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Best Online Savings & Money Market Account Rates 2024

Best Online Savings & Money Market Account Rates

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Sovereign Bank Run Pushed It Into Arms of Santander Bank

Sovereign Bank was quietly purchased by Banco Santander after a run caused it to face collapse. More of this is coming even with the government bailout.

Sovereign Bank was quietly purchased by Banco Santander after a run caused it to face collapse. More of this is coming even with the government bailout.Sovereign has a large franchise in New England. It's always been the #3 bank in the region and many thought that it was vulnreable.

In the last quarter the FDIC said customers pulled $4.2 billion, or almost 9 percent of deposits from the bank before the government's $700 billion government rescue plan. The Boston Globe spells out the last days of the bank as in independent entity, including the State of Massachusetts withdrawing $300 million in funds as Sovereign stock dropped and the bank looked increasingly shaky.

"When Massachusetts treasury officials called Sovereign to ask why the stock had fallen below $3, they couldn't get a good answer, said Cahill, the Massachusetts treasurer. Bank officials were attributing the drop to the market's overall plunge; the Dow Jones industrial average fell 777 points, its worst one-day point loss, after the first version of the bailout bill failed to pass.

The state Treasury had a total of $575 million at Sovereign. Of that, $275 million was for state operations, money that was collateralized, or insured against any losses. But the other $300 million, which covered a number of programs, was uninsured.

The treasury staff first started worrying about the stock price at about 2 p.m. By 2:55 p.m., it had advised Cahill that the state should move the funds. "I said, 'Do it,' " Cahill recalled.

And within 20 minutes, the funds were wired out - not to another bank, but to Fidelity, the Boston investment giant that manages $7.5 billion in state and municipal funds in a money market account."

The run would have resulted in failure but the FDIC intervened and had Banco Santender, an existing shareholder buy the rest of the company for approximately $1.2 billion.

In response, the FDIC has decided to provide unlimited protection through 2009 for non- interest bearing accounts that process payments for payrolls and are used by businesses.


GMAC Bank Raises Online Savings Rate to 3.75% APY

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Even though the Fed dropped rates last week by 1/2 percent, GMAC raised the rate on their online savings acccount from 3.5% APY to 3.75% APY.

Even though the Fed dropped rates last week by 1/2 percent, GMAC raised the rate on their online savings acccount from 3.5% APY to 3.75% APY. This places their account amongst the Top 10 best online savings account rates according to the BestCashCow rate tables.

From all accounts, opening an account at GMAC is easy and straight-forward. You can fund your account via an account-to-account transfer and they use an initial trial deposit to verify your ownership.

GMAC is rated 3 1/2 starts according to the latest Bauer Financial analysis but the company has come under stress due to the credit meltdown. It's residential mortgage arm, Residential Capital (ResCap) is relying on the Treasury Bailout plan to keep it solvent.

It's this pressure which probably led it to raise rates in its efforts to keep and attract new deposits.

Remember, as with any institution to keep your deposits amounts below the FDIC insurance limits.


US Partially Nationalizing Top US Banks - Citi, Bank of America, Morgan Stanley, Goldman Sachs, and More

It's a screaming headline and it's true. After bringing this country to its knees, many key US banks are now going to have to deal with Uncle Sam for the foreseeable future. That should be fun.

The WSJ, Bloomberg, and almost every other business news source is reporting that the US Treasury has decided to forcibly inject capital into several key US banks to prop them up and dispel any uncertainty about their viability. According to sources, none of the banks were given a choice. Paulson and Benanke showed up and basically laid down the law. Which is correct. The banks have so screwed up their own finances and that of the country that they long ago lost their right to act independtly. To me, a forced move like what is being reported is tantamount to a partial nationalization of the banking system.

The amounts and the banks include:

  • $25 billion to Bank of America, J.P Morgan and Citigroup.
  • Between $20 and $25 billion in Wells Fargo
  • $10 billion in Goldman and Morgan Stanley
  • Between $2 billion and $3 billion in Bank of New York Mellon and State Street

In return for its investment, the government, or rather us, are supposed to receive preferred shares. I wonder how that will work? Looking at just Bank of America, the company as of closing today had a market cap of approximately $100 billion. A $25 billion investment theortecially gives the government a 25% stake in the company. Will the government take a 25% stake? Will they be able to act as a shareholder? Do the preferred shares work differently?

In addition to the forced capital injections, the plan will:

  • Guarantee all new debt issue for banks and thrifts for the next three years.
  • Offer unlimited deposit insurance coverage to non-interest bearing accounts. I assume this means DDA and checking accounts. I'm not sure why this doesn't extend to savings and cds.
  • Put caps on executive compensation to all executives of the companies that have received Federal Funds. Say goodbye to all of the MBAs flooding into the investment banks. If the CEOs pay gets cut, guess what happens to everyone else at the company. Working for a bank just officially became a lot less lucrative.

The big question is whether it will all work. On that, the feedback is mostly positive. While many ecnomists and banking experts were hostile to Treasury's original plan to buy distressed assets from these banks, almost everyone seems to agree that this is a prudent plan that should help. Quoting from the WSJ:

William Poole, former president of the Federal Reserve Bank of St. Louis, was a fierce critic of Treasury's initial plan to buy up distressed mortgage-backed securities. Such a scheme, he said, would lead banks to dump their worst assets on the taxpayers.

But Treasury's new tack may well do the trick, said Mr. Poole, now a senior fellow at the free-market-oriented Cato Institute.

"Investors need to be confident that the banks they're dealing with are unquestionably solvent, and it's in the interest of banks to assure investors that that's the case," Mr. Poole said. "One way banks can provide that assurance is to raise additional capital, in some combination of private and government capital."

Let's hope he is right.