Banks have had it pretty good lately.
For months now, financial institutions have enjoyed near-zero interest rates, meaning they have access to capital on the cheap, so they can turn around and pour cash in investments like government bonds and make a profit on the difference in interest rates.
But banks haven’t extended the same favor to consumers; tightening credit and tossing nickels around Main Street like manhole covers.
Washington may have had enough, though. U.S. Federal Deposit Insurance Corp. Chairwoman Sheila Blair warned banks that even the biggest among them weren’t “too big to fail” – and neither were insurance companies and hedge funds. Blair said she was taking particular aim at those “shadow” financial institutions that operate outside the reach of federal regulators. Meanwhile, Congress continues to study ways to tighten regulations on banks and other financial institutions.
"We need to end 'too big to fail' and this needs to be an overarching policy that applies to everyone," Bair warned.
You get the feeling that Blair and other key policy makers in Washington are getting fed up with banks, who seem to be doing the least amount of suffering despite taking a prominent role in the near collapse of the U.S. economy.
What does this all mean to certificate of deposit rates? Ironically, even as banks feel pressure from Washington to open up the coffers and start providing credit to businesses and consumers, there’s not much to be done when it comes to hiking CD rates – that ingredient has long been baked into the low-rate soufflé that’s taken the air out of CD rates over the past three months.
That continued down the line last week, as a look at CDs via the BankingMyWay National CD Rate Tracker demonstrates. On the short-end, three-and six-month CDs fell a few basis points to 0.47% and 0.71%, respectively.
Up the ladder, two-year CD rates fell to 1.51% from 1.53%. Four-year vehicles fell to 2.01% from 2.03%, while five-year CDs slid to 2.3% from 2.32%.