The squeeze is on & banks will be feelin’ it

WE already know that savers have been hurt for a decade by extra-low interest rates. But now banks are also feeling pain.

As you probably heard, the Federal Reserve’s policy-making committee is meeting Tuesday and Wednesday this week. And on that last day the Fed is expected to cut interest rates by another quarter of a percentage point.

President Trump won’t be elated — he wants a bigger reduction in rates. And the stock market will probably cheer but not too loudly because this rate reduction has been expected for months.

Banks? They’ll cry and complain. And while you probably don’t care about forlorn bankers, this could be an major development going forward.

The heads of JPMorgan Chase and Wells Fargo have already lamented that low interest rates are squeezing their profits. Even as they are paying savers next to nothing to safeguard their money, banks are getting less and less on the loans they issue.

Rates on loans will go down some

more on the Fed move. And if those lower rates don’t spur more people to borrow, then the benefits of what the Fed is doing — and what the president wants more of — will be lost.

Banks’ “margin squeeze” could be a big issue going forward.

And while Fed boss Jerome Powell and the other Fed members might not care if savers are getting screwed — although they should — they should care very much about what’s happening to banks here and overseas because of worldwide low rates.

Could this lead to another banking crisis like the one that led to the Great Recession?

David Aurelio, senior manager of equity market research at IBES for Refinitiv, says experts are now expecting bank earnings for the third quarter to rise only 5.1 percent from last year’s levels. Back in July, that expected rise was 8.3 percent.

And annual profits are expected to be up only 3.5 percent. Back in July, the upside forecast was 8.6 percent. Low rates are mostly to blame. Aurelio says net interest margins at banks are expected to decline from 2.65 percent to 2.57 percent because of low rates — a significant drop. Now let’s talk about the wonderful bribes being offered by presidential candidates who want your vote.

And then let’s see if we can come up with something more to our liking.

President Trump, who’ll be the Republican candidate, is bribing voters with promises of a another tax cut and lower interest rates.

No matter. He’ll win regardless of what he offers unless the economy nose dives.

On the Democratic side, the bribes are more numerous, creative and very tempting — free health care, free tuition, forgiveness of student debt, guaranteed income even if you don’t work.

I might be missing some, but it’s hard to keep track.

Still to come: promises of weekend dog sitting; taking the SATs for your kids and folding the laundry every other week.

Lots of wonderful things. And the campaign is just getting started.

The best bribe so far came from Andrew Yang, who has no chance of being the Democratic candidate. The entrepreneur, lawyer and philanthropist last week offered to give a “Freedom Dividend” of $1,000 a month “for an entire year to 10 American families.”

Jeez, it’s the Yang Prize Patrol knocking on your door soon.

I don’t even have to take out my calculator for this one: $1,000 a month X 12 months X 10 families = $120,000.

That’s pretty cheap for a rich guy like Yang. But it did get me thinking.

All the candidates, their parties, Political Action Committees (PACs) and others are expected to spend more than $10 billion for the 2020 election.

Some 138 million Americans voted in the 2016 presidential election. So, if you split up that $10 billion 138 million ways, each voter could be bribed nearly $73.

Yeah, I know. If the bribes are that obvious, more people will vote and this will diminish each of our shares.

Many people might hold out for more than $73, the cost of living being what it is. But as more people refuse this bribe, they’ll be more left for the rest of us.

So let’s just cut out the ads, the issues, the campaign workers and the silly debates. Just send everyone $73, and we’ll hold the election when the checks clear.

Unless, Andy Yang wants to give us all $1,000 a month.

Is there a way to help the economy without boosting the deficit or cutting interest rates to silly levels?

I think there is, and it’s a way I’ve suggested many times with no result. But I’ll try again.

Washington should change the rules — even if only temporarily — so that Americans can have immediate access to money in IRAs, 401(k)s and the like. Let people take money out of these old-age accounts without penalty — and maybe with a reduced ordinary tax — for certain things.

Put whatever restrictions on these withdrawals that will make the experts comfortable. For instance, limit the amount that can be withdrawn. Or perhaps people can only put a down payment on a house with the money. Or a car. Or use the withdrawn money to pay for education or medical expenses. Americans would probably be more thrilled to see the trillions of dollars sitting idly in retirement accounts freed up than they would getting another small tax cut.

And the US Treasury will benefit from the tax paid on these withdrawals. And if the economy improves because of this, even more tax revenue will come in.

The deficit? It should go down with the new revenues coming in.