LIANE HANSEN, Host:
Here to discuss the savers' dilemma is NPR senior business editor Marilyn Geewax. Marilyn, it's great to see you again.
MARILYN GEEWAX: Hi, Liane. It's good to be back.
HANSEN: All right, explain: Why are interest rates so low?
GEEWAX: But that strategy of propping up borrowers has a cost, and savers were the ones who had to pay it. So in late 2008, if you put your money into the bank in the form of a CD, OK, you did your part to help the economy by making cash available, but you just didn't get much of a reward.
HANSEN: But all signs seem to point to the fact that the worst of the crisis is over. So, why not raise rates now?
GEEWAX: Well, it's definitely true that in the past year, the economy has stabilized - but stabilized is not great. It's still a very difficult environment. The housing market's very fragile, and if you raised interest rates, that would just make that market a lot worse. That means, here we are, we're stuck in a very low-rate period for a very long time. These days, if you could get even 1 and a half percent interest on a one-year CD, that's pretty good.
HANSEN: But what about if you're willing to tie up your money for longer than one year? I mean, can you get more interest in exchange for a longer commitment?
GEEWAX: Yes, you can but, you know, that's only if you're willing to tie up your money for five years. And then, even at that, you're only getting 3 percent interest. That's really not much of a return. And there's one other thing to consider. You know, in an economy that's still as weak as this one, do you really want to tie up your money for five years? What if you lost your job later this year? A lot of people who thought they'd never lose their jobs did, so sometimes you might need that money.
HANSEN: But couldn't you put your money in a five-year CD now and then pull it out if you had an emergency?
GEEWAX: Yes, you could get your money back, but you're going to pay huge penalties. The withdrawal penalties, if you take your money out of a CD, you could wipe out every bit of interest you earned. And depending on the circumstances, it's even possible that you could lose some of the principle - that is, the money you originally put in.
HANSEN: Marilyn, pardon me, but this isn't fair. This doesn't sound fair if you're a person who wants to save money.
GEEWAX: You know, it isn't fair. Actually, it's really frustrating for savers. You know, the consumers, the homeowners, the businesses that borrowed way too much money a decade ago, they left the economy in terrible shape. It was so bad that the Fed had no choice but to bail them out by driving interest rates lower. But the end result is that savers who are the very people who did not cause this financial crisis, are now the people who are getting puny returns on their money.
HANSEN: NPR senior business editor Marilyn Geewax. Marilyn, thanks a lot.
GEEWAX: Oh, you're welcome, Liane.
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