What Is Up With The Cd Rates

The low certificate of deposit rates returned to savers has a predictable trail.  Understanding the loop can provide savers with an accurate perception of the changes. 

Large sums of community money drifted in to military budgets to support a war that extended for a longer than expected period of time.  This contributed to a tightening of available cash in the community setting. 

Tightening of community cash caused area businesses to default on their bank loans.  Local consumers lacked the money to support the business.  This became so prevalent the bank industry regulators altered credit standards to better control the flow of money.

To reduce loss the banking industry has established tighter borrowing regulations.  This has helped contribute to the decreased loan demand.  National banking data indicates a decrease in the number of mortgage applications and a decrease in borrowing per small business lending index.

A portion of money paid to the bank as interest on real estate and business loans is used to pay cash as earned interest with certificates of deposit.   A decrease in the number of real estate and business loans translates to less capital available to pay holders of certificates of deposits.

Communities are continually challenged to alter models of business to enhance a return flow of federal and state dollars invested in serving the public.  If your community is sending money to support federal and state initiatives how is a portion of the invested money finding its way back to the community.

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