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Best Online Savings & Money Market Account Rates 2024

Best Online Savings & Money Market Account Rates

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Bank Profits Somehow Increasing Even Though Economy Worsening

So here's an interesting question: how are bank profits increasing when the economy and many of the loans written by the banks are in worse shape then ever? Don't believe the numbers.

So here's an interesting question: how are bank profits increasing when the economy and many of the loans written by the banks are in worse shape then ever? Don't believe the numbers. AI close look at those bank profits show that most of them weren't from better performance, but rather from the same type of financial manipulation that got the banks into a bad situation in the first place.

First, many of the banks benefited from the recent change in accounting rules that relax mark-to-market accounting. I wrote in an article last week about the FASB mark to market accounting change:

"The bottom line is this. Banks, which have shown they are incapable of pricing assets and managing risks are now going to have more latitude in pricing the crap they hold on their balance sheets. I say stay away. It's clear it's just another tactic by the financial powers that be to preserve their own companies and wealth at the expense of shareholders and the tax paying public."

Now, two weeks later, lo and behold, the banks have better than expected earnings. One would be wise to question those earnings. The economy and loan delinquincies have not improved. Foreclosures continue to surge and now credit card, commertical loans, student loans, and other types of debt are showing ominous default rates. The only thing that could positively impact the banks would be the super low, taxpayer subsidized liquidity. Bank can borrow money at 0% and lend it out at 4-5%, a recipe for profits - if they were lending.

In the case of Bank of America, Ken Lewis even has an incentive to juice earnings for the quarter - his job is on the line. He's fighting for his job amidst what is expected to be a close proxy vote on whether he should remain as Chairman and Chief Executive Officer. My answer: look at the stock's performance over the last ten years and see if he and his management team have maximized shareholder value.

As Andrew Sorkin wrote in the NY Times Dealbook Blog:

Bank of America sold its shares in China Construction Bank to book a big one-time profit, but Ken Lewis heralded the results as “a testament to the value and breadth of the franchise.”

Sydney Finkelstein, the Steven Roth professor of management at the Tuck School of Business at Dartmouth College, also pointed out that Bank of America booked a $2.2 billion gain by increasing the value of Merrill Lynch’s assets it acquired last quarter to prices that were higher than Merrill kept them.

“Although perfectly legal, this move is also perfectly delusional, because some day soon these assets will be written down to their fair value, and it won’t be pretty,” he said.

Yesterday, the markets saw through these financial shanigans and punished bank stocks, driving Bank of America down more than 20%. You'd think the "financial titans" would have learned that the jig is up. I guess not yet.


Wells Fargo Profits on the Backs of Savers

Wells Fargo posted a first quarter profit today that exceeded analysts expectations. CFO Howard Atkins came right out and said it was because they are no longer paying high rates on deposits. Bloomberg states:

"Margins are better because of the competitive situation” after many of the “irrational players” were eliminated, Chief Financial Officer Howard Atkins said in a telephone interview. The bank’s net interest margin, the spread between what it pays depositors and receives on loans, was about 4.1 percent in the first quarter, compared with about 3.10 percent in the fourth quarter and 4.7 percent in the same period a year earlier.

Wachovia paid extraordinarily high rates to attract deposits last year, Atkins said. He also said that many of those accounts now are running off, which should benefit Wells Fargo’s profitability later this year.

Wachovia did have competitive rates last year that benefited savers. Since then, the Fed has dropped rates to 0%, bringing down bank deposit rates. As the spread between deposits and mortgage loans has widended, banks have reaped a windfall. Savers are getting a double whammy, paying for saving the bank via TARP and also subsiziding them via low deposit rates. At least mortgage rates have come down a bit although credit rates continue to remain high and even rise.

As a saver, you can make the best of a tough situation by choosing to deposit your money in a bank with a competitive interest rate.


Delta Community Credit Union - Competitive CD and Money Market Rates

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Review of Delta Community Credit Union

Delta Community Credit Union is a state-chartered credit union, organized under the Georgia Department of Banking and Finance and federally-insured by the NCUA. It was originally organized to serve Delta Airline employees, but it now serves many other groups.

The credit union has a history of competitive rates on CDs, IRA CDs, HSAs, checking accounts and money market accounts.

Its field of membership includes members of the GettingAhead Association, an association that anyone can join with a small membership fee. Credit union membership is also open to employees of many companies and residents of several Georgia counties.

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