CD Rate Trends This Week: Feb. 2

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These days, you can’t swing a dead loan modification deal without hitting an economist worried about our national debt.

Here is a good example. Monday, the White House came out with a proposed $3.8 trillion budget for 2011. From the White House’s own numbers, the budget would expand spending by $1.7 trillion from 2010 to 2019. There are some interesting statistical ramifications from the budget proposal, which still has to pass both houses of Congress before it becomes reality.

Based on the White House’s own proposed budget, as calculated by the Washington, D.C.-based Heritage Foundation...

  • Our national debt would be 49% higher in 2010 than it was in 2009.
  • By 2020, 20% of all federal taxes would go to just paying the interest on the national debt.
  • Spending restraint is out. By 2020, about 90% of the growth in the national budget deficit comes from spending hikes — and only 10% comes from spending cuts.
  • In 2007, the federal government spent, on average, $24,000 per U.S. household. By 2020, that goes up to $36,000.
    If the U.S. actually spends this much money, how would that impact U.S. citizens? It’s a fair question. As Lawrence H. Summers — President Obama’s own economic adviser — has said, “How long can the world’s biggest borrower remain the world’s biggest power?”

It’s a question just as easily asked about banks. With the nation increasingly mired in debt, both individually and collectively, can bank consumers at least get some decent yields on certificates of deposit?

Not as long as there is so much uncertainty over the direction of the U.S. economy, and the proposed White House budget is only going to add to that uncertainty (if not trigger outright anxiety among creditors and lenders).

For the short-term, all of this economic uncertainty has translated into lower bank rates, particularly on CDs. That trend continues in early 2010, and into February, as CD rates fell again last week, even before the new federal budget proposal saw the light of day.

Here is the national CD rate picture for the last week of January, as measured by the BankingMyWay Weekly CD Rate Tracker:

Description             This Week         Last Week

60-Month CD              2.135%            2.21%

48-Month CD              1.845%            1.923%

24-Month CD              1.296%            1.355%

12-Month CD              0.853%            0.902%

Six-Month CD              0.569%            0.602%

Three-Month CD         0.378%            0.388%

Not to be Pollyanna-ish, but you really have to wonder how big headlines, day-after-day, about the White House’s proposed budget will impact bank CD rates. Let’s face facts. The harsher the spotlight on our national debt, the higher the uncertainty about the U.S. economy. And that won’t help CD rates.

We said this last week, and it still holds true this week. To get the best CD rates possible — even in this tough environment — start thinking small and head to local banks and credit unions. Community banks are doing a better job of offering more competitive CD rates than the big banks these days, and deserve more of your attention. To get those best rates, visit BankingMyWay CD Rate Search Tracker.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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