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Comment by binarymax | Hacker News Reader

I remember (but cannot find a citation) in ~2005/6 AIG was offering 4% saving accounts. I'm having deja vu all over again.

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That wasn't an unreasonable rate at that time[1], I don't recall the exact timing, but my credit union was at 4% on savings for a while, before fed set interest rates to near zero for many years.

[1] https://www.depositaccounts.com/blog/archive/2005.html

CDs were in the 5.10% range in 2006-2008, I had a ladder of them.

Many of the institutions I had CDs with were dissolved and I was refunded the principal (without interest) by the FDIC. Compared to the losses everyone else was seeing I was more than happy with my 0% "return".

That’s because interest rates were around that level at the time and the bank was also getting paid that much to hold your money. It wasn’t a conspiracy.

Consumer savings accounts had absolutely nothing to do with the crisis.

Like, on the list of “things that caused the crisis,” they would literally be dead last.

Did you know your parents had savings accounts that delivered 10% interest at one time? Look up historical interest rates in the US. 4% is like average.

IIRC, high interest rates are caused by an economic boom, as raising interest rates is caused by both an increase in demand for cash flows to finance investments and also as a monetary policy to put economic pressure to control inflation.

Currently the world in general is very far from an economic boom, and central banks are actually implementing desperate monetary policies to jump start inflation. Thus, we are very far from those times to the point that nowadays a 3% interest rate is considered huge, as the norm is for interest rates to remain below the inflation rate

3% is not huge for the US right now (we have been the most aggressive of the developed markets in normalizing). 3% is only a bit above the federal funds rate right now.

When you account for the investor cash that will subsidize this service as a loss leader offering, it’s not unreasonable.

The only risk is we enter a severe recession and the fed has to drop interest rates to 0 again. In that scenario, robinhood simply has to lower the rate of their offering as well. This isn’t some big existential risk.

> Consumer savings accounts had absolutely nothing to do with the crisis.

That's just not true. A significant contributor to the mortgage crisis is that banks loan out savings that are backed by the government. Savers deposit their money with banks even if those banks are underwriting risky mortgages

That’s like saying a significant contributor to the mortgage crisis was restaurants, because restaurants pay interest on their loans to banks which the banks then used to underwrite risky mortgages.

Not sure I follow your argument. How did savings accounts that offered 4% cause the crisis?

That's extremely reasonable for a savings account. The fed rate at the time was around 5% [1]. Today's is much lower which raises questions about where this rate is coming from.

1: https://en.wikipedia.org/wiki/Federal_funds_rate#Historical_...

Long term bonds are just above 3% now.

That was a real bank. Historically savings accounts are in the 2.5-5 range.

In Germany 5% was common at that time for savings.

yeah i had a 4% account from HSBC around that time. This immediately brought up an uneasy feeling for me, like this is the "pump" side of a pump and dump or the books are so ugly they need cash deposits at any cost to make it look sane.

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