FDIC ins goes to $250k permanently

[calmloki]

FDIC: Press Releases - PR-161-2010 7/21/2010

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[/FONT][FONT=arial, helvetica, sans-serif]"On July 21, 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which, in part, permanently raises the current standard maximum deposit insurance amount to $250,000. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until December 31, 2013. The FDIC insurance coverage limit applies per depositor, per insured depository institution for each account ownership category".[/FONT]
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[FinanceDude]

Awesome, now folks can put even more into CD's at 1% interest...........

 

[FinallyRetired]

Awesome, now folks can put even more into CD's at 1% interest...........

Hey, don't knock a positive return I do think this is a good deal, allowing me to reconsolidate some of the funds that I spread out over several institutions.

 

[calmloki]

psst - Costco Capital One online savings account at 1.39%. Because that extra .39% is gonna make all the difference....

 

[Gone4Good]

Awesome, now folks can put even more into CD's at 1% interest...........

You can still find 3% 5-yr CD rates. That is nearly double 5-yr treasuries, for basically the same credit risk. That sounds like free money to me (oh, and some of the CDs have very low cost put options too). Looks like Ally Bank is gonna get some more of my money.

 

[tmm99]

I think Discover has 3% for 5-yr CD's and 3.5% for 10-yr...

 

[ziggy29]

There was no way this wasn't going to happen. The risk of people rushing to pull out deposits between $100K and $250K was almost certainly never considered to be allowed.

 

[Stevewc]

Is it safe to assume the credit unions will follow suit?
Steve

 

[Gone4Good]

I think Discover has 3% for 5-yr CD's and 3.5% for 10-yr...

Any idea what their early withdrawal penalty is? I think I looked at them a decided their penalty was too high, but if it's 90 days interest, or something like that, I'd hit that 3.5% 10-yr.

 

[ziggy29]

Any idea what their early withdrawal penalty is? I think I looked at them a decided their penalty was too high, but if it's 90 days interest, or something like that, I'd hit that 3.5% 10-yr.

It's 9 months interest for terms beyond 5 years:

Certificates of Deposit : Discover Bank CD FAQ's

 

[Dawg52]

Is it safe to assume the credit unions will follow suit?
Steve

I hope so. PenFed will be getting more of my money if it does. Damn, wish this had been the case when they were offering 6% just a few years ago.

 

[Purron]

Is it safe to assume the credit unions will follow suit?
Steve

The $250K limit for credit unions is in effect until 2013. I'm guessing NCUA will follow the FDIC quickly. They don't want those deposits flowing out to banks.

 

[Helen]

This is so long over due.

Remember when 401k limits weren't indexed to inflation?

Have they indexed the 250k?

 

[JOHNNIE36]

I've still got 2.5 years to go on my 4.5% Cd's and then I'm going to be scared of what the interest rates will be. Can't believe they will stay this low that long.

 

[FinanceDude]

You can still find 3% 5-yr CD rates. That is nearly double 5-yr treasuries, for basically the same credit risk. That sounds like free money to me (oh, and some of the CDs have very low cost put options too). Looks like Ally Bank is gonna get some more of my money.

So, you would lock in at 3% for 5 years? Wow..........

 

[Purron]

NCUA has followed suit. Credit union coverage has also been permanently increased to $250K.

National Credit Union Administration (NCUA)

 

[ziggy29]

So, you would lock in at 3% for 5 years? Wow..........

If today's alternative is 1% and if the early withdrawal interest penalty is low enough that it's worth eating should interest rates spike in that time, why not?

 

[FinanceDude]

If today's alternative is 1% and if the early withdrawal interest penalty is low enough that it's worth eating should interest rates spike in that time, why not?

There are alternatives higher than 1%. Heck, you can get munis that pay 4% tax-free........

 

[Dawg52]

There are alternatives higher than 1%. Heck, you can get munis that pay 4% tax-free........

Where do you find them? I just did a search on Fidelity and 2.65% was the highest I found for a 5yr muni. That was searching S.E. states. Lead me by the hand.

 

[FinanceDude]

Where do you find them? I just did a search on Fidelity and 2.65% was the highest I found for a 5yr muni. That was searching S.E. states. Lead me by the hand.

They are around. Some you have to pay a premium for, so the yield is lower. I won't buy them over 104 in most cases. However, 4 or even 5% coupons are there.

Fido has a decent bond desk, but they don't have access to everything. I don't know how much inventory Vanguard's bond desk has. I might have access to more stuff because I am an FA..........

I was able to procure $50K of a double tax exempt WI GO bond with a 4.25% coupon at 102 callable in 2015 last week. That piece went really fast..........

 

[ziggy29]

Where do you find them? I just did a search on Fidelity and 2.65% was the highest I found for a 5yr muni. That was searching S.E. states. Lead me by the hand.

Searching at Schwab, I'm seeing a few number of munis maturing in 2015 and 2016 that have a YTM of 4% or close to it. Of course, these tend to be revenue bonds (i.e. riskier than general obligation bonds) from entities where the state/local budget situation is rather terrible.

The highest yielding non-callable GO bonds in that maturity I'm seeing are coming up in the 3.4% YTM range.

 

[FinanceDude]

Revenue bonds can be a little dicey. One of the good things about WI is that GO bonds rarely default because state taxpayers pay their taxes 95% of the time. In my community, the ratio is 98.5%, which is very good........

 

[meierlde]

Any idea what their early withdrawal penalty is? I think I looked at them a decided their penalty was too high, but if it's 90 days interest, or something like that, I'd hit that 3.5% 10-yr.

The way to figure it, is how much does the interest rate have to go up to make the deal break even or above. For example at 3% and a 6 month penalty, it works out that for 1 year left its 1.5% and for 4 years its like .4 percent. So if we get lt rates back at 5% it makes sense to take the penalty and run.

 

[Gone4Good]

So, you would lock in at 3% for 5 years? Wow..........

Absolutely, because I'm not really "locking it in." Ally's withdrawal penalty is just 60 days interest, so any time I want to reinvest it will cost me just 50bp to pull my money out. That is a super low cost put option I'm getting for free. So not only am I earning nearly twice the treasury rate for treasury credit risk, I'm getting a valuable interest rate put option at no cost.

 

[Gearhead Jim]

About six months ago I was looking for a good place to put a Roth CD. Ally's rates sounded good. But when I Googled Ally Bank reviews, found several complaints of very slow service when attempting to transfer out big chunks. Some of them seemed to be running on the border between gross incompetance and outright trickery.

As it turned out, I found a local CU that gave better rates and I did not investigate Ally any further, so not sure of the significance of this.