High Interest Investment

are those high interest saving account has any exposure to the subprime investment?

Does anyone know how banks that offer high interest saving accounts uses those money that you give them? Are they invested in the US sub prime housing market? Which is the financial mess that they are in now.

Public Comments

1. Most are involved.
2. If you get a savings account at a bank with FDIC insurance you don't need to worry about what they invest in because the govt will print money and give it to you if the bank fails. But the answer is probably no, because most of those loans were packaged into CDOs and banks don't hold them.
3. They pay you a little less than it would cost them to borrow from the goverment. Then they use the money for bonds and other investments. right now most banks are not investing new money they are buying treasury bonds. They need so much money they can get at fast in case they need it so they offer good high rate that cost them less than the goverment does.
4. most are involved in some way - the government has backed up to certain amounts of deposits but it can't just print more money as one person said - printing of money needs to be backed by gold reserves. The American governments deficit should be worrying people as they are in debt themselves!
5. Maybe not directly, but yes, they are interconnected. Federal Reserve issues money, Treasury distributes it. People earn their money, put them in banks, banks lend them to investors, investors invest in stock market, which is funded by loans, stock market includes mortgage market. So that means, do NOT put your money in savings accounts, any type. You're not only putting yourself at risk, you're also encouraging banks to lend out money at a low rate. Don't settle for savings interest, save the money to yourself and make them offer a better rate (I'd say at least 10%). The mess we are in right now is due to low interest and too much money supply, we need to cut back, so keep your money to yourself (yep, literally, in cash).