Ten banks paying back TARP early

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.


$250k FDIC Deposit Insurance Extended to 2013

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 theĀ  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.


Banking News Update

There has been a lot of action lately in the banking industry and the stock markets. I recently wrote about how fair value accounting could boost the value of bank stocks. Since then, much of the banking industry has been on a tear – in some cases climbing 30% or more. I’m not recommending that anyone invest in bank stocks though. Always do your due diligence before investing in any stock or industry.

Profits up for some banks

Last week Wells Fargo announced they were expecting a $3 billion profit – which was a pleasant surprise for the banking industry. Both Citigroup and Bank of America also recently announced that they operated at a profit during the first two months of the year.

Still some dangerous times for banks ahead

While some of these banks are currently operating at a profit, they also have a lot of toxic assets remaining on their books. The operating profit does not include such items as reserves for credit losses, nor does it account for troubled assets that may not be repaid in the future. The results look good now, but charge offs and failed mortgages and other debts could cause big problems down the road. Many banks are going to need to continue raising capital to hedge against loan defaults.

Related High Yield Savings Account information.

A previously published article, How the FDIC Takes Over Banks, was recently included in the Carnival of Pecuniary Delights No. 3 – The Money Box Edition, which was held at Miss Money.


Fair Value Accounting to Boost Bank Assets?

In light of the current economic crisis, the US Government decided to give banks and other institutions more leeway in the method they use to determine the value of their troubled assets (read subprime mortgages). This change means that banks are now able to set the value of the “toxic assets” they hold in their portfolios, which will affect the bottom line of their balance sheets from here on out.

According to CNN:

The Financial Accounting Standards Board, the private sector body that sets U.S. bookkeeping rules, moved Thursday to adopt a rule that makes clear that firms need not write down the value of their assets based on so-called distressed sales of similar assets by other banks.

Banks stock prices to rise?

This could potentially cause bank stocks prices to rise because they can report the value of their assets as they see fit – regardless of actual value. While the value of their balance sheet will change, that doesn’t change the underlying assets they hold, or the underlying risk of owning bank stocks. Just because stock prices increase, doesn’t mean it’s a good time to buy. In fact, this is removing one more layer of protection for the investor and consumer – which is exactly what got us in theis mes in the first place.


How the FDIC Takes Over Banks

Many US banks have already failed in 2009, and economists are forecasting more bank failures before the year ends. The economic crisis has hit many banks, large and small.

If you ever wanted to know what happens if your bank fails, this 60 minutes video shows how the FDIC comes in to take over banks when they fail.

3 Ways the FDIC can close a bank:

According to this video, the FDIC can close a bank one of three ways:

  1. Close bank and pay depositors
  2. Run the bank themselves
  3. Sell the bank to someone else to run

Of these options, the FDIC usually prefers to find another financial institution to run the bank, that way they aren’t on the line for reimbursing as many customers.

Make sure your deposits are protected

Always make sure the bank you join is a member of the FDIC, so your deposits will be covered in the event of a bank failure. If you join a credit union, make sure your credit union is a member of the NCUA, which is a similar government agency that protects deposits in credit unions.


More Banks Fail and More Bank Failures in the Forecast

The news seems to get worse each day – US banks are failing at a rate that hasn’t been seen in decades. According to this CNN article, there have already been 14 bank failures through the middle of February. There were 25 bank failures in 2008, meaning we are over halfway to last year’s number of bank failures through 2 month. And more bank failures are on the horizon.

What should you do if your bank fails?

In a previous article I asked the question What Happens if Your Bank Fails? The short answer is that if the bank is covered by FDIC insurance or the NCUA, then you don’t have much to worry about as long as you didn’t have deposits above the limits.You may consider moving your money to another institution, but the bank will likely be absorbed by another financial institution or otherwise taken over, so it shouldn’t matter much. The bigger problem is with the system.

How do bank failures affect the US?

Banks failures are hurting the US. Consumers and tax payers are losing confidence in the banking industry and the government is spending billions of dollars on FDIC insurance payments. The collapse of IndyMac last summer cost taxpayers $8.9 billion from the FDIC fund, and the FDIC maintains that losses will extend up to $40 billion by 2013. With banks failing at the current rate, don’t be surprised if the final numbers exceed expectations.

A downward spiral?

Banks are hurting due to bad loans and mortgages and no longer have the cash flow to continue making as many loans. The Fed lowered rates to roughly 0% to increase the lending rate, but that also means banks aren’t making as much money on loans. The lending market has also dried up, with lending restrictions tightening and fewer loans being made. Few new loans at lower rates means lower cash flow. See where this is going? Yeah, it’s ugly, and it’s getting worse.

What does this mean for high yield savings accounts?

Well, your money should be safe as long as you bank with an institution covered by the FDIC or NCUA. But as you have probably noticed already – interest rates for high yield savings accounts have dropped dramatically over the last few months and will continue dropping for the foreseeable future. Better start looking into high yield CDs if you want to lock in higher returns.


What Happens if Your Bank Fails?

bank-failures-by-stateAs of Early February, there have been 34 bank failures in the US in the last 13 months, including 9 already in 2009. That is a large enough number to cause concern for the banking industry. But does that mean you should be concerned?

Not if your bank is a bank that is covered by the FDIC or the NCUA. If your bank is covered, so are your deposits, up to the federal limits.

FDIC and NCUA insurance limits

Until last fall, those insurance limits were $100,000, but the federal FDIC and NCUA insurance limits were temporarily raised to $250,000 to entice more people to leave their money in bank deposits, which would allow banks to lend more money. This higher FDIC limit is set to expire December 31, 2009.

Should you worry about your bank failing?

