San Diego Housing Bubble News and Analysis

I spoke in great lengths about this with an old friend of mine that has a daughter in the OC that teaches. He parked 100k in the OC teacher credit union. He said it is written in law that if it is FDIC insured that the government just cannot print off money to cover the money you had. They have to raise rates whatever amount to attract investors to pay back the money. I have my cash in ING direct at the moment.

wh I have my cash in ING direct as well.

OCTFCU is insured by the NCUA, not the FDIC.

You should be able to get a Financial Performance Report through NCUA.

I seem to recall an interview with someone from OCTFCU in Lansner's blog ... sounds like they weren't into exotic loans, and he didn't seem *that* deluded.

ING Direct is good, I also have a savings account with Emigrant Direct that pays 5.05% - no minimums, no fees, just a place to park money between CD purchases and whatnot.

What is good about Emigrant Direct is they have a 0% rate CC card now. You can cash it all out and invest it back with them at 5%. Read up on it here.

http://www.websitetoolbox.com/tool/post/...

I have thought about doing something like that. Bank of America offered me a similar thing, a 0% APR on cash advances for an entire year. HOWEVER, they charged a 3% fee upfront, and you have to remember that after taxes, you are really only getting about 4% net back. So, it didn't make any sense to have such a large hassle for a 1% spread. It would only make sense if someone offered a 0% APR on a cash advance with NO fees upfront. I also thought about lending the cash on prosper.com, but then again you are exposing yourself to greater risk.

This is an interesting anecdote from a FDIC employee involved in the S & L Crisis of the 1980s. Shows the complexities of FDIC insurance. Be careful if you have a bunch of cash!

A LIFE SAVINGS NEARLY LOST

Twelve days after a bank closing in Hennessay, OK, in late 1985, only four FDIC employees remained at the bank to complete a payoff. By then, there were no more than a dozen uninsured depositors with whom we had not met. At noon, an elderly woman walked into the lobby and was shown to my office. We got right to business, and she explained that her husband had just retired after 40 years with a local farmers’ co-op. The couple had four accounts with the bank—a checking account with a few thousand dollars, a savings account with about $10,000, and two Certificates of Deposit, each for $100,000. One CD was in her name, payable upon death to her husband. The other was in her husband’s name, payable upon death to her. The bank had set up these two CD accounts so both would be protected with FDIC insurance. I told the woman that the CDs would be covered with FDIC insurance, but the other two accounts would not because they were set up jointly with her husband. She and her husband were each entitled to $100,000 of protection for the CDs, but they would lose the roughly $12,000 in smaller accounts. The woman sighed at losing $12,000, then told me that her husband had passed away on the same day the bank failed and she could not cope with any more bad news. I was shocked at this revelation because I realized that when her husband died, the CD in his name became her property. So, she was probably going to lose the other $100,000, which only seconds before I had told her was covered by FDIC insurance. I had no choice but to give her the bad news. She became extremely distraught at the thought of losing more than half of her and her late husband’s life savings. FDIC staff decided to consult a senior attorney in Washington about the matter, who asked the time of death. He explained that we were paying out funds based on the ownership at 3:00 p.m. on the day the bank closed, so if the husband was alive then, the insurance limits would cover both of them. I volunteered to call the woman to find out the time of death. The phone rang and rang. Finally, she picked up and I got the answer I was hoping for. Her husband had died at 10:15…p.m. So both CDs were, indeed, covered. I gave a thumbs up! --Robert C. Schoppe

I checked bankrate.com and decided to put my money in Ascencia Bank's money market acct., currently paying 5.35%. It has a higher star rating than Emigrant or ING and pays higher interest. I do worry somewhat about not having FDIC insurance on the amount over $100K, since I have substantially more than that in the account. I checked the bank's recent earnings report and they claim to have no exposure to subprime loans. Hope they're not liars like Countrywide. I considered parking my money in my Scottrade acct, since they pay 5% for amounts over 1M, but I wonder if it's really any safer there. Any thoughts?

cashman,

Being in a somewhat similar situation, I am planning to place all my cash in FDIC insured accounts with highest returns possible in multiple institutions (i.e. not exceeding $100K at a place). After the last weeks BNP Paribas news, I am sceptical about earning reports etc., I suspect most institutions have exposure to real estate, especially residential kind. Also, HELOC, credit card debt will all be impacted by real estate defaults. I saw S & L crisis from up close and if there is one thing I learnt, it is how irrational asset valuations can be.

I just saw an article that listed European banks that are exposed to the subprime mortage. One of them was Ing. It has 3.2 euro billions invested in subprime mortages through the ABS or 25% of its investments. Do you think this is still a safe bank?? I just transferred my savings to them. May have to look into a credit union!!

I like the National Mortgages News Online website. It lists the top ten subprime lenders' sales volume on a quarterly basis. Also does a year over year comparison.

