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.
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."
Two more banks failed yesterday, Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank bringing the total number of failed banks in 2008 to 15.
Two more banks failed yesterday, Northville, Mich.-based Main Street Bank and Eldred, Ill.-based Meridian Bank bringing the total number of failed banks in 2008 to 15. Both were relatively small banks in terms of assets and deposits. Main Street Bank had $98 million in total assets and $86 million in total deposits as of Tuesday and Meridian had $39.2 million in assets and $36.8 million in deposts as of Sept. 25.
Main Street Bank
All of Main Street's deposits were assumed by Monroe, Mich.-based Monroe Bank & Trust, the FDIC said. All depositors of Main Street Bank, including any with deposits in excess of the FDIC's insurance limits, will automatically become depositors of Monroe Bank & Trust, and they will continue to have uninterrupted access to their money. Therefore, there is no need for customers to change their banking relationship to retain deposit insurance. Depositors who already have accounts at Monroe Bank will have their Main Street deposits seperately insured for 6 months. That means if you had $250,000 at Main Street and $250,000 at Monroe, for six months you'll have $500,000 of insurance coverage.
The FDIC estimates that the cost to its Deposit Insurance Fund will be between $33 million and $39 million.
Meridian Bank
According to the FDIC press release, Meridian Bank had total assets of $ 39.18 million in total assets and $ 36.88 million in total deposits as of September 25, 2008. National Bank will purchase approximately $7.55 million of Meridian's assets. All depositors of Meridian Bank, including any with deposits in excess of the FDIC's insurance limits, will automatically become depositors of National Bank, and they will continue to have uninterrupted access to their money. Depositors will still be insured with the new institution. Therefore, there is no need for customers to change their banking relationship to retain deposit insurance.
The FDIC estimates that the cost to its Deposit Insurance Fund will be between $13 million and $14.5 million.
Things to Note About These Bank Failures
There are several points to note about these failures:
The takeover was done on a Friday, as usual and was done quickly and efficiently.
Customers still have access to their money via ATMs and the banks will be open for business on Monday under their new ownership.
All deposits, even those in excess of the FDIC insurance limits of $250,000 were protected.
The FDIC is doing everything it can to reassure the public and it stands behind the banks. Policy makers in Washington have been talking about insuring all deposits and with these smaller banks, it appears the FDIC has already taken that approach. If the size and number of failures mount (as is expected to happen), the FDIC will not be able to continue extending coverage to all deposits without formal authority and funding from Congress.
