Skip to main content

Deposit Times Are Changing

04/22/2024 07:27 pm

By Ray Birch

LAKE FOREST, Ill.— While the U.S. money supply in recent years has appeared to be stable, one economist says that’s not the case, adding that money supply components have been moving as wildly as a theme park ride and affecting deposits at FIs across the country.

“What’s the story?” asked Michael Moebs, economist and chair of Moebs $ervices, whose new study takes a detailed look at money supply components. “Insured transactions have fallen but are at an all-time high since 1914. Insured savings are making a big comeback. And uninsured deposits are soaring with insured deposits. Total money supply is far from stable. It is like a Disney amusement park ride with people looking suspiciously calm after a wild ride where each screamed and yelled as limbs and bodies were thrown around.”

Feature Money Supply

Moebs said Federal Reserve Chair Jerome Powell’s “new definition of money,” announced in the second quarter of 2020, has finally been implemented by financial institutions of all sizes.

“FIs all over are marketing and selling as dollars and accounts are moving to the best deals and highest rates,” he said.

chart

What Happened in 2023

Moebs detailed what happened with money supply in 2023:

  • Regular DDA (no interest) accounts fell slightly, by (1.7%) or about $90 billion, yet are still at their highest levels since 1914 when the Fed starting tracking money
  • Interest paying DDA levels fell (11.5%), the lowest since COVID started in U.S in. January 2020
  • Savings levels dropped dramaticaly (13.9% or $1.5 trillion), and are at their lowest level since COVID started. “In March 2020, when Powell eliminated reserve requirements and monthly transaction restrictions moving savings to M1, the bell started tolling for savings,” Moebs said. “The saver is moving money to DDA since saving rates are less than an average of 25 BPS. Plus, DDA is where stimulus funds came into play and have left about $1 trillion”
  • M2 was left with term-money CDs and retirement accounts (IRAs and Keoghs)
Moebs Mike

Michael Moebs

Additional Changes—And a First

Moebs highlighted the major money supply changes that ocurred last year:

  • Retail CDs had a huge resurgence “after almost dying” during COVID. Retail CDs increased 282% in 2023 and now are over $1 trillion
  • Jumbo CDs surged 46.7% to more than $800 billion

“For the first time since starting in 1962, retirement accounts at depositories dropped (19.3%),” Moebs said. “Why the dramatic shift in money? The answer is rates. Wall Street rates are being offered for all CDs and staying low for IRAs and Keoghs. M3 is money market mutual funds. Rates for MMMFs soared and funds poured in. Dollars mainly came from depositories. The most sensitive was depository retirement deposits.”

Effect on Money Stock

Moebs reiterated that pricing is influencing money stock.

“Gathering funds has gone beyond deposit insurance caps of $250,000. Risk is fundamental to price. Depositories need to adhere to analytical systems such as debit scoring and forego judgemental approaches,” Moebs said. “CDs are returning. Savings are falling. DDA is high. MMMFs on Wall Street are soaring. The signals call for new and different methods for managing deposit portfolios. Info is vital.  Measuring and pricing is essential. Deposit times are changing.”

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

The Case for Sharing a CEO Between Credit Unions

  Embracing Collaboration: The Case for Sharing a CEO Between Credit Unions In recent years, credit unions have faced numerous challenges, from regulatory pressures to evolving member expectations. As many seasoned leaders retire, smaller credit unions often find themselves at a turning point. In this landscape, one innovative solution is gaining traction: sharing a CEO between two credit unions. This approach not only addresses financial constraints but also fosters collaboration and enhances service delivery. The Rationale Behind Sharing a CEO 1. Financial Sustainability One of the most pressing concerns for small credit unions is maintaining financial health amid rising operational costs. A shared CEO model alleviates the financial burden of hiring and compensating a full-time executive. By splitting salary and benefits, both credit unions can allocate resources more effectively, allowing for investment in member services, technology, and community initiatives. ...
Post a Comment
Read Complete Article HERE>»

Reading Up On Recessions

  Reading Up On Recessions       Background Stemming from the Latin word “recessus” (meaning “a retreat”), recessions are  sustained periods  of declining activity in a country’s economy. During a recession, unemployment rises while economic output falls across a large swath of industries. Recessions are inevitable in modern economies, with one occurring about every six to seven years ( What causes recessions ?).   One common definition of a recession is when a country logs two consecutive quarters of shrinking gross domestic product, but in practice, ...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - Landmine Rat Honored

  Landmine Rat Honored   Cambodia unveiled the world’s first statue honoring a landmine-detecting rat (w/photo) Friday. Magawa the rat lived to 8 years old and identified more than 100 landmines and other explosives from 2016 to 2021.  There are more than 100 African pouched rats deployed in landmine detection operations across the world. To identify mines, the rats are trained to sniff out explosive compounds like trinitrotoluene, or TNT. (The rats are not heavy enough to trigger detonation.) In Cambodia, up to 6 million landmines remain undiscovered, most planted during three decades of conflict, from the Vietnam War era through Cambodia's civil war . Since 1979, roughly 20,000 people have been killed in Cambodia, and roughly 40,000 wounded as a result of the mines. Magawa cleared more than ...
Post a Comment
Read Complete Article HERE>»

