The first spread banks get to keep is difference between the 2% they pay you for your savings and the 5% they charge for loaning it out. It gets worse. The Federal Reserve allows banks to loan out 33 times their savings, or $33,000 for every $1,000 you save, at double the rate paid to you! What is the banker doing for all that money? Just entering the borrower’s info into a program which accepts or rejects the loan and sets the rate. You will be able to do that in your online account with the click of your mouse. And you won’t get an “inquiry” (which today hurts your credit), and there will be no Credit Reporting Agencies. You’ll receive a considerably higher rate for your savings, and pay a considerably lower rate on your loans.
The second spread banks get to keep is interest from money waiting to be made “available” as it transits from one account to another. What’s this? The voyage of Captain Rip Off? How long can it take in the era of high speed trading? Why pay banks for creating problems, like those associated with waiting for funds to be made available?
The third expense is fees, bad rates and all the costs of physical bank branches: land, parking, buildings, utilities, supplies, equipment and payroll.
The Valentine Constitution’s public utility bank eliminates physical banks and the two “spreads”, gives savers a fair interest rate, insures all savings, and passes on to savers all the money we save on branches and spreads.