Washington Post Nails It - Savers Penalized by Bailouts

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We've talked about it for some time, but the Washington Post has finally gotten with the program. The economic crisis and subsequent bailouts have severely penalized savers and those living on fixed incomes. Bankdeals has pointed out an article by Allen Sloan  that puts its finger on the dilemma created by the low rate environment engineered by the Fed.

"This is a quiz. What do the record-high Wall Street bonuses have in common with the record-low yields for savers? Answer: They show yet another way that prudent people, especially those living on fixed incomes, are being cheated by the government's bailout of the imprudent."

The article goes on to discuss how this time, the damage done to savers is greater than in the past. Usually, the Fed lowers short term rates (the Fed Funds Rate) which impacts yields on savings and CD accounts. But this time, it has purchased hundreds of billions of Treasuries to lower yields. Treasuries yields have dropped to record lows, even as the government issues more to cover it's record debt.

And the Build America Bond program allows municipalities to borrow, with 35% of the borrowing subsidized by the public. These bonds have crowded out regular municipal bonds and droppped yields to near record lows.

Those living on fixed incomes have been in a tough pickle. My advice is to ensure that all savings and cd rates are getting the best possible interest. Be sure to open a high yield savings account or a cd via a site like BestCashCow.

And hold on. Yields will not stay this low forever and if anything, will rise dramatically as the dollar continues its decline/collapse and as the economy shows some small signs of life.



Sam Cass
Sam Cass: Sam Cass, MBA, JD, University of Texas at Austin. Always a fan of Leonardo Da Vinci.

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  • Shorebreak

    October 21, 2009

    Sloan's article should be reprinted in every newspaper in this country. It is the best outline yet offered on how the savers in America have taken it on the chin for the irresponsible ones who brought this financial crisis upon us.

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