Before the HuffPo got all over "Move Your Money" (withdrawing from large banks and going with local community banks or credit unions) -- an idea that plenty of others, yours truly included, had advocated way before, I was a strong advocate for this practice.But, of course, uncle scam has now figured out a way to crowbar in his odds. Check this out, cuz it's truly insidious. You talk about Bizarro World, well, here ya go; let's punish people who SAVE. Given the pro-savings philosophy of Peter Schiff, his head must be exploding.
With a nod to Mish's blog (see sidebar) for the head's up:
Mar. 04, 2010
Copyright © Las Vegas Review-Journal
Credit union: Pul-lease take your money
Members with only savings accounts viewed as costly
By JOHN G. EDWARDS
LAS VEGAS REVIEW-JOURNAL
Nevada Federal Credit Union has a deal for big savers: Withdraw your money and you'll get a bonus.
The credit union, one of the largest in Nevada, figures that deposits from members who don't have a checking account, mortgage loan or any other products are expensive.
Brad Beal, chief executive officer of Nevada Federal Credit Union, estimates that about 1,600 of Nevada Federal's 85,000 members only use the credit union for savings.
The financial institution typically uses member deposits, including certificates of deposit and money market accounts, to make loans, which typically bear higher rates than deposits.
Beal figures those interest-bearing accounts are a money-losing proposition in Nevada's current depressed economy.
"We don't have any loan demand right now," Beal said.
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, Beal said.
While Nevada Federal is well capitalized, reducing deposits also will increase its net worth as a percent of assets. Beal said that is a secondary reason for reducing total deposits.
It's an unusual strategy. Another credit union manager said the strategy makes good sense in the short term but Nevada Federal also may be unable to get the members back again when demand for loans resumes.
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 credit union staff, he said, will help the savers find another place to park their money.
Contact reporter John G. Edwards at jedwards@ reviewjournal.com or 702-383-0420.