I am VERY conservative (and probably a bit paranoid). I deal directly with the Federal Reserve Bank and have for years. Right now 6 month t-bills are paying a little less than bank CDs (even considering no CA income tax on the interest) but I can keep all my cash in one place and keep reinvesting it. I just space it out evenly across the year and each month the interest is deposited directly into my checking account. I'm retired so it adds to my other monthly income of pension, social security and an annuity payment. Of course, I have a local checking account and a small savings account (about $40K) at Washington Mutual paying 5%. I sleep well each night.

"small savings account (about $40K) at Washington Mutual paying 5%"

Might want to stay up a bit longer at night.

"Washington Mutual warns on subprime pressures"

http://rawstory.com/news/afp/Washington_Mutual_warns_on_subprime_08102007.html

Might want to stay up a bit longer at night

No need as it is FDIC insured. Just make sure it is a Savings Account and not some High Yield Money Market Account.

You think you get FDIC money in a week? They have all sorts of nightmare FDIC stories on calculated risk right now.

How do you turn this bold off?

Thanks for the advice, waiting hawk. I am somewhat aware of this, but I need checking and savings accounts somewhere locally. Where do you suggest? 40K, for me, is not that much, although I'm not fond of losing money...

condogrrl,

I saw 6 month T Bills are paying 4.88% APR. I think you can do better and be very liquid if you split your cash into $100K or smaller chunks and invest in top FDIC insured savings accounts. You will average above 5%. I can assure you FDIC is very prompt in repaying deposits in failed banks. You can consider them same as T Bills. Using the FDIC cover, I think you can expose yourself to higher risk and get better return. If you win, you keep. If you lose, FDIC makes you whole. What is there to complain?

High yield money market is not covered?

I have SDCCU and Wamu accounts. SDCCU has high-yield checking which is liquid and pays 5%. Their cd's pay 5.45%, and they have the best rates I could find locally.

I'm still thinking about one of the CDAR banks.

http://www.cdars.com/

You think you get FDIC money in a week?

I very much think so. The instant the bank can't pay you, it is considered a failure and if I remember from S&L crisis days, they arrived within 2 to 3 business days and gave out cheques. Of course, you may have to consider blizzards etc., but a week seems very long.

High yield money market is not covered?

Usually so, unless they clearly identify otherwise. The SDCCU high yield Checking account is covered. Usually, anything with the words Savings or Checking is covered. But always read the fine print or ask. I have never heard of a bank misleading to invest in non-FDIC accounts. (Customer stupidity is a different story)

Bold is

Off ?

What about

the italics

I am willing to give up a little interest by not having to run around town renewing my CDs or finding a safer bank to park them in when they mature. And, other than the Fed Reserve Bank, I want to be able to get my hands on the human who holds my money. Locally (San Diego) it seems World and San Diego National are the best rated banks by bankrate.com. And that changes from time to time. One thing that pisses me off is local banks offering higher interest rates to "new money" than my "old money." Banks are crazy to have me withdraw my 100K while they lure in a new 5K account. I don't want to play their games.

I have money in FNBO direct. they have 6% annual rate but I have been worried about this bank lately. I have to look at the risk exposure.

FNBO direct. they have 6%

Is it FDIC insured?  - Yes it is. Good one. Only problem is the high rate is till end of September.

BTW, does anyone know of any other FDIC insured Savings accounts that gives 6% or above APR? (I feel the bankrate.com is a pain)

nccoastalseller

SDCCU is covered by NCUA insurance (100K per SSN).

SDCCU CAEL rated 2 (1-5, 1 is best 5 is worst).

http://www.bankrate.com/brm/safesound/ca...

NCCoastalSeller,

Thanks for that info. I am a little perplexed by these ratios. Do you understand what these are? The 3 columns are for Q12007, all of 2006 and all of 2005:

Asset Quality:

Nonperforming Assets / Assets 0.11 0.16 0.07

Nonperforming Assets / Equity & Loss Reserves 0.92 1.38 0.55

Loss Reserves / Loans 0.27 0.32 0.26

They look rather large for non-performing/loss reserve.

nccoastalseller

I can't comment on the specifics of the financial statement.

I do wonder how often the ratings are updated.

Anyone in the banking world want to provide comments?

I plan on reading through this: (http://www.fdic.gov/regulations/resource...)

when time allows.

So, any thoughts about putting the cash with the big brokerage houses? They claim $25M in insurance from SIPC, but that's for securities. What about the cash? There must be lots of people out there that have millions in cash laying around. How do they protect it? It's too much of a pain the neck to split it out in 100K chunks to dozens of FDIC banks.

Does any one have any info on Mission Federal Credit Union?
How safe is that bank?

Gracie, according to the creditunionrate.com website, Mission Federal is number 34 on their top 50 list of credit unions in the nation.

Thanks.....for the info. We have one account there...thought I might move more funds over to that account.