Jumbo CD Investments - CD Rates Blog

I Just Can Not Believe This

I was reading Dwight’s daily post at WesCorp.  And he is commenting on the Unemployment report (not good BTW).

While the initial reaction to the Unemployment Report was one of relief, the fact remains that this was a very ugly report.  There was nothing to feel good about.  The survey that is used in calcutlating the Unemployment Rate was particularly gloomy.  While the teen job sector did adjust from the last month’s faulty seasonal, all other elements deteriorated in the month of June.  Here’s a spin one economists put on the number.  He said (and I’ll leave him nameless) that at some point soon, many of those unemployed will simply give up looking for jobs.  The BLS will then classify them as “discouraged workers”.  This means they will no longer be considered unemployed, and that will soften the rise in the Unemployment Rate.  In other words, you no longer exist in the eyes of the BLS.  What a concept!  Now if they can just eliminate the price of oil from memory banks, all will be well.

Does the book 1984 mean anything to you?  The Gov’t is messing with inflation, messing with unemployment, etc. Why can’t they just be honest?  And I’m not just pointing fingers and the current administration.  It seems that politicians in general can’t seem to speak the truth.  Just drives me crazy.

Also, I’m working on the newsletter.  Trying to round up some positive news.  Anybody have any?  I hate being so negative.  Keep Looking up…

Fed Holds

The Fed held rates yesterday.  The next meeting is August 5.

Although they adjusted their stance slightly to indicate inflation was beginning to pose a higher risk, they really can’t do much since the economy is still limping along.  It really seems like they are just paying lip service and hoping their words, alone, can make the markets move.

We don’t see the Fed Funds changing in the short-term.  We have seen CD rates on the 2-year to 5-year terms come up quite a bit.  We finally have a nice yield curve.  The 1-year rates are about 1.70 to 2.00% above fed funds.  Hang in there.

The biggest problem I think for the economy is oil.  If only our politicians would stop paying us lip service and let us go drill for our own.  If we did that, you know prices would fall.  The mid-east would fear losing their monopoly.  Let me know your thoughts. 

cd :O)

Best CD Rate - 6/17/08

Updated: 6/17/08.

Our best shorter-term personal CD rate is 3.90% APY for 1Y. There is a 2Y at 4.00% APR / 4.08% APY (No Fee).  We also have a 3Y at 4.55% APY.   Finally, 5Y at 5.00%.

 Our highest Corporate rates are 4.00% APR for 1Y (Fee) and 5Y at 5.00% APR (Fee).

Visit our Certificate of Deposit Rates to get started with our process. We do have a fee for our service.

Brokered Deposits, Where is the Big Bad Wolf

[Note: Please forgive the ads.  They are supposed to be relavent to the information on the site.  I have no idea why the ones that are currently being shown are.] 

Reuters published an article today on the “evils” of brokered deposits.  And now my gloves are off!

Let’s get something straight.  Deposits, brokered or otherwise are not the problem.  The banks making poor management decisions are the problem.  The problem is with the bank’s bad loans and poor investment decisions.   It is not the accepting of brokered deposits that causes banks to fail.

The perceived problem with brokered deposits is that they are more volatile than a bank’s “core” deposits.  This may have been true in the Stone Age when we didn’t have newspapers and the internet, but it simply IS NOT TRUE in 2008.  In a matter of hours, a bank through the internet can take in Millions of dollars.   Just look at the recent onslaught of funds that AARP helped Huntington National Bank raise or how about Countrywide Bank?  Those internet funds are as volatile (and “expensive” I might add) as any brokered deposit.

There is also another class of deposits that most people outside of the banking industry probably don’t even know about.  They arrive from a rate listing service.  Rate listing services actually have a specific exemption from being considered deposit brokers because they don’t “facilitate” the placement of the deposit.  They just provide rates and the investment manager makes the decision as to which institution to place the deposit.  (Don’t even get me started on this one).  Again, a bank can list CD rates on these services and within hours raise Millions of dollars.  Millions of dollars that are just as volatile as any brokered deposit.