Sunday Reading - The gold standard, explained

  Gold Standard       The gold standard, explained A gold standard is a system where a country’s currency is pegged to, and can be converted into, a fixed amount of gold. It’s typically meant to create a sense of security in the country’s currency: When a government uses a gold standard , its currency can be exchanged for an equivalent amount of gold—although regulations around redemption vary by country.   After the Civil War, in 1873, America adopted the gold standard for the first time. At the time, if gold was priced at $100 an ounce, each dollar  rep...
Post a Comment
Read Complete Article HERE>»

Open Banking Pushes Leading Credit Unions Ahead In Race For Member Loyalty

  https://youtu.be/pUIV8hwSDCE NEW YORK—Credit unions that embrace open banking aren’t just keeping pace with competitors—they’re pulling ahead, new data show. A new report finds that innovation in digital tools and personalized experiences is emerging as the decisive factor separating credit unions that win lasting member loyalty from those at risk of losing ground. “ The 2025 Credit Union Innovation Readiness Index: Closing Gaps, Winning Members ,” a June report produced in collaboration between  Velera  and PYMNTS Intelligence, underscores innovation as a defining factor for credit union success. iStock-Korakrich Suntornnites “Facing shifting expectations from both consumers and small to medium-sized businesses (SMBs) toward digital convenience and tailored experiences, credit unions must modernize not just to compete with traditional banks, but to remain relevant to their members. The report, based surveys of 500 credit union executives, 15,000 U.S. consumers, and nea...
Post a Comment
Read Complete Article HERE>»

Long-Stalled Credit Card Competition Act Moves Forward In Senate Clarity Act Markup

WASHINGTON—A long-stalled bipartisan push to boost competition in the credit card market moved closer to becoming law late Friday, as Sens. Roger Marshall (R-KS) and Dick Durbin (D-IL) advanced a new amendment attached to the Senate Agriculture Committee’s markup of the Digital Asset Market Structure and Investor Protection Act, commonly known as the Clarity Act. Dick Durbin The amendment, a core component of the long-debated Credit Card Competition Act, would prohibit major credit-card networks and large issuing banks from enforcing network exclusivity on credit cards. Supporters argue the measure would expand transaction-routing competition, weaken the dominance of the largest payment networks, and reduce swipe fees that merchants say inflate consumer prices. The renewed momentum reflects President Trump’s recent backing of efforts to rein in credit card costs, a shift that has altered the political trajectory of legislation that has struggled to advance in prior Congresses. With Tru...
Post a Comment
Read Complete Article HERE>»

USPS Defends Banking Pilot, While Opponents Call It Illegal

  By David Baumann - July 11, 2022 Program has faced opposition from the outset, including from credit union groups, and has struggled to gain real traction. The U.S. Postal Service (USPS) argued this week that the controversial pilot program it is operating i...
Post a Comment
Read Complete Article HERE>»

Meet Spokane Firefighter Credit Union (SFCU) New President/CEO - Troy Clute

Meet SFCU's New President/CEO - Troy Clute  Troy Clute serves as the President and Chief Executive Officer of Spokane Firefighters Credit Union, bringing 29 years of experience in banking and finance. His career includes extensive leadership roles across the industry, with a strong foundation in consumer lending and member-focused financial services. Troy is a graduate of the renowned CUES CEO Institute Program, having earned the Certified Chief Executive (CCE) designation—one of the highest leadership credentials in the credit union movement. His leadership is defined by strategic vision, operational excellence, and a deep commitment to serving Spokane’s firefighter community and their families. Beyond his professional role, Troy values family above all. He and his wife, Karri, have been married for 36 years and share two grown children, Kellen and Kennadie, as well as three grandchildren—Tyus, Izze, and Major—who keep life joyful and full of adventure. When he’s not leading the c...
Post a Comment
Read Complete Article HERE>»

The impact of recent bank failures could impact credit unions.

The failures of Silicon Valley Bank (SVB) and Signature Bank, combined with the FDIC’s decision to cover all depositors could have an impact on credit unions. With over 93% of their deposits uninsured, SVB appears to be the poster child for poor strategic planning. The bank got caught short when the Fed raised rates. For credit unions, the real story is the decision to cover ALL accounts regardless of the amount in the account. Where is the threat to credit unions? Credit unions had no role in the failures of SVB and Signature Bank. The threat lies in the Treasury and FDIC’s decision to guarantee the funds in every account…no matter how much was in that account. While the Treasury Secretary and FDIC Chairman Gruenberg may have felt the need to do so to restore confidence, this action just kicks the can down the road. And the road will have no end if NCUA feels the pressure to do the same thing if a similar situation hits the credit union movement. Should there be a conservatorship or...
Post a Comment
Read Complete Article HERE>»