if ever acknowledged by Bernanke or anyone else at the Fed.

This essay, “The Federal Reserve Is Immoral”, by software engineer and blogger Tim Iacono provides a provocative and compelling argument for abolishing the Fed.

But lets get real. The big banks, with their army of lobbyists and millions in campaign contributions, would never let that happen.

What we need to do is start demanding that President Obama oust Bernanke when his term as chairman expires on Jan. 31 and replace him with someone who will chart a fundamentally different course for the Fed.

We need a Fed chief who will truly regulate the banks and help the millions of millions of Americans who ask for no more than an honest return on their savings.

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Comments (2)
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2 Existing Comments
  1. professor said:
    on August 20th at 01:52 am

    The problem is that obama is part of the problem too. Look who he selected as ambassador to England and Germany (C and GS bankers).
    He wanted rubin as treasury secretary, but people got angry so he selected his loser followers. Obama wants summers as head of the fed and he would be worse than ben. We are so screwed.

  2. willam hopkins said:
    on August 21st at 06:52 pm

    You can’t turn around 8 years of Bush/GOP spending/pork in 6 months.