Are Savers Getting Hosed?

That is the question, I was left with after reading a recent LA Times article.

Who's really bailing out the banks?

Taxpayers, for sure. But the largely unsung victims of the financial system rescue are loyal bank depositors -- especially older people who have relied on interest income from savings certificates to live.
- LA Times article.

The problem is, it appears, according to the article, is interest rates. Well duh, even in best of times, bank interest rates are pathetic savings tools.

To save the banks from soaring loan losses, the Federal Reserve did what it always does when the industry gets into trouble: Policymakers hacked their benchmark short-term interest rate, which in turn pulled down all other short-term rates, including on savings vehicles.

But this time the Fed went to rock-bottom on rates. In December, the central bank declared that it would allow its benchmark rate to fall as low as zero.

Savers still are paying the price for that gift to the banks. Average rates on certificates of deposit nationwide have continued to slide this year, according to rate tracker Informa Research Services in Calabasas.

The average yield on a six-month CD fell to 1.27% this week, down from 1.86% on Jan. 1 and 2.24% a year ago.

Anyone who has a CD maturing soon should be prepared for serious sticker shock.
- LA Times article.

Listen, when you give up risk, for safety, you lose the potential earning power. That holds more true, with the down turn of the economy. Why would the LA Times run this article? It's not shocking news. It's basic economics, that anyone who saves, should already know.
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