Wednesday, September 24, 2008

Time to throw in the towel on WaMu?

The beleaguered bank just can't catch a break. Today Standard & Poor's Rating Services downgraded WaMu's counterparty credit rating to "CCC" from "BB-" further miring it in junk status. The reasoning being a split of the bank on any sale, as vultures are keen on snatching the strong deposit base while staying as far away as possible from the toxic mortgage assets.

As seen in the chart, WaMu's stock price (NYSE: WM) has fallen along with the confidence in the bank, dropping another $0.94 to a 52-week low of $2.26. Uncoincentally, this battering has led them to increase interest rates on online savings to 4.00% and on 12 month CDs to 5.00% in attempts to shore up capital.

While these are GREAT rates given current market conditions (who wouldn't want guaranteed returns in this financial crisis!) how safe is your money? Sure its FDIC insured on deposits up to $100,000 but with all these bailouts and government takeovers, but how long will the FDIC's printing press be available until it breaks down? Here's a great article on reasons to stay with WaMu from MyMoneyBlog, but seeing that nearly 60% of my cash is sitting with WaMu, I still am pretty uneasy with leaving my money in there.

I have an online savings account and an 8-Month CD (which I opened for 4.25% APY) and the trigger is itchin for me to withdraw the money. IndyMac is the closest example to what would happen should WaMu fail and after reading some stories from those customers (via SlickDeals) seems like it took 4-5 weeks for money to be returned. So seeing that a bailout of WaMu would be greater than IndyMac, I can't imagine how long my money would be locked away NOT earning interest.

So do I forgo the attractive interest rates and settle for a lower rate but more security? I'm leaning towards a move back to EmigrantDirect at 3.00%. So far I'm undecided, but I'll wait for this month's interest to be deposited and then I'll make a decision.

Happy rate hunting!

One Love,

Wednesday, September 3, 2008

Interest Rate Roundup

Rates have come up a tad bit in the last month. Here's the current roundup:

WaMu Online Savings: 3.75%

WaMu 8 month CD: 4.25%

WaMu 12 month CD: 4.50%

Emigrant Direct: 3.00%

ING Direct 3.00%

HSBC Direct: 3.50%

E-Loan Savings: 3.01%

E-Loan 6 month CD: 4.06%

So my in my rate chasing, I moved my matured E-Loan CD into WaMu and dumped it into an 8 month CD. I've been socking most of my savings into the online savings account as well. Due to the turbulence in the market I'm reluctant to move everything into WaMu, so I still maintain my other account at Emigrant Direct. While these rates are better than what we've been seeing, the forecast looks bleak. About a week or two after I opened the 8 month CD, WaMu was offering a 12 month, 5.00% CD which I would have definitely jumped on. I jumped the gun too early, then waited to late and now they've dropped the 12 month rate to 4.50%. So unfortunately looks like there won't be another uptick in savings rates anytime soon :(

One Love,