It's a sure sign that something is seriously wrong with the Federal Reserve monetary policy.
Nevada Federal Credit Union has a deal for big savers: Withdraw your money and you'll get a bonus...
The financial institution typically uses member deposits, including certificates of deposit and money market accounts, to make loans, which typically bear higher rates than deposits.
Beal figures those interest-bearing accounts are a money-losing proposition in Nevada's current depressed economy.
"We don't have any loan demand right now," Beal said.
The credit union is investing in short-term Treasurys and earns about one-quarter of 1 percent on those government securities on average, but it was paying 0.4 percent to customers with savings.
In addition, the credit union expects the National Credit Union Administration to boost deposit insurance premiums by 0.15 percent to 0.4 percent this year.
For each $100 million in deposits, that premium increase will increase Nevada Federal's costs up to $400,000 yearly, Beal said.
This is just an example of how the traditional banking model is dead. Or to put it another way:
The old definition of banks, "take demand deposits and make commercial loans," has been changed in practice to a new one: "borrow money guaranteed by the government and make real estate loans." The implications of this structural shift for systemic financial risk have yet to be worked out.
– Alex Pollock
The significance of this shift is staggering, but I don't have my head totally around it yet.