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Stephen Gandel

Guess Who’s Getting Richer From Higher Rates? (Probably Not You)

Large lenders scoop up the biggest benefit of higher interest rates.

Loose change.

Loose change.

 Photographer: Billy H.C. Kwok/Bloomberg 

One of the chief criticisms of the Federal Reserve’s strategy of prolonged low interest rates was that it punished savers. But now that the Fed is generally raising rates, the rewards don’t appear to be going to them. Instead, I calculate that as much as 83 percent of the gains are going to the banks, with the largest ones sucking up the biggest benefit.

Here’s my math: The nation’s four biggest banks — Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. — have just more than $5 trillion in deposits among them. Those deposits, based on the Fed’s overnight lending rate, are generating about $94.5 billion a year for the banks, up from $6.3 billion three years ago, before the Fed started raising rates. And that’s before the money they make lending out those deposits. Interest rate disclosures and recent calculations from analysts at KBW, an investment bank that specializes in the financial sector, indicate that those four banks are capturing as much as $73 billion of that $88 billion increase. Depositors’ income has risen just $1.25 billion a month, or $15 billion annually at current rates.