An economist seems to agree with me. Maybe I'm right.

Tyler Cowen, public intellectual and one of the best known economists in the U.S., seems to support my position that Wall Street bankers have captured the political process -- the result being that CD rates are unrealistically low.

Right now banks are earning their way back into profitability by playing the spread.  They're paying close to zero on deposits and earning fair sums on long-term loans. ...

I don't wish to push too hard on this hypothesis, it is speculative rather than confirmed by evidence.  ...

I also regard this as a somewhat gruesome hypothesis.  It means that "Main Street" is paying for "Wall Street" (forgive me the use of those awful terms) in at least two ways: high unemployment and inability to earn much on one's savings.  Risk on the Fed balance sheet is also paying some big part of the bill, since presumably that is helping to maintain the interest rate spread.

  To me, it seems relatively simple. Businesses want to borrow money. People want to earn money on their savings.  The intermediary between these parties is banks: they borrow from you (via Certificates of Deposits) and then lend to them (via loans). They make a bit of money in the middle -- but in ordinary times only a bit because they have to compete for customers on both sides, like any intermediary.

But if they don't have to compete by offering high interest rates because they can borrow more cheaply from the government than they can from me, they will do it. And if the government orders banks NOT to pay higher interest (as it did with banks connected with GMAC), this prevents competition and makes banks more profitable and their stockholders happier.