Through the ever changing banking dynamics, everything is for sale. This includes bank accounts, especially to those companies who are not necessarily in the banking business. E*Trade, known as a discount brokerage firm, has a banking division which at points in recent history helped the company stay afloat. However, in a further effort to commodify, well, everything, some accounts were sold. Those online savings accounts that were not tied to brokerage accounts were sold to Discover Bank. The actual transfer of asses occurred on March 7, 2010.
Through the ever changing banking dynamics, everything is for sale. This includes bank accounts, especially to those companies who are not necessarily in the banking business. E*Trade, known as a discount brokerage firm, has a banking division which at points in recent history helped the company stay afloat. However, in a further effort to commodify, well, everything, some accounts were sold. Those online savings accounts that were not tied to brokerage accounts were sold to Discover Bank.The actual transfer of assets occurred on March 7, 2010.
While this is not a major set back by any means, it serves as a great example of the disloyalty of banks to current consumers. Granted, at the time of the sale the savings interest rate for E*Trade was 0.51% APY and Discover is now 1.34% APY, so consumers won in a certain regard…and we all need to savor small victories.
The deposit sale is "in keeping with the strategy of reducing the bank's balance sheet and, therefore, the capital required to support the bank," Bob Druskin, E*Trade Chairman and interim Chief Executive, said during a conference call last month.
This does allow Discover to grow its deposit base, but it poses small challenges to consumers. One of which is the new minimum deposit that Discover Bank allows through its automatic savings plan. E*Trade allowed for as little as a dollar to be transferred from a checking account to their online savings account, Discover has a minimum of $25.
Fortunately, in this case, the consumer “won” by getting a higher rate, but that may not always be the case. As internet savings rates are quietly still declining (see ING at 1.1%), one will question how long this medium will continue to thrive and we will revert back to local banks…maybe even with passbook accounts!
Tired of the credit crunch, state and local governments are putting their money where their mouths are--with small banks. Should you join them?
There's no two ways about it--states have big bank books. Even states that haven't been making a lot of cash in investments these days, or states that are losing money, they still take in a lot of dough from the various taxes they assign. And cities have their share too. So when a state government is starting to look at local banks instead of giant conglomerates to hold their cash, it's enough to make you consider joining them.
See, the states and municipalities are fed up with BoA and all the rest telling them--and their citizens--where to stick it when it comes to getting a loan. The big banks have tightened credit so far that even perfect credit scores are being turned away. The states aren't happy about this--no credit means small business has problems and that means fewer taxes coming back.
But meanwhile, your local bank IS LENDING. Some of them even say so in their advertising--I've heard at least three radio ads this week for local banks saying "we're lending!", and not long ago, a banker came into my favorite local coffee joint to ask if they were looking to do any expansion that might need a loan! So the states, which still have big amounts of cash coming in even if there's just as much going out, are taking a closer look at parking their dough with smaller banks, giving them more TO lend in the first place.
I asked in the summary, "should you join them"? Well, it's not exactly rocket surgery to consider this move; if you've got an account with BoA and something goes wrong you're on a call to New York or maybe even BANGALORE in a bid to get the problem fixed. At your local bank, however, the problem fixers are right there. You can see them yourself. And it's not like anyone's offering any huge premiums interest rate wise, so if you do a little checking around first, you're likely to find a bank near you that's offering the same (or better, sometimes) rates than the nationals.
So you may want to take the same move the states are taking, and take your money elsewhere.
Christopher Dodd just held a news conference to explain his new blueprint for sweeping financial reform.
The Dodd Bill that was just unveiled does several things:
(1) It enables greater control over banks,
(2) It enables the government to orderly unwinding of those banks that were previously believed to be too big to fail,
(3) It facilitates some supervision of large hedge funds, and
(4) It implement some level of consumer protection where highly complex derivative instruments are involved.
It is not a bill to destroy the financial industry. However, it is not regulation which would ever gain the support of the financial industry. The regulation therefore can only be put through by someone who does not need to answer to the banking lobby in a re-election campaign.
As Dodd said, this regulation isn't going to stop the next crisis. It however may help to prevent it and it will certainly help to limit the consequences of it.
