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.


Provident Bank Free Checking Review and $123 Bonus

Like many banks in this economy, Provident Bank is jonesing for some new customers – and the best way to do that is to give customers some free money to sign up! Let’s face it, the only way a bank is going to make money in this economy is to have money so they can make legitimate loans. So let’s give them some money and get some free money in return!

To get the $123 bonus you must open your free checking account with direct deposit and an activate a debit card by March 31st, 2009.

Provident Bank Review:

Provident Bank is the largest independent commercial bank that is headquartered in Maryland. Their assets are listed at more than $6.4 billion, and they offer quality banking services to individuals and businesses located in the Greater Baltimore, Greater Washington and Central Virginia areas. Provident Bank also offers a number of additional services including loans, credit cards, home equity loans, Health Savings Accounts (HSAs),  and additional investment services at their network of almost 150 branches.

Provident Bank Free Checking Review:

  • Higher rates on CDs, savings and money market accounts
  • Lower rates on home equity loans, lines of credit, personal, auto and boat loans.
  • FREE Online Banking with Bill Pay.
  • Evenings and weekend hours at convenient locations.
  • Thousands of surcharge-free ATMs nationwide.
  • Member FDIC

How to get the $123 Bonus

  • Choose and open your checking account, plus order your FREE MasterMoney™ debit card by March 31, 2009
  • Sign up for Direct Deposit
  • Start using your new account and get $123

Here is the fine print:

Provident Bank will award $123 to new personal checking customers that open a new Totally Free, Regular, Interest or Platinum checking account between February 2 and March 31, 2009 that have direct deposit and an active Provident MasterMoney™ debit card by April 30, 2009. Customers that enroll in Provident Bank’s Power Points debit card rewards program by April 30, 2009 will receive 500 bonus points by May 31, 2009. Offer only available to residents of DC, MD, PA, VA or WV who are 18 years of age as of February 2, 2009. Limit one per household. Employees and their families of Provident Bank and its subsidiaries are not eligible for this offer. Minimum opening deposit of $25 is required for all personal checking accounts. Checking account Annual Percentage Yields as of January 21, 2009: Interest: .10%; Platinum .25%. Yields may vary after account is opened and may vary by branch location. Fees can reduce earnings. The cash award will be deposited into qualifying personal checking accounts in good standing on or about May 31, 2009. The maximum award for this promotion is $123. Customers will be responsible for applicable taxes. Offer valid for limited time and cannot be combined with other promotional offers.

Here is more information about how you can get free ATM transactions.


Metropolitan National Bank Review and $200 Sign Up Bonus

metropolitan-national-bankMetropolitan National Bank is currently offering a $200 sign up bonus when you sign up for their free personal checking account and fund your new checking account via direct deposit. Metropolitan National Bank is located in New York, but you can apply if you are located outside of NY if you send in a copy of your driver’s license and a copy of a recent utility bill to verify your address. In addition to sending in verification of your identity and your address, you will need to send in a copy of a recent pay stub to provide proof that you are participating in direct deposit. Why they can’t verify it on their own, I don’t know. But $200 is a lot of money, so it may be worth it to you.

Metropolitan national Bank Free Checking Account Review

  • No minimum balance requirement
  • Fast and easy online application process
  • No monthly fee
  • No direct deposit requirement
  • Free VISA* check card
  • Free online banking with free bill pay
  • Free e-Statements
  • Free ATM transactions worldwide
  • Member FDIC

Sign up for Metropolitan National Bank free checking account.

$200 Metropolitan National Bank New Account Bonus

The $200 bonus is a good reason to try out this bank.

Here is the fine print:

Free checking $200 bonus offer is subject to change without notice, limited to one account per customer. Free checking $200 bonus requires activating full, direct deposit ($500 minimum) of recurring payroll, government benefits or pension disbursements. $200 bonus will be credited to the account (approximately 30 days) after first full, qualifying direct deposit posts to your account. The initial qualifying direct deposit must be made within 60 days of account opening. We also require that qualifying, full direct deposits be made continually for no less than six months from the date of the initial qualifying direct deposit. Should these deposits be terminated or the account closed prior to six months, any paid bonus will be charged from your account or shall be otherwise due to us. The bonus is considered interest and will be reported to the IRS with form 1099-int.

It takes a little work to get your account set up – faxing all the paperwork is a drag – but the end result is nice. $200 for free and free worldwide ATM transactions make me a happy man.

Here is more information about how you can get free ATM transactions.


E*Trade Cuts Interest Rates – Currently 2.50% APY

E*Trade chopped their interest rate from 3.01% down to 2.50%. This is one of the larger cuts from the banks listed in the top high yield savings account rates, but E*Trade had one of the highest interest rates out of those high yield banks, so it is understandable that their recent cut was so large.

How does E*Trade compare to other high yield savings accounts?

Even with such a large rate cut, E*Trade is still very competitive in the market for high yield savings accounts. As I mentioned in the previous article about the HSBC Direct rate cut, high yield savings accounts are still a good option and will earn you much more money than a traditional brick and mortar savings account. Here are more benefits of a high yield savings account.

Be sure to check the top high yield savings account rates for a current list of the top high yield savings account rates.