opening a wamu and/or wachovia cd

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Submitted by djkimd on August 20, 2008 - 6:54pm

i know that both wamu and wachovia are 'walking zombies' that will/could be closed down any weekend soon. however, they are offering pretty high cd rates. of course so did indymac. my question is this- as long as the cd deposit (including anticipated interest) is below the fdic insurance limits, and the interest payments are compounding monthly, are there any other problems with opening a- say 12 month cd? of course, when/if the fdic closes the bank, you have to find a new place to deposit the funds. but until that happens, you are getting paid a higher rate. am i wrong in thinking that the most that would be lost is unpaid interest? if the payments are monthly, then at worst, up to 29 or 30 days of interest could be lost. and of course there is always the additional paperwork and effort to move the funds after the bank's collapse. what other problems are out there?

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Our family's trust has CDs at
Submitted by TuVu on August 20, 2008 - 7:43pm.

Our family's trust has CDs at both Wachovia and WaMu. I (trustee) bought a 12-month CD from WaMu about a month ago and our broker was nervous enough to advise me to invest $96,000 instead of $100,000 so that if WaMu fails, I will still get the $100K FDIC protection, even with the relatively high interest they are paying. FWIW, he is more worried about WaMu than Wachovia.

I should add that I am not talking about this being my small family's trust. It is the extended family trust.

Be very careful. There's lots
Submitted by peterb on August 20, 2008 - 7:44pm.

Be very careful. There's lots of talk on the street that both these places are in big trouble. Even if you're covered by FDIC, how do you know how quickly and easily you'll get your funds out? Why risk it? Go somewhere more solvent.

Although you never know what
Submitted by Diego Mamani on August 20, 2008 - 7:47pm.

Although you never know what may happen, Wachovia is in far better shape than WaMu. They are big and diversified. Yes, they made the huge mistake of acquiring World Savings for its subprime market share, but they are big enough to survive, at least on paper. WaMu, on the other hand, bet heavily on subprime loans (not unlike World Savings) and is not as strong or diversified as Wachovia.

I'd say, as long as your deposits are below the FDIC limit, you should be OK with either one.

peterb, thanks for your
Submitted by djkimd on August 20, 2008 - 7:53pm.

peterb, thanks for your comment. i think i read it on this site. if a bank gets taken over, that is usually done over the weekend. the fdic does what it does, and then the following monday it reopens and depositers who are insured can get their funds right away, up to the fdic limits. so the time risk is a matter of a few days.

Why risk it? Is an additional
Submitted by cr on August 21, 2008 - 10:17am.

Why risk it?

Is an additional 1% or less worth the hassle if the bank fails?

ING will give you 3.4%, Capital One will give you 4%, and the Fed is going to have to raise rates soon anyway.

Sure you could make an extra $900 or a year with that 1%, but you'd likely lose more than that in the time it takes to get all your money from the FDIC. That's if they remain solvent.

I wonder if you can short the FDIC...

Risk reward is your choice,
Submitted by peterb on August 21, 2008 - 11:07am.

Risk reward is your choice, of course. But these are somewhat new waters of default levels and the FDIC. Past performance may not be an accurate indicator for the future. This seems like a rather large chunk of change to risk when it's not really needed to risk. In a receeding market, capital preservation is absolutely critical. There's no upside anywhere right now and lots of downside happening and coming down the pike. Take an ultra defensive position and wait for the bottom. My opinion FWIW.

THE PROBLEM WITH WORD ON THE
Submitted by yeah im a banker on September 19, 2008 - 9:11pm.

THE PROBLEM WITH WORD ON THE STREEET... IS THAT IS ALL IT IS... WACHOVIA IS THE 4TH LARGEST BANK IN THE NATION.. NOT IN BRANCHES OR MTG. BUT ON ACTUAL ASSETS.. THEY ARE VERY WELL DIVERSIFIED. THE WORSE THING THAT COULD HAPPEN IS THAT IT COULD MERGE AGAIN... AND AS FAR AS THE BROKER GOES. IT IS AGAINST THE LAW FOR ANY BANK EMPLOYEE TO COMMENT ON THE STABILITY OF ANOTHER FINANCIAL INSTITUTION..

LETS NOT BE STUPID PEOPLE.

WHATEVER YOU SAY MR.
Submitted by Enorah on September 26, 2008 - 2:49pm.

WHATEVER YOU SAY MR. BANKER!

"Wachovia Slumps After WaMu's Seizure, Bailout Impasse (Update1)"

http://www.bloomberg.com/apps/news?pid=2...

fwiw, here is a follow up. i
Submitted by djkimd on October 3, 2008 - 10:03am.

fwiw, here is a follow up.
i did open up a 190k 12 month 5.0% cd (joint account)at wamu exactly one month ago. i just now checked. wamu says that the cd will be unchanged and monthly interest payments will continue until maturity in sep 1009. at 5.0%
best djkimd

uh, make that sep 2009. i
Submitted by djkimd on October 3, 2008 - 10:12am.

uh, make that sep 2009. i just checked. wamu is still offering the same cd terms. now, IF the fdic limits are raised to 250k, then it would be theoretically possible for me to get another 285k 12 or 13 month 5.0% cd (joint account)at wamu. the point being to stay below the fdic limits, including accrued interest of course. IF i had the funds, hey, 5.0% is 5.0%.