Personal Finance Blog By MoneyRates - November 2008
November 25, 2008
The Fed has slashed their benchmark lending rate to 1.00%, but competition between online banks has kept the best rates on money market accounts closer to 4.00%. The twenty banks listed below are all offering a money market rate over 3.45%, although restrictions and rules do apply to earn the highest APY.
20 Highest Rates on Bank Money Market Accounts
Regions Bank 4.00% APY, $20K minimum
Evergreen Private Bank, 4.00% APY, $50K minimum
Bank of America Defenders of Wildlife 3.93% APY, $5K minimum
EverBank 3.82% APY, $1.5K minimum
First East Side Savings Bank 3.75% APY, $100K minimum
TriState Capital Direct 3.75% APY, $75K minimum
Heritage Bank 3.75% APY, $50K minimum
Corus Bank 3.75% APY, $10K minimum
Sovereign Bank 3.75% APY, $75K minimum
Union Federal Savings Bank 3.75% APY, $1 minimum
Imperial Capital Bank 3.75% APY, $100K minimum
Fulton Bank 3.65% APY, $100K minimum
Flagstar Bank 3.65% APY, $1 minimum
OnBank 3.60% APY, $1 minimum
Century Bank Direct 3.57% APY, $1K minimum
Hanmi Bank 3.56% APY, $10K minimum
Investar Bank 3.52% APY, $2.5K minimum
Heritage Bank 3.50% APY, $50K minimum
Fulton Bank 3.47% APY, $100K minimum
AIG Bank 3.46% APY, $50K minimum
Posted in: Miscellaneous
November 24, 2008
A mutual fund money market is supposed to be a simple investment with a stable $1 share price with seemingly little differentiation between various funds. September 2008 showed that line of thought was a fallacy as several funds with heavy exposure to Lehman Brothers paper suffered losses significant enought to push their net asset value price below $1. As a consequence more customers have been asking the difference between Treasury-only funds and basic money funds. Mutual funds have offered for over 20 years Treasury-only money market funds which invest solely in United States Treasury products. The yields on Treasury-only funds have typically lagged the yields on other money funds which have the ability to utilize commercial paper and notes to boost their yield. Two money funds from Fidelty Investments illustrate the widening gap between yields on Treasury-only funds and basic money funds.
Fidelity Money Market Fund 2.46%
Fidelity U.S. Treasury Money Market Fund 0.60%
Treasury-only fund yields have been hampered by the huge influx of funds into U.S. Treasuries which have pushed yields on Treasury bills to historic lows, while other money funds have benefited from the assurance of the temporary federal guarantee (for participating companies)which has allowed managers to remain in their diversified positions. Investors can check online to find the holdings of money market funds. The latest available report from Fidelity on their Money Market Fund indicated holdings consisting of:
38.5% Medium-Term Notes
30.2% Certificates of Deposit
14.0% Commercial Paper
12.0% Repurchase Agreements
1.9% Federal Agency Paper
1.6% Master Notes
0.4% Short-Term Notes
0.4% Asset-Backed Securities
0.1% Bank Notes
0.1% Municipal Securities
The holdings will be updated each quarter so customers can determine how their manager is balancing yield and risk with their funds. While there has been some high-profile instability in the money market fund industry, for the most part the system has weathered the biggest financial crisis in over 50 years relatively smoothly. The September panic-liquidations of money funds was slowed within a week after the federal government jumped in with their guaranty program and aid to those mutual fund companies who were forced to freeze redemptions. The US taxpayer will pay the ultimate cost for the unsoundness of some of the mutual fund money market holdings, but the system as a whole is still functioning. In fact, inflows into mutual fund money markets have improved over the last few months and fund companies are doing a good job of making information available online for investors concerned about price instability.
November 19, 2008
Federal Reserve Chairman Ben Bernanke addressed the mutual fund money market industry in comments made before Congress on November 18, 2008. The huge amount of money withdrawn out of money funds since September has been an ongoing aggravation in the credit crisis. Bernanke and the Fed have already addressed investor fears regarding money funds with the federal guarantee program in which most mutual fund companies have opted to participate. Bernanke told the Committee on Financial Services in the U.S. House of Representatives in part:
"Normally, money market mutual funds are major lenders in the commercial paper markets. However, in mid-September, a large fund suffered losses and heavy redemptions, causing it to suspend further redemptions and then close. In the next few weeks, investors withdrew almost $500 billion from prime money market funds. The funds, concerned about their ability to meet further redemptions, began to reduce their purchases of commercial paper and limit the maturity of such paper to only overnight or other very short maturities. As a result, interest rate spreads paid by issuers on longer-maturity commercial paper widened significantly, and issuers were exposed to the costs and risks of having to roll over increasingly large amounts of paper each day.
