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.”

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.

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)

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

The Skills Board Chairs Need Now: Leading Through Complexity, Not Control

NCOFCU Podcast Grant Sheehan CCUE | CCUP | CEO-NCOFCU The role of the board chair has quietly—but fundamentally—changed. A decade ago, success was defined by experience, authority, and strategic judgment. Today, those traits are still relevant—but no longer sufficient. The modern board chair operates in a world shaped by competing stakeholder demands, technological disruption, geopolitical uncertainty, and increasing scrutiny. What emerges is a role that is less about control—and more about navigating complexity. Below are the core capabilities that now define effective board leadership. 1. From Authority to Orchestration The most important shift is conceptual. Board chairs are no longer expected to be the smartest voice in the room. Instead, they are expected to make the room smarter . This requires the ability to: Synthesize large volumes of information Reconcile conflicting perspectives Facilitate high-quality dialogue Traditional strengths like executive experience matter les...

Read Complete Article HERE>»

On Stablecoins, NCUA Has Opportunity to Strike Right Balance and Get it Right

By Grant Sheehan As digital payments continue to evolve, the National Credit Union Administration’s (NCUA) efforts to establish a regulatory framework for stablecoins mark an important step forward. For credit unions, especially those serving mission-driven communities like firefighters and first responders, access to emerging financial technologies is not just an opportunity but a necessity to remain competitive and relevant. The National Council of Firefighter Credit Unions (NCOFCU) appreciates the thoughtful input provided by both America’s Credit Unions and the Defense Credit Union Council (DCUC) on the NCUA’s proposed stablecoin framework. We find strong merit in the recommendations of both organizations and believe their combined perspectives offer a constructive roadmap for getting this right. Important First Phase, But… At its core, the proposal represents an important first phase in implementing the stablecoin provisions of the GENIUS Act. Establishing a...

Read Complete Article HERE>»

It All Starts in the Boardroom

It all starts in the boardroom—but the consequences are felt far beyond it. When Governance Breaks Down, Members Pay the Price Credit unions are built on a simple but powerful idea: they are owned by their members. Unlike traditional banks, where shareholders drive decisions, credit unions are meant to operate democratically—guided by a volunteer board elected by the very people they serve. But that model only works when participation exists. A governance breakdown happens when the people elected to oversee an institution stop truly representing the people who own it. In credit unions, this breakdown doesn’t usually come from scandal or sudden failure. It happens quietly, over time—through disengagement. The Root of the Problem: Low Engagement Most credit union members don’t vote. Board election turnout is typically in the low single digits. In some cases, it’s barely measurable. That means a very small percentage of the membership is effectively deciding who governs an institution th...

Read Complete Article HERE>»

Sunday Reading - Why the IRS is necessary

'Taxman' Why the IRS is necessary The Internal Revenue Service, or IRS, is a division of the US Treasury Department created in 1862 that enforces the Internal Revenue Code —Title 26 of the US Code, a compilation of federal statutes—and, effectively, oversees tax collection. In 2024, the IRS's roughly 75,000 employees collected roughly $5T in tax revenue. Given its role in diverting household income streams, it also has a bad reputation. Half of Americans had an "unfavorable view" of the IRS as of 2024 ( see data ). In a ranking of 16 well-known federal agencies by popularity that year, t...

Read Complete Article HERE>»

It's Financial Literacy Month

April is Financial Literacy Month—a time dedicated to empowering individuals and families with the knowledge and tools needed to make informed financial decisions. Whether you're budgeting, saving, managing debt, or planning for the future, improving your financial literacy can have a lasting impact on your well-being. We invite you to explore our Consumer Education website, where you'll find helpful resources, tips, and guidance to support your financial journey. If you find it valuable, please share it with your family and friends—because financial knowledge is even more powerful when it’s shared. https://www.ncofcu.org/financial-literacy ================================================= Remember, you're not alone with NCOFCU.org Join/Upgrade Check out some of NCOFCU's additional features: Annual Conference First Responder Credit Union Academy Financial Literacy Podcasts YouTube Mini's Advocacy