The article written by John Poirier also uses scare tactics and a nice salting of misinformation to give the impression that brokered deposits are evil.  Almost every paragraph could be rebutted.  But then this post would be 10 pages long.

First, the article leads off with a statement about “cash hungry banks are in danger of failing” because of brokered deposits.  The fact is that the banks are cash hungry because they made risky loans that aren’t being paid back.  Secondly, they are cash hungry because they are losing “core” deposits to high yield savings accounts and checking accounts that are being offered on the internet.

Next the article states that brokered deposits have “fueled a spate of recent bank failures.”  First, there have only been four failures this year.  I wouldn’t classify that as a spate.  Second, of the four banks, only ANB had a large amount of brokered deposits.  Douglas NB had about 3.2% of their deposits listed as brokered and First Integrity had about 4%.  Banks that do take brokered deposits usually limit them to no more than 10%.

One of the funnier misstatements is the fact that the author writes, “Brokered deposits are short-term deposits that often attract banks in remote areas to increase lending activity.”  First, brokered deposits can be far from short-term.  They can be anywhere from 90-Days out to 20-years.  The term is really dependent on the market.  Secondly, the article implies that it was the lure of brokered deposits that caused them to increase risky lending activity.  However, usually the bank has already begun the lending activity and suddenly realizes they need more deposits to fund the loans.  The increased risk the bank was willing to take (at least during the Housing bubble) was fueled by greed and the low cost of funds, not brokered deposits.

One of the few partially true statements is “Brokered deposits also usually offer higher rates than other bank products such as certificates of deposits…”  The true part is often the rates are higher.  However, as I stated above, they may be no higher than many internet specials.  This author shows just how little time he took with his research.  99% of brokered deposits are certificates of deposits. 

Are brokered deposits really more expensive though?  If a bank that has $1 Billion deposits needs $5 Million dollars they can make a private offering to brokers without alerting their entire deposit base of these higher rates.  So would you rather pay a higher rate on $5MM or $1BB?  Moreover, brokered deposits tend to be in higher denominations which means much, much less paperwork and handling for the bank.  They also tend to be from other financial institutions.  This means the patriot act doesn’t apply and the bank doesn’t have to worry about OFAC violations.  In the long run, brokered deposits cost the bank less.  Finally, although a single deposit may be more volatile, the broker is usually able to replace any deposits that close and thus, brokered deposits become a stable funding source.  They are certainly  more stable than high-yielding savings accounts being offered across the internet that can be withdrawn at anytime.

The author goes on to infer that ANB was a small Arkansas bank.  He makes it seem like the evil brokers took advantage of a small little bank.  ANB Financial at the time of closing was over $2BB in assets.  Most banks do not have over a billion dollars in assets.  ANB was a large bank.   The management of this bank did not have the wool pooled over their eyes.  The brokers didn’t come to them  as wolves in sheep’s clothing. 

He states that the FDIC picked up the $214 million tab when ANB was taken over.  Pulaski took over a large part of the deposits.  As the closure process hasn’t been completed and ANB’s assets sold off, there is no way to know how much it will actually cost.  But if you want to talk about cost, how about the Bear Stearns bailout or the billions and billions of dollars the Fed has pumped into the system.  How much is that costing and how much of that are the banks using to continue their mismanagement practices.

Deposits from any source other than the local area should have more scrutiny, if any additional scrutiny is going to be placed.  If a bank’s insurance premiums are increased for accepting brokered-deposits, the practice of utilizing rate listing services and offering internet specials will increase, thus skirting the intent of the original regulations (which is to make banks keep a watchful eye on their non-core deposits).

If you’ve gotten through all of above, who is really going to pay for higher oversight and or the higher premiums that have been suggested?  You the saver.  You the saver are the one that will pay with lower rates.  You have already been hit hard with the Fed lowering rates over 3%.  The FDIC should scrutinize the entire banking operation, including all sources of deposits and lending practices.  The fact is in 2008, all deposits are volatile.

