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Online Savings & Money Market Account Rates 2023

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Here is How Banks Can Act Now On Climate Change

At COP26 in Glasgow, unlike before, the financial world showed up and a group of 450 financial institutions pledged to invest $130 trillion in the transition to a low carbon world.

But, there is so much to be done and it is now incumbent upon banks of all sizes in the US – and around the world – to become engaged in the necessary climate transition that must occur to ensure the world remains within what the Paris Agreement deemed acceptable climate change parameters.

The question is how.   There is so much to be done.   And, while banks come under heavy criticism for their lending to the fossil fuel and coal industry and commitments must be made now to reduce this funding over the next few years, banks must also need to figure out how to more actively engage in a transition.

At the consumer level, it seems obvious that banks can assist any federal and state incentives and require heat pumps and energy efficiencies in any mortgages and home equity loans they extend.   Auto loans can be predicated on shorter payback periods with favorable terms extended if the car is removed from service in favor of a fully electric car.

Loans to industry can require immediately methane remediation and sourcing of materials from green carbon-neutral sources.   Green steel, for example, could be immediately required, even if that now requires sourcing all steel from Scandinavia where Hybrit and Vow Green Metals are way ahead at this game.

Loans to agriculture can also demand methane procedures around livestock, but also better water and fertilizer practices.  

But, the biggest challenge facing banks is that many technologies that have the potential to reduce carbon are still in their infancy and may in fact never materialize – such as the use of hydrogen as a fuel and carbon capture.  And, banks and large financial institutions, which are inherently risk averse, will not be able to get comfortable with the risks of these projects.

One area where banks can easily become comfortable and where tremendous progress can be made very quickly is through investing in onshore and offshore wind projects.  Wind projects are essential to the new energy infrastructure, offering not only the lowest levelized cost of energy for the next decade, according to the Department of Energy, but also a proven technology that banks across northern Europe have now been actively funding for the last 10 years.   Other areas that banks can invest in today without technology risks are solar, energy storage and the laying of cables to expand the electrification of transportation networks.

These types of projects, particularly offshore wind projects, can require complex lending structures to protect the lending banks.   The good news is that the repayment periods for the cost of funding are much shorter and collateral can be better securitized than was ever possible for oil and gas project finance structures that major banks were always so eager to fund worldwide.  Banks of all sizes in the US can extend capital to these projects at the most senior or secure tranches where the cost of capital is the lowest.  Other funding and guarantees can come in at less secure levels in the capital structure by long-term power purchase agreement (PPA) counterparties (utilities or direct partners) or by local and federal agencies.  As a result of Build Back Better, there will be a healthy amount of capital available that will be released through these agencies in early 2022.

The highest level of risk in the project (and much higher returns) is then taken by sponsors,  by OEMs, by developers or by a group of venture capitalists.    Sponsors like NextEra, Brookfield, Orsted and Avangrid will have basically unlimited capacity for these projects in the US.

It is time for banks to begin to act.  

Contact me through BestCashCow if you need further direction, advice or introductions.

Federal Reserve Announces Slow Tapering, Fails to Provide Guidance on Raising Rates, Causes Loss of Purchasing Power for Savers

The Federal Reserve has tapered its bond buying, beginning to contract its $120 billion monthly bond buying purchases that propped up the economy after COVID-19 struck in March 2020.  The bond buying will be decreasing by about $15 billion a month.

The Fed’s actions – and other stimuli that have been introduced – served its purpose initially.  Powell not only prevented a catastrophic recession in 2020; he also kept financial markets intact and maintained full employment.

But, these types of actions were designed to address an emergency and to keep things intact through 2021.  They also, though not designed, created inflation that is by even the most conservative metrics running well above 3.50%, and by more realistic metrics as high as 7.00%.  In short, we now have rampant inflation that is reflected in the price of everything from bread to mega-mansions.