Not really. As long as your bank is covered by the aforementioned federal programs, then you don’t have much to worry about unless your deposits are above the limits. If they are, try putting money in your spouse’s name, a high yield CD, or into another top high yield savings account. That way you maximize your protection under the FDIC and NCUA insurance limits.

Bank Safety is important

In a recent post we talked about bank safety when we asked the question – is online banking safe? The answer is probably yes, so long as you are taking the proper precautions – using updated software and operating system, anti-virus software, updated spyware program, etc. You can never be too careful when you are dealing with your online bank accounts!

Photo source: CNN Money.


E-Trade Lowers Savings Account Rates Again

Adding to a long string of rate cuts at most high yield savings accounts, E*Trade dropped their rates yet again. This comes less than two weeks after their last rate cut, which slashed the rates from 3.01% APY to 2.50% APY.

E*Trade high yield savings account rates as of Feb 15, 2008

As of today, E*TRADE Bank officially cut their high yield savings rate from 2.50% APY to 2.15% APY.

Will this be the last rate cut? Unfortunately, I doubt it. I have a strong suspicion that we will continue to see more rate cuts in the near future. AS long as the Fed keeps the prime rates at or near 0% and banks continue to hold a vice grip on their purse strings, we will continue to see rate drops.

All of the top high yield savings rates have dropped in the last few months, including those from well known banks like ING Direct, HSBC Direct, WTDirect, FNBO Direct, and more. Some have slashed their rates as much as 30% or more – just in the first month and a half of the year! Now may be time to consider putting your long term savings into a high yield CD or a CD ladder.


Is Online Banking Safe?

Is online banking safe? In today’s environment of hackers, identity theft, and corporations “losing” confidential data, this is a relevant question to ask. Let’s face it – anytime you use the internet, you are exposing your computer to dangers such as viruses, spyware, trojans and other malware. This article will help you be safe when using online banking and protect your investments.

Minimize your exposure to online banking fraud

Follow these tips and your online banking experience will be safer and more enjoyable:

Keep software and operating systems up to date. Online thieves use automated bots to scan the internet for old software programs and operating systems with known security flaws. Staying up to date keeps your computer from raising red flags in their searches.

Install current anti-spyware and anti-virus software. Anti-virus and anti-spyware programs will save you a lot of trouble and keep your computer and personal information safe from identity thieves.

Use a safe browser. Not only does Internet Explorer suck from a user’s perspective, but it is full of exploits. Switch to FireFox, a free browser, which is safer, faster, and offers more functionality.

Don’t access online banking sites from a public computer. Enough said.

Use secure passwords. Make sure your passwords contain both upper and lowercase letters, numbers, and symbols (if allowed). Also vary your password and user account names.

Be careful with wireless connections. If you know how to secure your wireless connection so it doesn’t broadcast your signal, you can encrypt your transmissions, and otherwise keep prying eyes away from your private information, then go for it. Otherwise, don’t bother.

Beware of phishing e-mails. Phishing e-mails are cleverly disguised e-mails purportedly from your bank. These spoofs try to trick people into going to a false website disguised as the original and inputting their account number and password. To avoid these make sure you only bank on a website that uses secure socket layer technology – the url should look like this:

“https://” plus your bank’s name.

The “s” in the web address means it is secure.

The other thing to look for is the actual location of the web address. Hover your mouse over the link and look at the bottom of your browser – it should show the location the link is pointing to. For example, hover your link over this: High Yield Savings Accounts. You should see “” in the bottom of your browser. If a link in your e-mail is trying to send you to a location you don’t trust, don’t click it! It may send you to a site that will attempt to install a virus or trojan on your computer.

Use an online bank with security features. Many online accounts add an additional layer of protection when accessing their site. A common security feature is using a custom picture and PIN – ING Direct, Vanguard, and more recently, WTDirect use this security feature. You can read more about WTDirect adding this feature here: WTDirect adds security features to account login.

Another security feature is using a keyboard PIN pad like TradeKing or the Thrift Savings plan use. Some banks taker their security a step further and provide customers with a SecurID fob, similar to what many corporations use to prevent unauthorized account access.

Protect yourself and your assets

Thieves are lurking around trying to get your money – don’t give them easy access. Protect yourself and your assets, and enjoy the wonders of compound growth with the best high yield savings account rates.


WT Direct Adds Security Features to Login

WTDirect is adding a security feature to make their login process more secure for users. Like many other financial institution, such as Vanguard and ING Direct, WTDirect will be separating the User ID and password page. Also like Vanguard and ING Direct, WTDirect will require you to select a picture which you will need to verify upon login. Add some additional security questions, and oila! Your banking is now more secure!

You should also be able to register your computer to avoid having to answer as many security questions upon login. This is a standard feature found in many financial institutions, again like ING Direct as well as TradeKing and other discount brokerages.

Here is a copy of the e-mail WTDirect sent out to its members detailing the new WTDirect security features:

We’ll soon be introducing additional security measures to further protect online access to your financial information.

These new security features add a layer of protection to help us verify your identity, and help assure you that you are using the genuine WTDirect website. Your Password will now be on a separate page from your User ID, and we will ask you to confirm your chosen Security Image and Caption at Log In. We may also prompt you to answer one or more new Security Questions before permitting access to your accounts. For example, if you attempt to log in to from an unrecognized computer, we will ask you to answer one of your new Security Questions and Image/Caption to ensure that you are permitted access.

As part of the introduction of these new measures, the next time you log in to, we’ll request that you select and provide answers to two Security Questions and select an Image/Caption that will be used as additional identification.

These new security measures provide another example of why you can be confident that WTDirect continues to implement ways to protect your personal information and assets.

I htink it’s good any time a bank increases its security. Glad to see WTDirect join the party.