Read Complete Article HERE>»

Growing Use of Stablecoins Could Reshape How FIs Manage Liquidity, Allocate Assets, NY Fed Report Suggests

NEW YORK — The growing use of stablecoins tied to the U.S. dollar could reshape how banks manage liquidity and allocate assets, potentially leading institutions that support the digital tokens to hold more reserves and make fewer loans, according to a new study from the Federal Reserve Bank of New York . The paper, titled “ Stablecoin Disintermediation ,” was authored by economists Michael Junho Lee and Donny Tou and examines how stablecoin activity affects the balance sheets and liquidity management of banks that partner with stablecoin issuers. The researchers found that while stablecoins rely on traditional banks to function, the relationships can alter the liquidity demands placed on those institutions. Banks serving stablecoin issuers tend to hold larger reserve balances and reduce the share of assets devoted to lending, shifting toward a more reserve-heavy banking model. Focus of Study The study focused on developments following the March 2023 collapse of...

Read Complete Article HERE>»

Why is NCUA Overlooking the Biggest Fee of All?

By Frank J. Diekmann NCUA has made a priority out of the F word in 2024—fees--announcing a special focus on NSF and OD fees this year. And yet the agency seems to have little interest in the biggest and most egregious fee of all—the “merger” fee that comes when net worth isn’t returned to the people whose money it is in the first place, and it instead goes to insiders—often in amounts a multitude larger than any bounced check fee. It's sadly ironic that NCUA seems bothered by fees members opt into, but not by a merger fee they don’t seem able to opt out of. The merger fee is a hidden-in-plain-sight cost to members that is so brazen and increasingly occurring it has entered that dangerous territory of almost being taken for granted, wi...

Read Complete Article HERE>»

The Federal Open Market Committee Up's Rates

WASHINGTON–As expected the Federal Open Market Committee at its meeting today moved to increase rates by a quarter-point to a range of 1.25% to 1.50%. In a statement accompanying the announcement, the Federal Reserve said data from November indicate the labor market has continued to strengthen and that economic activity has been rising at a solid rate. “Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further,” the Fed said. “Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2%. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.” The Committee said it continues to expect that, with gradual...

Read Complete Article HERE>»

One Proposed LIBOR Replacement Has ‘No Clothes,’ Says SEC Chairman

WASHINGTON–Gary Gensler, chairman of the Securities & Exchange Commission (SEC), believes one of the benchmarks being proposed as a replacement for LIBOR has “no clothes.” Gary Gensler In remarks before the Alternative Reference Rates Committee’s SOFR Symposium, Gensler said he was sharing his own views and not those of the SEC, and his view does not align with many of those backing a move to the Bloomberg Short-Term Bank Yield Index from the London Interbank Offered Rate (LIBOR). “As some of you may know, when the topic of LIBOR comes up, I sometimes find myself thinking about Hans Christian Andersen and Warren Buffett. Others of you might be wondering why I’d mention these two men — born 125 years and an ocean apart — in the context of LIBOR,” Gensler told the meeting. “Well, as Hans Christian Andersen wrote in his famous folktale, ‘The Emperor’s New Clothes,’ the emperor has no clothes.” And who is the emperor? It’s many of the replacement rates being suggested to fill LIBO...

Read Complete Article HERE>»

Newly Released Fed Minutes Show Policymakers Seeking to be Flexible on Rates

04/13/2023 Tweet WASHINGTON — Newly released minutes from the Federal Reserve’s March meeting show officials are seeking to remain flexible when it comes to future rate decisions. The paradox for the Fed remains that the labor market remains strong, even as inflation continues to be high, although it cooled in March, according to new data from the Bureau of Labor Statistics. “Central bankers have spent more than a year waging a battle against the most painful burst of price increases in decades, raising interest rates to slow the economy and to wrestle price increases under control,” noted the Wall Street...

Read Complete Article HERE>»

First-responder Credit Union Newsroom

Search This Blog