Real Story Behind Negative Interest Rates: Banks Pushing Credit Unions Out of Business?

July 9, 2012

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Source: AmericaFirstSite.com

Are the banksters attempting to eliminate their local, community-owned competition in the fractional-reserve banking system? Last October, Bank of America faced a backlash from angry customers when they attempted to raise fees. Droves of people left the bank (and others) to put their money in credit unions. Credit unions serve most Americans better than banks, because they generally offer lower interest loans, have fewer fees for membership than banks charge for their accounts, and offer better service. Here’s a story from October 2011:

More banks are hitting customers with fees, but there are ways to get around them.

Citibank announced increased fees for some of its checking accounts, and that they’ll be phasing out free checking accounts, and if you have an EZ checking account, you’ll need to keep $6,000 in your account or pay a fee of $15 a month.

And as you know last week Bank of America announced a $5 a month fee for using your debit card. Consumers are not happy and many of them are turning to credit unions.

http://www.ktsm.com/local/credit-unions-growing-popular-as-banks-increase-fees

Remember, this is the same banking industry that received hundreds of billions of dollars in government bailout funds over the last few years and handed out massive bonuses to the bank bosses, even in companies losing money. Unemployment is high, wages are falling, and government involvement in healthcare is pushing up the costs of medical bills for Americans. Seems a bit greedy to raise fees on customers given all that, no?

For those familiar with the Federal Reserve System, recall that money is created essentially out of thin air by the Fed, then loaned out at a low interest rate (that’s the rate the Fed always adjusts) to the rest of the banks. My inkling is that the bigger the bank is, the better the deal they are getting from the Fed. Then, the bank loans you money at an even higher interest rate. The difference between their rate from the Fed and the rate they charge you is a huge source of profit. The more loans the banks have on the books, the more money they make.

Now credit unions are known for having lower rates, and many of them are community or at least locally owned. Here’s a disturbing letter from a credit union:

You are receiving this letter because you have placed your faith in Susquehanna Valley Federal Credit Union by depositing more than $xx,xxx in your savings with us. We thank you for your past loyalty and Plan to provide valuable products to meet your financial needs for many years to come.

Like many banks and credit unions, however, SVFCU has experienced a large influx of deposits over the past few years as members have sought safety for their savings while also decreasing their loan balances, our primary income source. Although SVFCU has remained profitable during this recession, the increase in deposits has negatively affected a key ratio regulated by the federal statutes, namely the ratio between deposits and net worth. Because of those regulations we need to reduce our deposits from $78 million to $74 million in the next few months.

As a result, effective June 1st, we suspended dividend payments on all tiers of our Money Market products. We also discontinued issuing new share certificates and paying dividends on non IRA share savings and club accounts. The intent of this letter is to encourage you to look for other places where you can deposit some of your shares. By doing so you will assist your credit union by reducing deposits and improving the net worth/deposit ratio. If you have certificates and wish to move any of those funds, we will waive all early withdrawal penalties.

We continued to be insured to the maximum level of $250,000 and anticipate restoring dividend payments as soon as this ratio returns to desired levels.

Notice that credit unions are reliant on interest from loans and savings accounts to stay afloat. We just posted a story today about the Danish central bank setting a negative nominal interest rate. Essentially, saving is punished with an additional fee! In America, interest rates are also near historic lows, with a 30 year mortgage available to some for lower than 3.5%!

Are federal regulations (and by that I mean regulations set by the very privately-owned and secretly-operated Federal Reserve) pushing credit unions out of business to strengthen the banksters’ grip on our economy and people’s lives? Just like with government, lending institutions are generally more efficient and responsive to the people when they are locally controlled. And they’re a threat to the big banks’ desired monopoly on lending and money changing.