What kind of fucked up regulation is that to begin with?
The general idea was to prevent people treating savings accounts like just another regular bank account they can spend from all the time but with a different interchangeable label on it.
A savings account is meant to be for, well, saving. You're meant to use it to store money that you don't intend to use for a long time. Things like saving up for a vacation, or sending your kids to college, or a down payment for a new house. Money you plan to use to pay your bills, shop for groceries and spend on vacation doesn't belong in a savings account -- it should be in a regular draft account. If you really do need to dip into your savings, you're meant to do it in one go. Lost your job and need to pay bills? Transfer a whole month's worth of expenses from savings to checking in one shot, and pay for things from checking as normal.
To incentivize using savings accounts, they earn interest over time unlike the average draft account[^1]. In exchange for being able to store money in an account that accrues interest on the money it holds, the tradeoff is that you're only allowed to withdraw from the account a few times each month without penalty. Again, you should only really be withdrawing money from a savings account rarely when you're doing/buying whatever you were saving for (or to deal with an emergency).
Savings accounts used to form the solid foundation on which banking was built. Money people deposited into savings was loaned out to other people to be repaid with interest. Assuming the borrower repaid the loan in full eventually, the bank makes a profit on the loan and the people who deposited the original money never notice. When everything's working properly, individual depositors never noticed anyway because banks weren't supposed to lend too much of their held deposits back out to borrowers. In fact, federal regulations controlled what percentage of its total deposits a bank could lend, requiring the remainder to stay with the bank to establish a minimum reserve and ensure the bank stays solvent. The FDIC insured all deposits (up to $100k) so people would trust banks enough to store their money in them knowing they'd be loaning it back out to others.
When the regulation was put in place, it was a reasonable tradeoff because savings accounts paid reasonable interest rates in excess of 5%. Banks used to compete (even as recently as ten years ago) for business partly on the basis of how high their interest rates were compared to other banks. Hell, there used to be websites out there dedicated solely to hunting down the highest-yield savings accounts for people to use for profit.
Unfortunately, two things have changed in the intervening years that have made savings accounts essentially worthless (and arguably losing propositions). First, the feds drastically eased the reserve requirements, essentially allowing banks to loan out most of their deposits while maintaining minimal reserves. Second, interest rates paid by savings accounts absolutely cratered. It made sense to "soft-lock" your rainy day money in an account that paid 5-6% knowing you could still get it back immediately without penalty so long as you withdrew it in one shot and didn't treat it like a draft account. But 0.5%? Pffft, nah. Not worth it at all. With inflation skyrocketing and interest rates this low, you're literally losing money (pretty quickly) keeping it in a savings account.
The only way to have any chance of earning enough interest on your savings to beat inflation is to put it into a money market account (or even a 401(k) or IRA). But those have even more restrictions (401(k)'s and IRA's straight up
steal 10% from you off the top if you withdraw from them before you turn 65, with very few exceptions)
and those potential profits come with a whopper of a caveat: it's largely dependent on the fucking stock market. My 401(k) lost 30% of its value this year. Thanks Biden!
Conveniently this relieves the banks of any responsibility for protecting their customers' assets and encourages them to gamble with those assets instead of risking their own. If they make a profit, they win, but if they take a loss, oh well -- it was customer money anyway, and hey we told you there were no guarantees, also you still owe us the usual fees. Money market, 401(k) and IRA accounts aren't insured by the FDIC or protected in any way, either.
The feds shouldn't have lifted the fractional reserve requirement. That was a vicious mistake and we've been reeling from it for years now. Banks immediately took advantage of the new limits, so now literally all of them stand balanced on a razor's edge between solvency and bankruptcy having loaned out 90% or more of their deposits hoping to profit from the loans. Incidentally this contributed significantly to the 2008 subprime mortgage crisis that led to unprecedented bank bailouts. If the higher reserve requirements had still been in place, the banks wouldn't have been threatened with insolvency and they wouldn't have handed out so many subprime mortgages in the first place.
Lifting this savings account withdrawal limit is a signal to banks that we're basically giving up on the basic principle of banks lending real deposits composed of savings deposits by customers and going in hard on the new "money printer goes brrrrr" style of banking. It's also a signal to individuals that we officially don't consider "savings" to be anything different or special that distinguishes it from "checking." It's a subtle way to discourage people from using savings accounts at all (not like there's much point now anyway with interest rates in the toilet) and encourage them to take whatever they've saved up and run right back out there and spend, spend, spend!
I'm sure this is being done to try to stimulate the economy by encouraging consumer spending and also to squeeze the last of the lower and middle class' meager assets out of them by discouraging them from bothering to maintain any savings whatsoever.
Bastards.
[^1] Yes, some draft accounts also earn interest or include gimmicks that pay a bonus when they're used in certain ways (using the associated debit card as a credit card transaction instead of entering a PIN, etc.), but for the sake of this discussion I'm discounting that because it's rarely more than a pittance.
