I have to write an analytical paper on how both the consumer and the
banker benefits from the low interest rate.  Can you give me any
information

Hello.

Consumers and banks benefit from low interest rates in a variety of
way. I have selected a number of sources that explain the various ways
that low interest rates may be beneficial.


Consumers benefit from low interest rates in a number of ways:

"Lower interest rates benefit household consumers as wells as firms.
When interest rates are low, households are better able afford major
purchases such as homes, cars, and durable consumer goods. Much of the
prosperity over the past several years has been due principally to
strong consumer spending, and rapid productivity growth, both of which
have been fueled by low interest rates."
Source: senate.gov, cached by Google
http://216.239.51.100/search?q=cache:YQkaUNCPJMMC:finance.senate.gov/hearings/testimony/021402rbtest.pdf+%22lower+interest+rates+benefit%22&hl=en&ie=UTF-8&client=googlet

"There must be some way consumers benefit from these interest rate
cuts, right?
A: There are several areas where consumers can still benefit. The most
significant, bankers say, are home equity loans. Homeowners who want
to borrow against the value of their house to make improvements or
build an addition will find more favorable rates now than in January.
It is the same with new and used-car loans, whose rates also are
dropping. Competition to sell cars makes dealerships more willing to
match interest rate quotes received from banks and credit unions.
Shopping around for the best rate can mean a significant savings. Some
car loans are structured to allow the interest rate fluctuate over the
course of the loan, so lower interest rates translate into a savings
when the loan is nearly paid off. In some cases, it might save the
consumer one or two payments."
source: southcoast today
http://www.s-t.com/daily/05-01/05-17-01/a03wn014.htm
 
"Lower interest rates help consumers meet loan payments and increase
their willingness to renegotiate overdue debts."
source: clevelandfed.org
http://www.clevelandfed.org/research/Et96/0696/intdel1.htm

"But the economic implications of increased borrowing depend, not just
on the absolute size of the rise in borrowing, but on households'
ability to manage and service that debt. Despite the sharp rise in
borrowing, lower interest rates mean that interest payments currently
account for some 8% of households' post-tax income, well below the 15%
peak recorded in 1990."
Bankofengland.co.uk
http://www.bankofengland.co.uk/speeches/speech170.htm

"lower long-term interest rates help consumers, as they can refinance
their mortgages"
source: morganstanley.com
http://www.morganstanley.com/GEFdata/digests/20011102-fri.html

 "Lower interest rates benefit consumers, businesses, and the
government alike by reducing their cost of borrowing. "
source: "Encouraging Official Dollarization in Emerging Markets,"
hosted by geocities
http://www.geocities.com/Eureka/Concourse/8751/edisi04/dolriz1.htm


Banks benefit from low interest rates:

"Banks will continue to benefit from low interest rates that reduce
their borrowing costs and improve lending margins. "
source: businessweek.com
http://www.businessweek.com/magazine/content/02_02/b3765601.htm

"Lending margins also have widened for some banks as interest rates
fall. At Citigroup, profit from credit cards, consumer loans and
branch banking rose 13 per cent to a record $US2.2 billion ($A4
billion), enabling the bank to overcome a drop in underwriting and
advisory business and growing loan losses."
source: theage.com.au
http://www.theage.com.au/articles/2002/10/16/1034561210592.html

"Banks also end up being big winners from low interest rates. The high
level of economic activity means businesses and consumers take more
loans. Low rates also mean fewer defaults on loans. In addition, banks
are big investors in stocks and bonds, so they benefit as low rates
increase their value."
"How low interest rates benefit all"
source: theage.com.au
http://new.theage.com.au/articles/2002/11/07/1036308422763.html

And most importantly - small banks benefit more from low interest
rates. Consumer-oriented small banks often have many short-term
deposits that are used to fund longer-term loans, so lower short-term
rates improve their profit margins.
source: ticker.com, cached by Google:
http://216.239.51.100/search?q=cache:jLxDfS5vHQ0C:www.ticker.com/story.htm%3Fstory_id%3D1317+%22interest+rates%22+%22banks+benefit%22&hl=en&ie=UTF-8&client=googlet

"In most cases, banks benefit from declining interest rates because of
increased borrowing by consumers and corporations, which boosts
lending profits. "
source: optioninvester.com
http://www.optioninvestor.com/archive/combos/2001/051501_1.asp

"Interest-Rate Environment Helps Community Banks' Net Interest Margins
The industry's net interest margin fell for the second consecutive
quarter, but a $134.5-billion (2.3-percent) increase in
interest-earning assets during the quarter helped lift net interest
income above the level of the second quarter. The average margin
declined from 4.11 percent to 4.07 percent, although a majority of
commercial banks reported margin increases. Smaller institutions rely
more on retail (core) deposits to fund their assets, and with interest
rates at historic lows, many community banks have difficulty lowering
the interest rates they pay to retail depositors when short-term
interest rates decline. As a result, margins at community banks have
tended to not improve until after rates stabilize. Larger banks rely
more on interest-sensitive liabilities, which reprice quickly when
short-term interest rates change; their margins have tended to improve
when rates are falling, but tend to narrow when interest rates are
stable."
source: fdic.gov
http://www.fdic.gov/bank/analytical/fyi/112602fyi.html

"Low interest rates are usually not considered good news for the
banking sector, which makes its profits from the 'spread' - the
difference between the interest rates banks charge on loans, and the
rates they have to pay out on deposits.
These spreads are usually higher when rates are high than when they
are low, as banks will be reluctant to offer very low savings rates.
But in Japan's case, the main fear is that a number of banks will go
under because companies who have borrowed money from them cannot pay
it back.
Therefore, if low interest rates help these companies stay solvent,
they will ease fears that another banking crisis will sweep through
Japan."
source: bbc.co.uk
http://news.bbc.co.uk/1/hi/business/1229330.stm


search strategy:
"low interest rates", "lower interest rates", "declining interest
rates"
consumers, benefit, "help consumers"
banks, benefit, "help banks"
banks, "lending margins"

I hope this helps.

This is for a paper in my class. I have yet to read the material but
it definitely looks like it is leading me in the correct way.  Thanks
for all of your help.