Do Savings Accounts Matter?

Savers, who are seeing their wealth dry up from inflation, are being overlooked, as federal resources rally to help those who've been far less responsible.

With all the recent news about federal bailouts, the cynics of the world are wondering if our national anthem should be changed to the Steve Miller Band's "Take the Money and Run." That's the message being sent when legislators are quick to clean up after gamblers who ended up on the wrong side of the bet.

Squeaky wheels get the grease

The U.S. government seems to favor risk-takers, particularly when those big risks turn into big disasters. Just ask the folks at Bear Stearns, Fannie Mae, and Freddie Mac, plus all the borrowers who took out mortgages they couldn't afford. And there'll be more federal assistance to come. The Wall Street Journal recently reported that domestic auto manufacturers are getting ready to ask for help-they need a shot of cash to get by until their new hybrid models can be rolled out. Apparently, auto executives haven't adhered to the advice about never putting all of your trucks and SUVs in one basket.

No reward for responsibility

Meanwhile, there's a predicament afflicting this country's savers-the people who make their mortgage payments, pay their bills, and save a little money on the side. That predicament is related to how the Fed's economic actions have changed interest rates on savings accounts. Fed rate cuts, made to stimulate the economy and help at-risk homeowners holding adjustable-rate mortgages, have pushed savings rates to well below the inflation rate. The average one-year certificate of deposit (CD) pays less than 2.5 percent, while a regular savings account pays between 0.25 and 0.50 percent. Inflation, however, is on its way up to 5 percent. As a result, savers and individuals living on fixed incomes are watching their wealth deteriorate. And yet, no one's calling for a federal savings stimulus plan.

Mortgage rates and good savers

The financially responsible are taking the punishment in other areas, too. Mortgage lenders, struggling to recover from years of reckless underwriting practices, have overhauled their standards and implemented risk-based pricing. Sure, they've raised the bar on subprime borrowers; but they've also made things tougher on creditworthy borrowers. Mortgage rates and mortgage fees are on the rise across the board. Established borrowers, who have good credit, are being charged a premium for loans that fall even slightly outside of traditional conforming standards. It's a new and extreme form of risk-based pricing; if the loan or borrower has a whiff of risk, it will cost more.

Legislators argue that bail-out loans and stimulus packages are being implemented to ward off even larger crises. And lenders say they're only adjusting to these more uncertain times. Unfortunately, neither claim means much to the millions of U.S. taxpayers who've paid their bills, saved their money, and are now shouldering the burden of someone else's recklessness. No doubt the most bitter of these taxpayers are wishing they'd taken the money and run, too.