Should a well funded bank be able to set their own interest rates to attract new customers, or should they bend to the pressure from the Federal Deposit Insurance Corporation (FDIC) to lower interest rates? If you support the free market, your answer would probably be no. But that is what recently happened when the American Bankers Association (ABA) sent a formal letter of complaint on behalf of its members to the FDIC.
The complaint stated that Ally Bank was offering higher interest rates than its competitors, and that Ally Bank had plans to receive funds through the Treasury Liquidity Guarantee Program (TLGP).
The FDIC’s Temporary Liquidity Guarantee Program backs financial institutions and allows them to borrow money at near-Treasury rates in exchange for a fee. Because Ally has been approved to borrow money from the TLGP, some ABA members complained they were using the TLGP funds to attract new customers by offering higher interest rates that was reasonable in the current economic environment.
Should the FDIC control interest rates?
The government shouldn’t regulate every aspect of private industry, but the lines become less clear when there are government bailouts or even government ownership on the line. The FDIC responded to the ABA’s letter by sending a letter of their own to Ally Bank, essentially telling them to lower interest rates so long as they participate in the TLGP.
What does this mean for Ally Bank members?
Overall, not much will change except interest rates. Ally Bank accounts are still covered by the FDIC so there should be no problems with customer funds no longer being guaranteed, and there should be no other differences noted by customers. Unfortunately, it means that new customers who were lured by the promise of higher interest rates will see them fall a little bit – through no fault of Ally Bank. It’s just an unfortunate change of events from a customer perspective.
Ten major US banks received approval to repay Troubled Asset Relief Program (TARP) funds early, potentially leading to a repayment of $68 billion in taxpayer bailout money. The Treasury Department did not disclose which 10 banks were given approval for early TARP repayment. However, several banks have already publicly stated their intention to pay back the TARP funds if given approval.
Banks paying back TARP early
Some of the banks who are thought to be paying back their TARP funds early include Capital One, BB&T, and U.S. Bancorp, and most of the banks that it was determined would not need new capital after the bank stress test results were released last month. Those banks include Goldman Sachs, JPMorgan Chase, American Express, Bank of New York Mellon, JPMorgan Chase & Co., and State Street.
So far, the only banks the US Treasury department has allowed to pay back TARP funds have been small banks, totaling almost $1.9 billion.
Paying back the TARP funds is like kicking a bad habit
The banks can’t wait to get rid of the TARP funds because of increasing restrictions and limitations imposed by the government. To get rid of the TARP, banks were required to raise billions of dollars in funds to ensure they had enough reserves to weather substantial losses.
Overall, this should increase the banks’ flexibility in dealing with the economic crisis.
The Treasury Department recently approved the FDIC’s request to extend the temporary deposit insurance limit of $250,000 from the end of 2009 to 2013. This move was made to add stability to the banking industry and instill more consumer confidence in our economy.
Until last year, the FDIC insurance deposit limit was $100,000. However, consumer fear and failing banks lead to the approval of a temporary increase in insurance coverage. The $250,000 limit was set to expire at the end of 2009, but now has added life.
According to the FDIC, on January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except for IRAs and other certain retirement accounts which will remain at $250,000 per depositor.
National Credit Union Share Insurance Fund (NCUSIF) insurance limits have also been extended through the end of 2013. The NCUSIF protects money held at credit unions and is administered through National Credit Union Administration (NCUA). The limits are also $250,000 per account and are set to return to previous levels on January 1, 2014.
The FDIC and NCUSIF protect your money
Thanks to the FDIC and the NCUSIF, no protected account at a bank or credit union has ever lost money due to a bank failure. For more information about how the FDIC works, check out this great video: Watch the FDIC Takes Over a Bank.
USAA Federal Savings Bank is offering a $100 sign up bonus for new checking accounts. The kicker is that you must be eligible for their property and casualty insurance. United Services Automobile Association (USAA) is an insurance company that offers financial services including banking, investing, credit cards, and other financial products.
About USAA
There are two things that set USAA apart from other financial institutions. The first is that USAA was founded for military officers and continues to have fairly strict eligibility requirements – basically you must be in the military or be the adult child of a current USAA member. The second thing that sets USAA apart from other financial institutions is their consistently high ratings for financial products and customer service. They are often rated number one for best credit cards, customer service, brokerages and more. You can read a USAA Federal Savings Bank review for more information.
$100 USAA Checking Account Bonus
All you need to do receive the $100 bank referral bonus is follow these steps:
- Open a new Four Star Checking account online or by phone (800) 531-8132 (mention offer code)
- Use Offer Code: CEO 100.
- Deposit a minimum of $25.
- Set up direct deposit.
- The offer expires 5/31/09.
- Receive $100 bonus in December 2009.
Other notes:
Offer is not available to current USAA checking account holders and excludes Teen Checking accounts. Limit one $100 bonus per household.
The $100 bonus will be credited to your account in December 2009 if your Four Star Checking account has active recurring direct deposit.
Like all bank referral bonuses, this bonus is considered interest and will be reported on IRS Form 1099-INT.
Key Bank is offering new customers a free Garmin GPS for signing up for their free checking account. It’s a pretty sweet deal if you live in one of the states where Key Bank operates!
Get a Free Garmin nüvi 205W GPS
Key Bank is offering new checking account customers a FREE Garmin® nüvi® 205W GPS when you open a Key Express Free Checking account or a Key Advantage® Money Market Checking account. You will also need to make one debit card transaction plus a combination of two direct deposits and/or automated payments each of $100 or more.
Get a Free Garmin nüvi 265WT GPS
Key bank is offering a higher model GPS system to new customers who sign up for any of the following checking accounts: Key Privilege® Checking and Key Privilege Select Checking.
The requirements for the free Garmin® nüvi® 265W GPS are the same – make one debit card transaction plus a combination of two direct deposits and/or automated payments each of $100 or more. However, there is a $25 monthly service charge for the Key Privilege Checking accounts unless you maintain a minimum balance of $25,000.00 in any combination of checking, savings, CDs, retirement deposits, investments, credit cards, loans and lines of credit. The Key Privilege Select Checking account requires a minimum balance of $100,000 to avoid monthly service charges.
Unless you are already a Key customer, you would probably be better off getting the free Garmin 205 GPS and putting your money into a high yield savings account to earn better interest rates.
Get your free Garmin soon!
You must open a qualifying checking account at KeyBank by May 15, 2009 and meet the other requirements (debit card transaction and 2 direct deposits or automated payments of $100+) by July 17, 2009. I noticed they have extended this deal twice already, so it is possible they will do it again – but probably only until their supplies are exhausted. So take advantage while you can!
Here are the official details. Note – only available in the following states: Alaska, Colorado, Connecticut, Florida, Idaho, Indiana, Kentucky, Maine, Michigan, New York, Ohio, Oregon, Utah, Vermont, and Washington.
*Like all bank referral offers, the value of the GPS will be reported on your 1099.