Jumbo CD Investments - CD Rates Blog

Wachovia and WaMu — TKO

WaMu (Washington Mutual) was seized by the FDIC last Thursday, 9/25/08. JP Morgan came in to gobble them up. It gives JP Morgan access to a lot of bank branches in areas they didn’t have a prescence.

Wachovia wasn’t seized, but the FDIC orchestrated a buy-out by Citigroup. Frankly, I thought Citigroup had enough problems of their own, but I guess it was too good of an opportunity to pass up. Sounds like the story with many of the bad loan pools they invested in, but what do I know. My boss found a couple of interesting notes in the press release the FDIC put out. In the first paragrah it says this was done at no cost to the Deposit Insurance Fund. However, in the third paragraph it says the FDIC entered into a loss sharing arrangement. Citigroup will assume up to $42BB in losses on a $312BB pre-indentified pool of loans. If the loss goes above that, the FDIC picks up the tab. Plus, the FDIC was granted $12BB in preferred stock to help off-set the risk. All of this just makes my head spin.

Here is some good news. There is a great new movie out. It has a limited release. It is called Fireproof. GO See THE MOVIE. Here is a link to the trailer. Regardless of your religious persuasion, this is a great movie. It has danger, action, drama, tears, and laughter. My wife and I went to the 7:00 showing last night. The theatre was packed.

FDIC Simplifies Coverage Rules

The FDIC annoucned today an interim rule that makes it much, much easier to determine coverage for Recovable Trust Accounts, also known as payable-on-death (POD) or living trust accounts. I wrote a fairly lengthy article dealing with this.

Before today, you had to have qualifying beneficiaries on the account. Now, the beneficiary can be anyone, the bank’s records just need to specify who they are.

If you have uninsured funds at any bank you can ask the bank to retitle the CD as a POD acccount and add the number of beneficiares you need to cover the account. POD accounts are insured up to $100,000 per beneficiary, assuming each beneficiary has equal proportional interest.

Unfortunately, a big reason for this may be the expected increase in bank failures and before the interim rule, it was quite a time consuming task for the FDIC to determine if the account was covered or not. Many people had the return of their funds delayed.

If any of you need a beneficiary, I will gladly volunteer my services.

Here is a link to the announcement on the FDIC’s website.
Have a great weekend.
cd :O)

They Want How Much?

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have asked the congress to approve a $700BB Bail-out of the banks. They had the gall to want this with no strings attached.

I’m a conservative republican, but that doesn’t mean I agree with the administration lock, stock, and barrel.

Thankfully, Congress is asking good questions and suggesting logical and intelligent modifications to the request.

Some of the key things they have asked to be added:

• No Golden Parachute Packages for executives of banks that sell their Toxic assets to the Fed
• Limits on their overall compensation if they are receiving Federal help
• Having a potential equity stake in the institution, so that the Tax Payers have a chance of not footing the entire bill. In theory, these institutions will return to being profitable. If we are helping them get there, we should receive some of it
• Creating a trust for the profits and proceeds of the eventual sale of the toxic assets to go into. Congress may not touch these funds. They are soley for the benefit of paying off the debt incurred for the bail-out and if money is left, it would be returned to the Tax Payers.
• Allowing judges to re-write the parameters on the Toxic Debt the Fed buys. If possible, give the distressed homeowner some relief.

I encourage you to contact your representative and let them know how you feel. Frankly, I’m not for the bail-out at all, but I believe there is too much momentum for something not to happen.

What are your thoughts?

cd :O)

Washington Mutual (WaMu) Increased Savings Rates

Due to the closure of WaMu this offer is no longer available. FNBO Direct still has a good rate of 3.50%.

Washington Mutual has increased their Savings rate to 4.00% APY. They are a very large bank, but have also had some trouble of late.

cd :O)

Bail-outs, Bail-outs, Anybody Need A Bail-out?

[Disclaimer: Reading this may cause anxiety, distress, depression, heart palpitations, or any other number of potential side affects. Read at your own risk.]

I am not a big fan of bail-outs. So far the Gov’t has just been throwing money around, our tax money, to bail out private businesses that made bad business decisions. Why aren’t they bailing the american people out? We just aren’t big enough.

I am not a big fan of Big Gov’t. But if these private businesses are going to be bailed out, regulations should be in place so that this can’t happen again. If a company is deemed to be too big to fail, or have to many complex instruments that spread throughout the financial world, and thus they can’t be allowed to fail, then a company should never be allowed to get that big or get that complex. I believe in Capitalism. It is the best system to reward ingenuity and creativity. It rewards risk when the market buys into the “product”. But true Capitalism also takes care of failures. If the market, doesn’t buy into the “product”, then it will not last. I also believe true Capitalism assumes people are smart enough to regulate themselves. Many people have lost that aspect.

So far we are probably looking at $500BB to $1000BB (One Trillion) for the current bail-outs. This does not include the funds that the FDIC has been paying out for the banks that have already failed. I can not even fathom that amount of money. I read somewhere that if you took a Trillion one-dollar bills and stacked them, it would reach the moon. Whether that is true or not, here is some information on how long it would take to count our national debt.

One trillion seconds of ordinary clock time =

( 1012 sec)/( 3.16 x 107 sec/yr) = 31,546 years!
Six trillion seconds equals 189,276 years. Now, as an aside, along with the nearly six trillion miles in the light-year, you might be interested to know that there are nearly five trillion dollars in the current U.S. national debt. Is it any wonder that our politicians in Washington are concerned?

(An interesting bit of trivia: If one were to count the national Debt at the rate of one dollar per second, he or she would have to use a mechanical counter to click off the digits. Why? Because, if he or she counted in the usual way, saying “one, two, three, ?” etc., there would be numbers whose names are so large, that it would take more than a second of clock time to pronounce them. For example: “Nine hundred and ninety nine billion, nine hundred and ninety nine million, nine hundred and ninety nine thousand, nine hundred and ninety nine,” takes about 8 seconds to pronounce.) — http://www.lerc.nasa.gov/WWW/K-12/Numbers/Math/Mathematical_Thinking/how_big_is_a_trillion.htm

Note, the website that it is on. NASA. I’m so glad we are spending our tax dollars to help us figure those things out. All I can say is, “Yikes and Zoinkers”.

What are your thoughts? Like John McCain, I do believe in the strenth of most American people. I believe in their strength and creativity. I’m just not sure the Gov’t is working in the people’s best interests.

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