Credit Union Pays Savers to Close Their Accounts; Deposit Insurance Makes Saving Accounts a Losing Proposition for Banks
Nevada Federal Credit Union has too much money and does not know what to do with it. Worse yet, sitting in cash is costing the credit union money.
Insurance premiums are the culprit. On top of any deposit premium paid to customers, insurance runs .4%. Yet short term treasuries yield .25%.
Nevada Federal sees no good lending opportunities so it is paying customers to close accounts.
Inquiring minds are reading Credit union: Pul-lease take your money.
Nevada Federal Credit Union has a deal for big savers: Withdraw your money and you'll get a bonus.Perverted System
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, Brad Beal, chief executive officer said.
Starting Monday, the credit union has cut the variable interest rates on deposits held by members that only save money to zero.
"We're losing money, and they are not making money," Beal said.
So the credit union will pay these savers a $25 bonus for withdrawing amounts between $25,000 and $49,999. The bonus jumps to $50 for amounts up to $74,999 and goes to $75 for larger sums.
The National Credit Union Administration (NCUA) and FDIC parasites siphon off deposit insurance money from good institutions not willing to take risks, to support institutions taking excessive risks.
In turn, banks and credit unions sitting with high levels of cash lose money on deposits and the customers make zero percent interest, thanks to the Bernanke Fed holding interest rates at zero.
Nevada Federal Credit Union is fed up with paying money to the National Credit Union Share Insurance Fund (NCUSIF) for sitting in cash, so it is paying depositors to withdraw that cash.
Is this a perverted system or what?
Mike "Mish" Shedlock
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