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Financial crisis did savers no favors

By Claes Bell, CFA · Bankrate.com
Monday, April 9, 2012
Posted: 4 pm ET

Savers haven't had much to cheer for since the Great Recession began in late 2007 and the Fed responded with a series of rate cuts that's had the key federal funds rate near zero since late 2008. CD rates have steadily declined since then, eventually falling to the point where earning 1 percent on a one-year CD is the exception, rather than the rule.

At the White House Personal Finance Online Summit last week, Gene Sperling, Director of the National Economic Council, was asked about the administration's stance on the plight of U.S. savers. While he wouldn't give any specifics on monetary policy, which is within the purview of the Fed, he did say the following.

The first priority for our economy was obviously to prevent ourselves from spiraling into a potential depression in 2009. And then I think, as we faced headwinds in 2011, to make sure that we did not even take a significant risk of another downturn when we were already at 9 percent unemployment. And I think your first and fundamental goal has to make sure that you have a recovery that is solid and taking hold and moving in the right direction.

While many economists would probably agree with Sperling's priority list, it may be a bitter pill to swallow for the many savers who never participated in the spending and borrowing frenzy leading up to the financial crisis. They'll likely have to wait until economic growth reaches a healthier clip before the Fed moves to prevent inflation from rising to see CD rates return to something approaching normal.

What do you think? Are negligible returns for savers a necessary evil of the government's response to the financial crisis?

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5 Comments
teafor2
April 17, 2012 at 1:49 pm

Now we understand that the bailout was done on the backs of the decent, good and hard-working people. Those responsible must pay for that error.

Hanover Bill
April 11, 2012 at 9:01 am

While our government saw fit to bale out almost every conceivable class of the American economy, they left the fixed income investors hanging out to dry. Who, may you ask are the fixed income investors, they are the people who lived within their means, and in no way contributed to the economic crisis, the biggest majority of whom are senior citizens. If the funds were available to bale out virtually everyone, why not put aside some of those resources and guarantee the fixed income investor a reasonable rate so their quality of life was not adversely affected. I for one have always been a conservative saver, thinking that when I retired I would make no less than 4 or 5 percent on my savings, little did I know what a surprise our government had in store for me and others like me. Now I find myself struggling to protect my principal, while living a much more austere lifestyle than I ever envisioned as I worked hard and saved throughout my working years. The government has let us down big time, one can only hope that rates climb a little for we savers while we are still around to enjoy it. I hope that Ben Bernanke and his chums at the Fed realize how many peoples lives they have negatively affected with their policies.

Meagan
April 10, 2012 at 11:45 am

Although I think savers have definitely taken a hit with their investments since the beginning of the financial crisis, so has MOST anyone involved at all in the American economy. It is unfortunate that in order to save the entire economy, interest rates had to be reduced to nearly zero. It begs the question though, what would have happened if interest rates had NOT been slashed? Widespread unemployment (as a result of thousands of employers being unable to access credit to keep their businesses afloat) and the resulting economic instability would have led to riots, in a post- Hurricane Katrina style. How much is living in a stable country worth? I think a few years of low interest rates for savers is worth it.

ExWallSter
April 10, 2012 at 3:24 am

cranking rates to negligible certainly benefits the banks, the real estate developers and the automakers at the expense of retirees and the others who don't fund their lifestyle with debt...the obama administration, as the bush one before it used cheap and easy mortgages to bubble us out of the post-9/11 slump, realized that the traditional model of americans working to earn a living wouldn't create economic growth in an era of globalization and technology, so decided to take an 'if you build it they will come' approach by flooding the country with cheap credit that people will use to buy things they wouldn't otherwise. in my opinion it can't end soon enough. debt should have a price and prudence should be rewarded - it's been the reverse for 10 years which is too long.

NO stocks 4 me
April 09, 2012 at 7:41 pm

what keeps happening to my posts here?