One funny side note.  I looked at the deposit breakdown on ANB.  And I discovered why they failed.  As of 3/31, the FDIC reported that they had about $1.8BB in deposits.  Of that, about $1.7BB was listed as core and about $1.5BB was listed as brokered.  A deposit can’t both be core and brokered.  I think ANB failed because they simply couldn’t add 1+1.  :O)

POD Accounts — Are they insured?

Naturally, if there weren’t a question, I wouldn’t be writing this post.  :O)  Many, many people became concerned after the recent ANB Financial failure.  So I figured I would provide some clarifications and hopefully helpful information.

Here is the info from the FDIC (bolding added by me).

POD accounts are insured up to $100,000 per owner for each beneficiary if all of the following conditions are met:

• The account title must include commonly accepted terms such as “payable-on-death,” “in trust for,” or “as trustee for” to indicate the testamentary nature of the account.  These terms may be abbreviated as “POD,” “ITF,” or “ATF.”
• The beneficiaries must be indentified by name in the deposit account records of the bank.
• The beneficiaries must be the owner’s spouse, children, grandchildren, parents, or sibling.  A beneficiary that meets this requirement is called a “qualifying beneficiary.”

Much of the confusion has come about because many bank employees tell depositers that they just need to indicate the beneficiaries in the account records.  This is not true.  The account title must contain the “secret” letters as noted above.  This means that if you are doing POD type accounts for the purpose of maximizing FDIC insurance coverage, you will probably need at least two accounts. 

For instance, if you aren’t married, but have a sibling you can have up to $200,000 of insurance at each bank.  You would need to have one account titled  ”Your name” for $100,000 and a second account titled “Your Name POD”.  The second account also needs to have the benenficiary indicated in the bank records.  Although not required, it would be a good idea if there aren’t too many beneficiaries to put them on the account title after the “POD”.

What should you do if your accounts don’t have “POD” indicated on them?  That is an excellent question and I even sent the FDIC a message to clarify the requirements and I asked them exactly that.  Although my personal belief is that the FDIC would honor the intent of the account, I wouldn’t want to risk $100,000 or more.  Here is their response:

Inconsistent or incomplete records, in which the owner’s intentions are not clear or in which the regulatory requirements are not met may result in unintentional uninsured funds in the event of a failure of an insured bank.

As to your question, “What should a consumer do if a bank refuses to change the title, already has their funds, and refuses to send the uninsured funds back without penalty?” the FDIC would suggest filing a complaint with the FDIC stating the failure of the specific bank to comply with section 12 C.F.R. Part 330.10(b).  The website for filing a complaint is found at https://www4.fdic.gov/STARSMAIL/index.asp.

Feel free to contact us if you have any questions.

cd :O)

Greystone Bank - Certificate of Deposit Rates

Updated: 6/17/08.  Greystone Bank was established on November 1, 2005.  They aren’t a large bank.  As of March 08, assets were a little over $274MM.   They do currently have an operating loss of $1.58MM.  They are considered well-capitalized.  FDIC# is 58094.

View their website, here.

Tough Call - To Post or Not

I really struggled with whether to make this post or not.   It isn’t business related nor on topic for what the blog is usually about.  I even have other posts I would like to make. But, I just felt the need to express a few thoughts. 

Regardless of your circles, you probably heard that Steven Curtis Chapman and his family suffered a devestating loss yesterday.  Their five-year old daughter, Maria Sue, was hit in the driveway by one of their other teenage children driving home.  The teenager didn’t see her.  I know the Christian community (of which I belong) is reaching out to them with prayers and looking to help anyway they can. 

Although, receiving prayers from all over the world I’m sure helps bring comfort this is probably a case where they really don’t want the attention.  However, that really isn’t the point of my post.