After the Fed first lowered interest rates to its current range of zero to 0.25% on March 15, 2020, Chairman Powell guided that it would hold interest rates at this level until 2023 or 2024.   Somehow, Powell has been unable or unwilling to process new information as it has come to him, and he has held the Federal Reserve to this pronouncement through 2021.   In fact, Powell is unwilling to commit to any sort of schedule to raise rates in 2022.

The Fed and the Treasury Secretary insist that the inflation we are seeing is transitory.   The new language released today is that inflation “is expected to be transitory”.

Regardless of whether inflation is transitory or not, it is here now, and the Fed is way behind the curve.  Holding interest rates at this level is now creating a complete diminution of people’s purchasing power.  $1000 that you earn today can be worth $1005 in one year if you put it in an online savings account or online CD, and that $1005 will buy you goods and services that today would cost you only $930, if you are lucky.

In emerging markets that have experienced this kind of currency depreciation, people would run to the bank and place their money in a high yielding account or switch it into dollars. This is not possible here, unfortunately.

In the US, our alternative currency has become Bitcoin, a virtual token that isn’t a currency at all and that has so far failed to emerge as a currency (except where it is used to pay off international hacks).   It was established as a Ponzi scheme and it may now be forced through circumstances of the Fed’s creation to replace the US dollar as the most accepted means of exchange.  

By just announcing a taper and failing to at least begin to address this reality by raising the Fed funds rate, the Fed is showing that it just doesn’t care.

Examining the Banks’ Climate Policies Critically

It is pretty clear at this stage that those of us alive today and our children, grandchildren and their descendants are facing a climate crisis unlike anything the inhabitants of Earth have ever faced.   It is also very clear that this crisis largely emanates from our addiction to fossil fuel over the last half century.

As we begin to grapple with the challenges we face, there is an increasing desire to blame the major money center banks for their continued funding of fossil fuels.  In fact, if you drive down the west side of Manhattan you will see advertisements for a smart-up mobile app that will keep deposits away from fossil fuels (and but pay a rate below leading online savings rates).

We have all made mistakes in our reliance on fossil fuels in the past.   That includes the banks.  I myself worked for major European banks that were funding BP and Royal Dutch Shell’s exploration around the world.  I also practiced law in Russia where I advised Exxon on Sakhalin 1.  If I had understood the consequences of those operations, I would have refused to do the work, and that is true of everybody who I worked with.   We are all guilty of recognizing the crisis much too late.  The banks too.

But, our path to transitioning out of fossil fuels to renewable energy is also going to rely on established banking systems.  There is such an extraordinary amount of investment that is going to need to made immediately to effect this transition that there simply is no other source that can lead in this arena.

I performed a little bit of research recently to learn more about the progress that major global banks are making in their lending to renewable projects worldwide.   I came across multiple reports on the banking industry’s current loans to the fossil fuels industry.   These reports all slam JP Morgan Chase, which is now the largest bank in the US and hence the largest covered by BestCashCow, for its outsized and outstanding loans to companies like Chevron and Exxon without, at the same time, recognizing the history of these loans (i.e., when these loans were placed).  None of these reports asks whether the bank can even divest itself of these loans.   One report (Banking on Climate Chaos by the Rainforest Action Network) goes so far as to attack Chase for lending to Iberdrola, Orsted and Siemens Energy.     Iberdrola and Orsted, of course, are now the largest offshore wind operators in the world and will be vital in the US’s efforts to transition away from fossils.  Siemens Energy, likewise, is a manufacturer of solutions relating to wind, solar and energy storage and transmission.   Quite simply, it would be irresponsible for Chase not to be increasing its lending to these three companies right now.

The point is simple.  We need leadership from the banks on the climate crisis.  Rather than rushing to judgment, we need to give them the opportunity to outline their actions and their forward  plans to address the climate crisis.   Banks are now free to outline their policies on BestCashCow for their customers and potential customers.   Read what they have to say on their bank pages on this site or ask them directly for their policy, if they haven’t outlined it.  Examine their actions critically, looking at the investment to renewable companies as well as fossil fuel companies.   And, only then should we hold them to account.