Bloomberg published an article today in which several analysts and bank execs said the rates being paid by some banks was insanity (way too high). I guess they haven't heard of competition or of the saying he/she who has the cash makes the rules.
Bloomberg published an article today in which analysts and bank executives said the rates being paid by some banks was insanity (way too high). I say let's see higher rates. Savers are finally getting some measure of respect for their money.
"“You have a whole raft of smaller banks out there, some of which are in difficulty, who are paying rates that are bordering on insanity,” James Wells, chief executive officer of SunTrust Banks Inc., said in a conference call with investors Nov. 13."
The article goes on to say that:
"A key reason regulators pushed Wachovia to sell was that they were screwing up deposit costs up and down the Eastern Seaboard,” said Tony Plath, a finance professor at the University of North Carolina at Charlotte. “A lot of hot money was moving into Wachovia and other banks that weren’t matching Wachovia were getting clobbered.”
Now, I don't know about you, but I think that high rates are a good thing. One of the central premises of sites like BestCashCow is that bank competition is the only way for you to earn a fair return on your money. In the article, Ken Lewis, CEO of Bank of America describes peer bank Wells Fargo as a "rational pricer," code language for providing very low rates. Bank of America has never been know for their generous rates either. Bankers hate high deposit rates because they lower their profit. Of course Ken Lewis wants rates low. It makes his job easier and makes it easier to pay for all of the high rise buildings BofA operates in Charlotte, Boston, NY, and San Francisco. It makes it easier to pay for the Countrywide and Merrill Lynch acquisitions.
But our goal isn't to make it easier for bankers, it's to get the best return for our money so we can pay the rent, send our kids to college, and maybe retire. Consumers, people like you and me should also be working to maximize our return. But the secret a lot of banks don't want you to know is that you can get a much higher return without any additional risk just by doing a bit of research. Check out the savings, cd, and money market tables on BestCashCow or the deals on Bank Deals or the info on other financial sites. If your money is earning a significantly lower return, then you should change banks. Don't be fooled by the fancy marketing and branding campaigns. And because the banks covered on this site (and on most of the others) are FDIC insured, you can change banks without any risk. Your money is covered up to FDIC limits whether you are earning 1.2% at Bank of America or 4% at a smaller Internet bank.
So the choice is really yours. Do you want to put money into all of those banker's pockets? Or, would you rather do a bit of research and put the money into your own?
Venture Bank Direct is offering a competitive 3.8% APY savings account.
Venture Bank Direct, a relatively new entrant into the high yield savings game is offering a competitive 3.8% APY savings account. This puts it into the top 5 savings account rates on the BestCashCow rate tables (November 17, 2008).
I called to find out more about the account and learned that they have an all-electronic application process. They authenticate users via several questions presumably pullled from your credit file. This is standard procedure for an online applicatin. Transferrring funds in and out can also be done electronically via ACH. According to the customer service rep I spoke with, a hard pull is not done when applying for the account.
The company launched their online direct bank in August and they have had the 3.8% APY savings account since October 2. According to the CSR, they "are not planning a rate change anytime soon." That doesn't mean of course that they can't or won't lower the rate tomorrow but it's nice to hear them at least say they plan to keep rates steady for some time.
Venture Bank Direct is the online channel for Venture Bank. Venture Bank has approximately $1.2 billion in assets and 18 financial centers in four western State of Washington counties. The bank was established in 1979 as Lacey Bank and the Company was incorporated in 1983. It changed its name to First Community Bank in 1981 and in 2003 changed its name again to Venture Bank.
The bank has a 2 out of 5 star rating from Bauer Financial. In its most recent filing with the SEC, the bank's President acknowledged that the bank has felt pressure from the declinking real estate market:
“We are feeling the effects of the real estate slowdown, which have affected virtually all banks”, said Ken Parsons, Chairman and CEO of Venture Financial Group. “The impact has been most pronounced with residential land development projects. Lot sales activity has slowed, putting pressure on developers’ cash flow, and in some areas impacting lot prices.”
Venture Bank and Venture Bank Direct are FDIC insured so as we recommend with all banks, stay below FDIC limits.
If anyone has experience opening an account at Venture Bank, please share your experience below.
The mainstream press is catching on to something we've been writing about for some time, namely that banks are being forced to keep their rates high to prevent runs and to rebuild liquidity.
For those of you who read BestCashCow, the article won't come as a surprise. It discusses how banks, strapped for deposits and fighting to maintain liquidity and prevent bank runs have had to raise rates to keep and attract deposit dollars, your dollars. Past BestCashCow articles on this include:
"Banks covet deposits because of this year's failures of IndyMac Bank, Washington Mutual Inc.'s banking operations and other institutions. Bank executives have been rattled by those seizures and the woes of beleaguered banks such as Wachovia Corp. and National City Corp., from which panicky customers yanked their money. Many lenders are now ratcheting up rates to shore up their deposits."
And:
"The desire to lure depositors is triggering a "national price war," says Michael Poulos, a partner at financial-services consulting firm Oliver Wyman. "In the past 15 years, there's been nothing like this. The level of competitive intensity is unprecedented right now."
Even though rates have held up well despite cuts in the Fed Funds Rate, BestCashCow data shows that they may have peaked and have declined from their high. Whether they continue to decline depends on whether the Fed cuts rates further and how much additional stress banks face in the next six months.
Below is an analysis of savings account rates compared to Certificates of Deposit.
Even if they do decline, I still expect that we'll see a premium over the Fed Funds rate for some time. The collapse of Wall Street is the collapse of a financial model that generated lots of cheap capital and liquidity. It fueled enormous bank and financial profits. But the model has been proven faulty and as banks go back to the basics - borrowing from consumers and lending out their money - they are going to have to pay more for our money.
Now, we'll see how long it takes for banks to begin offering toasters, televisions, and trips to Florida to get your cash. There is now more competition than ever for your money, and on BestCashCow we think that's a good thing. Make sure you are getting the highest rate.