Tragedies like this happen everyday.  Families experience loss everyday.  Since I do have a large family, it just struck a chord.  I have a daughter that is the same age as Maria Sue was.  We don’t expect things like this to happen to us.  Nobody is immune from loss or tragedy.  No matter how many records you’ve sold, miles you’ve walked, or days you’ve taught.  No matter how many people know your name, how many hearts you’ve fixed, how many teeth you’ve repaired, or how many sermons you’ve preached.  No matter how many posts you’ve made, how many bad guys you’ve caught, how many wars you’ve fought, or how many fires you’ve put out.  Your next day is not promised.  Those around you are not promised another day with you.

Take time today to make sure those you love, know it.  Take time today to heal broken relationships.  Take time today to make sure things are in order.  Give your wife, your children, your friends, your boss, your pastor, your paperboy, whoever an extra hug today.

Finally, I have certain beliefs that allow me to not fear such tragedies.  I know there is a God who is bigger than I am, and He is in control.  However, I’m not going to beat you over the head with those beliefs.  Sometimes, though, it takes a tragedy to ask the right questions and to seek the right answers.  I’ll leave you a link if you want to explore more.  On Tuesday, Lord willing, its back to business.

www.purposedriven.com/salvation

cd :O)

AARP Savings Account Rate

Updated: 5/27/08.  AARP had an amazing savings rate.  They took in a lot funds and then kindly dropped the rate.  It stands at 4.05% APY.  The underlying bank is Huntington National Bank.  Their FDIC # is 6560.  I will warn you though.  The health of Huntington is questionable.  Granted, they are a very large bank, about $54BB, and the Fed has shown some resistance to allowing large banks to fail; the Fed did close down ANB Financial, about $2BB.

Bankrate.com gives them 3-stars which is average.  When I actually tried to review the report, there was an error.  Interestingly enough, there was a big ad for AARP on the site.  I’m jealous.  The rating system we use gives them the equivalent of 1-star.  That is for data reported as of 12/07.

I believe the deposit may be able to be held at Countrywide instead.  I saw some other people posting they wouldn’t dare let that happen.  Ironically, Countrywide has a higher rating in the system we use (3-stars), but everyone has been scared away by the bad press.  Bankrate.com has Countrywide as unrated.

So tread carefully.  I would recommend keeping funds under $100,000 if you go through with the deposit.  If you are doing POD accounts make sure it is titled correctly.  The FDIC regs say not only do the bank records have to clearly have the beneficiaries listed, but the letters POD or ITF have to be on the account title.

Here is the AARP link.

cd :O)

Seriouspaid.com — Review (Be Careful)

As many of you know, we host google ads on our site.  Most of the Ads are for other sites also offering CD Rates and/or savings rates.  Some are offering Corporate notes and other investment opportunities.  We make no warrant or guarantee for these ads.  At times, we do find it necessary to block certain ads that we feel many pose too much risk to our viewers.  This is one of those times.

Last night I noticed an add for a site Seriouspaid dot com (I won’t give them a benefit of a link).  They were promising returns of around 4000% for 6-days.  My motto, if it is too good to be true, it probably is.  After some further research, I found some info on Yahoo answers, Yahoo Answers - Seriouspaid .  There was a second link I found last night, but I can’t find it now.  I couldn’t find anything postive about them.

As always, do your due diligence before doing any investments.  I hope this is helpful information.

cd :O)

Peer-to-Peer Lending

This is a sponsored article.  We’ve added a new section on our website about Peer-to-Peer lending.  I’m pretty excited about it.  Of course, I don’t want you to take all of your investable funds this route, but a properly managed portfolio can earn you some good returns. 

Peer-to-Peer lending basically cuts out the bank and you lend directly to the borrower.  For obvious reasons, it is also known as Person-to-Person lending.  Prosper is one of the premier services in this area.  Your funds aren’t insured like an FDIC insured CD, and you can lose principal, but Prosper goes along way to make sure you know the background of the borrower. 

Check out the new section, let me know what you think.  Peer-to-Peer Lending.

cd :O)