Today's Fed announcement and Chairman Jerome Powell’s press conference marked the Fed’s first acknowledgement that inflation is more contained. After having been on hold for four of the last five meetings, the Federal Reserve has now inserted the word "any" into its statement, indicating that additional policy firming may not be necessary to get to the Fed's 2% inflation target by 2025.
The news on inflation has been good. The Fed’s members see the core Personal Consumption Expenditure Index at 3.2% in 2024, down from 3.7% at the last meeting. They also see unemployment at 4.1% and believe that US GDP growth will be at 1.4%. These numbers point to a very soft landing with no recession on the horizon.
With the Fed and market participants adopting the idea that inflation is not going to be part of the permanent landscape, there is a strong likelihood that the Fed will be cutting rates in 2024, and analysts now see more than a 40% likelihood that the Fed's first cut will come before the end of Q1 2024.
As US markets celebrate what looks to be an inflation victory, it is not clear that we are going back to the exceptionally low rate paradigm that we saw from 2008 through 2021 anytime soon, if ever. Sovereign debt, especially in the US, is now at unsustainable levels. Oil prices have been exceptionally low, and are completely out of whack with inflation-adjusted long-term norms. De-globalization of our supply chains and immigration curbs could result in pricing pressures on core commodities and labor costs. And, the climate crisis may soon cause such dislocation in the economy that prices end up on a long-term trajectory upwards.
I have been a keen observer, advisor and investor in the climate space for many years. I am a believer that the lowest hanging fruit in our decarbonization efforts revolve around investments related to energy generation through the replacement of our oil and gas sector with wind, water and solar facilities. I recognize that others believe that the great frontiers are in areas like heat pumps or electric vehicles or the "electrify everything" movement that will require a more robust electricity infrastructure involving batteries and distributed storage.
Every once in a while I am reminded that this climate battle that we are entering has multiple other fronts. During COP28, the US's Environmental Protection Agency finally acted to slash methane emissions, since such emissions are contributing greatly to our warming planet. Even though most methane is dispersed into the atmosphere through active or uncapped hydrocarbon extraction, there are many other sources.
Forbright Bank had already caught our attention at BestCashCow when we named it the first US Sustainable Bank last month. Today, Forbright detailed its financing for Divert, a company that has established an anaerobic digestion system that addresses food waste issues, capturing and repurposing methane gas that would otherwise be released from this waste.
The Divert financing employs a project finance structure through which Divert subsidiary is funded to operate and expand its operations across the country.
With this financing, Forbright is not only expanding into still more areas of sustainability, but is also using innovative and more flexible structures for borrowers seeking fast expansion with their climate-addressing solutions.
This video about Divert and the Forbright loan is quite informative:
It is my hope that other US financial institutions will now begin to act quickly and decisively with innovative financing structures that enable broad buildouts of sustainable projects that are needed to address the climate crisis.
A lawsuit has been filed by customers of CapitalOne Bank alleging that the bank engaged in deceptive tactics with its 360 Savings customer base in 2022 and 2023. The plaintiffs assert that when CapitalOne began offering the 360 Performance Savings account as interest rates began increasing in 2022 and then into 2023, it did not notify its existing customers that a higher rate from a similar sounding product was available. Full details of the lawsuit are available on Yahoo! here.
The lawsuit may be of interest to any customer who lost significant amounts of interest by failing to switch from a 360 Savings account to a 360 Performance Savings account in 2022 when the latter began being offered, as the Plaintiffs attorneys are presumably intending to obtain the complete list of account holders and then seek class action status.
However, as a former attorney, I would suggest that those customers not to get too excited about their prospects for any recovery.
As the Yahoo! article points out, offering a higher rate to one customer than to another is engaged in frequently, and has been also been a practice of BrioDirect and UFB Direct. Popular Direct, Vio Bank and VirtualBank are other online banks that have engaged in this process over the 2022 - 2023 time period. Salem Five Bank has engaged in this practice for years. To boot, many banks, including Capital One, will extend better rates to their online customers than they do to branch customers. Bank can offer higher (or lower) rates to customers who are members of an affinity organization (like AARP), or to those buying brokered products (like those customers purchasing a brokered CD or arriving through a deposit consolidators like Raisin. In short, banks have the right to segment their markets and do not need to offer all customers the same rate. It may not be good business, but it is well within their legal rights.
Since this case is not going to be successful on the basis of a contractual obligation (i.e., a violation of the terms and conditions), it is going to need to depend on some sort of affirmative and active intent on the part of CapitalOne to deceive its customers. Stranger things have happened in courts and in the process of discovery, but it seems like a difficult burden for the plaintiffs to meet. Statements were made available to customers online and by mail monthly that fully disclosed the rate and the interest earned. Even a cursory review should have made clear to customers that they were not earning the 3% or 4% Performance rate. The product is also differentiated by the use of the word Performance.
The law does not guarantee you the right to earn the highest savings or money market rate that is available, even from a bank that you may feel good about and may have been working with for decades. Rather, you need to constantly review your statements are be aware of the interest rates that you are earning in all of your accounts. Fortunately, it is easy to check sites like BestCashCow - and competing sites like RatesAndInfo.com - to be sure that you are getting the most competitive savings and money market rates in the market.