The Federal Reserve has developed three programs to address these problems. The first allows money market mutual funds to sell asset-backed commercial paper to banking organizations, which are then permitted to borrow against the paper on a non-recourse basis from the Federal Reserve Bank of Boston. Usage of that facility peaked at around $150 billion. The facility contributed importantly to the ability of money funds to meet redemption pressures when they were most intense and remains available as a backstop should such pressures reemerge.
The second program involves the funding of a special-purpose vehicle that purchases highly rated commercial paper issued by financial and nonfinancial businesses at a term of three months. This facility has purchased about $250 billion of commercial paper, allowing many firms to extend significant amounts of funding into next year.
A third facility, expected to be operational next week, will provide a liquidity backstop directly to money market mutual funds. This facility is intended to give funds confidence to extend significantly the maturities of their investments and reduce over time the reliance of issuers on sales to the Federal Reserve's special-purpose vehicle. All of these programs, which were created under section 13(3) of the Federal Reserve Act, must be terminated when conditions in financial markets are determined by the Federal Reserve to no longer be unusual and exigent.
The primary objective of these and other actions we have taken is to stabilize credit markets and to improve the access to credit of businesses and households. There are some signs that credit markets, while still quite strained, are improving. Interbank short-term funding rates have fallen notably since mid-October, and we are seeing greater stability in money market mutual funds and in the commercial paper market. Interest rates on higher-rated bonds issued by corporations and municipalities have fallen somewhat, and bond issuance for these entities rose a bit in recent weeks. The ongoing capital injections under the TARP are continuing to bring stability to the banking system and have reduced some of the pressure on banks to deleverage, two critical first steps toward restarting flows of new credit. However, overall, credit conditions are still far from normal, with risk spreads remaining very elevated and banks reporting that they continued to tighten lending standards through October. There has been little or no bond issuance by lower-rated corporations or securitization of consumer loans in recent weeks.
To help address the tightness of credit, on November 12 the federal banking agencies issued a joint statement on meeting the needs of creditworthy borrowers. The statement took note of the recent strong policy actions designed to promote financial stability and improve banks' access to capital and funding. In light of those actions, which have increased the capacity of banks to lend, it is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met in a manner consistent with safety and soundness. As capital adequacy is critical in determining a banking organization's ability and willingness to lend, the joint statement emphasizes the need for careful capital planning, including setting appropriate dividend policies. The statement also notes the agencies' expectation that banking organizations should work with existing borrowers to avoid preventable foreclosures, which can be costly to all involved--the borrower, the lender, and the communities in which they are located. Steps that should be taken in this area include ensuring adequate funding and staffing of mortgage servicing operations and adopting systematic, proactive, and streamlined mortgage loan modification protocols aimed at providing long-term sustainability for borrowers. Finally, the agencies expect banking organizations to conduct regular reviews of their management compensation policies to ensure that they encourage prudent lending and discourage excessive risk-taking."
November 14, 2008
iGObanking, a division of Flushing Savings Bank, is offering an online checking account with a 3.80% yield on all balances over $1. Not only is this one of the highest rates in the country on a checking account, but the account comes with no monthly requirements, no geographic limitations, and a $1 minimum opening deposit. The online checking account comes with a online money management tools which give customers the option of easily making the iGOchecking account their bill-paying account. The other typical hesitation by potential online banking customers is the ability to access cash and make deposits. iGObanking has 32,00 surcharge-free ATM locations throughout the nation as part of the Allpoint network. Deposit to the iGOchecking account can be made either by check, direct deposit, or online.
Find a list of the highest rates on checking accounts at Money-Rates.com.
More information about iGObanking from their website:
iGObanking.com® is an online division of Flushing Savings Bank, FSB, and a FDIC insured institution established in 1929. Accounts at iGObanking® are FDIC insured to the maximum allowable limits.
November 13, 2008
The latest economics forecast from Wachovia Economics Group has been released and includes predictions for negative economic growth in the United States and Europe for 2009 with a return to positive growth in 2010. The forecasts calls for continued growth in some Pacific Rim countries and South American countries contributing to a global growth rate of 1.9%, the lowest global growth rate since 1991. The 1.9% forecast is well-below the mark of some other major economists who have pegged global growth as low as -3%, but without the detailed breakdown and analysis of the report from Wachovia.
United States GDP Forecast
Germany GDP Forecast
France GDP Forecast
Italy GDP Forecast
United Kingdom GDP Forecast
Japan GDP Forecast
Canada GDP Forecast
China GDP Forecast
India GDP Forecast
Mexico GDP Forecast
Brazil GDP Forecast
The United States is still seeing net inflows into dollars, but many Americans have been diversifying after seeing the frightening economic forecasts for the US economy. Everbank, a bank in the United States, has been offering a variety of foreign-denominated currency products for anyone interested in speculating on the strength of a foreign currency versus the US dollar. More information about the EverBank products can be found on the Money-Rates.com EverBank Product Page.