Credit Union PAYING customers to close savings accounts ! Deposit insurance premiums
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Credit Union Pays Savers to Close Their Accounts; Deposit Insurance Makes Saving Accounts a Losing Proposition for Banks
Nevada Federal Credit Union has too much money and does not know what to do with it. Worse yet, sitting in cash is costing the credit union money.
Insurance premiums are the culprit. On top of any deposit premium paid to customers, insurance runs .4%. Yet short term treasuries yield .25%.
Nevada Federal sees no good lending opportunities so it is paying customers to close accounts.
Inquiring minds are reading Credit union: Pul-lease take your money.
Nevada Federal Credit Union has a deal for big savers: Withdraw your money and you'll get a bonus.
The credit union is investing in short-term Treasurys and earns about one-quarter of 1 percent on those government securities on average, but it was paying 0.4 percent to customers with savings.
In addition, the credit union expects the National Credit Union Administration to boost deposit insurance premiums by 0.15 percent to 0.4 percent this year.
For each $100 million in deposits, that premium increase will increase Nevada Federal's costs up to $400,000 yearly, Brad Beal, chief executive officer said.
Starting Monday, the credit union has cut the variable interest rates on deposits held by members that only save money to zero.
"We're losing money, and they are not making money," Beal said.
So the credit union will pay these savers a $25 bonus for withdrawing amounts between $25,000 and $49,999. The bonus jumps to $50 for amounts up to $74,999 and goes to $75 for larger sums.
Perverted System
The National Credit Union Administration (NCUA) and FDIC parasites siphon off deposit insurance money from good institutions not willing to take risks, to support institutions taking excessive risks.
In turn, banks and credit unions sitting with high levels of cash lose money on deposits and the customers make zero percent interest, thanks to the Bernanke Fed holding interest rates at zero.
Nevada Federal Credit Union is fed up with paying money to the National Credit Union Share Insurance Fund (NCUSIF) for sitting in cash, so it is paying depositors to withdraw that cash.
Is this a perverted system or what?
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com"(snip)
Re: Credit Union PAYING customers to close savings accounts ! Deposit insurance premi
The perverted thing is that this money should not be idle. It should be in secured loans. Problem is that no one is confident enough to ask for loans in Risky City.
Re: Credit Union PAYING customers to close savings accounts ! Deposit insurance premi
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Problem is that no one is confident enough to ask for loans in Risky City
My acquaintances in the banking industry tell a different story. There really isn't a shortage of new loan applicants ... simply a shortage of ability / willingness to repay !
And now we have new regulations kicking in which limit the lenders' ability to foreclose on delinquent mortgages, which limit the lenders' ability to raise interest rates on delinquent credit cards etc. Both of these increase 'risk' and reduce 'reward' from the standpoint of a lender. Thus it should come as no surprise that, with 10%+ 'write-off' rates on credit cards, with record high 'write-off' rates on small business loans etc. that bank risk managers are leaving their money parked in Treasury bonds ( that pay 2-3% and require no insurance) instead of loaning it out to individuals and/or small businesses at market interest rates that don't cover the bank's probable losses ?
Re: Credit Union PAYING customers to close savings accounts ! Deposit insurance premi
The lack of "ability / willingness to repay" is why they aren't confident enough to get in the slippery slope of a loan.
And in a turnaround, it's the banks who are saying : "I'm not so much worried about the return on investment; I'm worried about the return OF investment."
This is what a recession is. It's when confidence builds back up that a recession starts to end, or perhaps when our patience runs out and we are willing to take chances again. I don't think we really understand the essentials of why it ends. That may be why it lasts so long. To me it is like a traffic jam; we can see why it started but long after the blockage is gone, there is still a roadblock. Then after that inexplicable wait in just a few seconds it just ends. Amazing.
Of course in the current debacle, the essential setup for the crisis has not changed, so this could occur again. Unless the rules are changed drastically. As they should be. (They were after the Great One of the '30s.)
Re: Credit Union PAYING customers to close savings accounts ! Deposit insurance premi
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Of course in the current debacle, the essential setup for the crisis has not changed, so this could occur again. Unless the rules are changed drastically. As they should be.
from one point of view, 'changing the rules drastically' this time around could assure that America's economy never 'recovers'. I'm referring to the notion that, since the early 90's, America's economy has been based on the piling on of ever increasing levels of debt. This time around, foreign lenders are NOT going to be willing to supply their capital to permit that debt creation.
Re: Credit Union PAYING customers to close savings accounts ! Deposit insurance premi
The key is going to be three-fold : moderate spending, wise investment and regulation, and efficient industrial/commercial expansion
Not : hedonistic profligacy, extreme greed, and unwise expansion and regulation. Which is what we've had for a few decades.