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Problems at HSBC's US Operations

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HSBC
HSBC's US operations had a difficult time last year, and reports of the problems are making the news (see TimesOnline article). According to the article, bad debt will be 20% more than the $8.8 billion anticipated by analysts and this is mostly due to the deterioration in the US business.

What will this mean for HSBC Direct? Bankrate.com did give HSBC Bank USA a 2 out of 5 safe-and-sound rating based on September 30th financial data. It'll be interesting to see how this changes on newer data. Keep in mind that HSBC is the third-largest banking company in the world (see Wikipedia article). Also, HSBC Bank USA is FDIC insured.

So I wouldn't worry. We'll have to see what happens to the rates after this 6% savings account promotion ends on April 30th. Hopefully, they'll be able to maintain competitive rates even after the promo like they have done for the past two years.

Please refer to my HSBC Online Savings Account review post for more info on the 6.00% promotion and details about HSBC Direct.

Thanks to the reader who emailed me the link to this article.

  Tags: savings account, HSBC

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Comments
43 Comments.
Comment #1 by Anonymous posted on
Anonymous
Did you ever hear about Refco. Used to be one of biggest brokerages out there. They had insurance as well. About 8B in assets. I used to have an account with them. It’s been about 2 years since they declared bankruptcy and I still waiting for my money.

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Comment #2 by SVG (anonymous) posted on
SVG
Banking Guy,

>>Also, HSBC Bank USA is FDIC insured. So I wouldn't worry.<<

I completely agree with you. I too find it unnecessary to worry.

A few of the sub-prime lenders have gotten / are going to get their fingers burnt a little. The losses for 'bad debts' will affect the overall performance of the financial instutute, however this has no potential impact at all on the products that are FDIC insured.

- SVG

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Comment #3 by Anonymous posted on
Anonymous
Lucky for me, yesterday I cancelled my application for a savings account with HSBC. Long story, but I began my application 1/27, and mailed a check at that time for the initial deposit. Time was wasted by their needing address verification (2 times), sending a money order for $1.00, even though my name was listed in the telephone book and I had lived at the same address over ten years. I called yesterday and they said the account was approved but my money would not be deposited for another 5-6 days with no interest occuring. The SR told me of the penalty for cancellation and I responded that I would put a hold on the check. Her supervisor said that they would return the check and close the account.

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Comment #4 by SVG (anonymous) posted on
SVG
Different Strokes for Different Folks

I'm sure a few will have good experience with HSBC (I did) and a few won't.

Quite often there are some requirements that will hinder a few, as against that a few others will get past them without any issues.


>>The SR told me of the penalty for cancellation and I responded that I would put a hold on the check.<<

HSBC could have posted a negative report about you on Chexsystem's debit report making your (banking) life rather difficult.


>>Her supervisor said that they would return the check and close the account.<<

Looks like your bad experience had silver-lining in the end. *smile*


- SVG

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Comment #5 by Anonymous posted on
Anonymous
They are NOTORIOUS for long holds and failures to credit ACH in a timely way. This is how they try to make money - by receiving your funds and then not paying interest until after a long delay. Thanks to Banking Guy, I guess we are finding out why HSBC pulls this stuff. But don't they realize it angers customers, and would-be customers, and drives them away?

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Comment #6 by Anonymous posted on
Anonymous
Yes, would be interesting to know how millions or even billions they put on hold every month. Probably just about enough to cover investment loses :)

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Comment #7 by SVG (anonymous) posted on
SVG
Anon,

>>They are NOTORIOUS for long holds and failures to credit ACH in a timely way.<<

A simple way to bypass this hold is to mail-in the deposit or to use an ATM to make the deposit (provided of course there is a branch of HSBC close to your location).

HSBC branch is very close to me.

- SVG

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Comment #8 by Anonymous posted on
Anonymous
Existing long time HSBC customers like me have had 0 issues.

HSBC for NEW ACCOUNTS ONLY does have restrictions. But after you are an established customer with them, everything is okay.

If you want high interest and can get to an ATM to transfer between Checking AND Savings when you need to, HSBC is the best bank hands down for depositors.

Get a LOCAL ATM Card, loads of branches locally, can transfer at ATM, highest rate around, all frills with linked accounts (FREE CHECKS, FREE BANK CHECKS, you name it), its the MOST Competitive offering of all the banks here if you have 15k and a SMART CHECKING PLUS PACKAGE combined with Online Savings.

HSBC is NOT REFCO and is NOT going out of business. They are still profitable and are are NOT GOING BANKRUPT. They have plenty of reserves as well.

HSBC is a HUGE BANK with billions of dollars of deposits. HSBC is fully accountable to the FDIC and you can look at all of the HSBC statistics.

If HSBC ever got to the point of me being worried about their financial solvency, I would be the FIRST ONE to say so.

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Comment #9 by Anonymous posted on
Anonymous
svg, for your information HSBC in the process of closing over 100 branches

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Comment #10 by SVG (anonymous) posted on
SVG
Anon,

>>HSBC is NOT REFCO and is NOT going out of business. They are still profitable and are are NOT GOING BANKRUPT. <<

E x a c t l y !


(... If one wants to profit from what HSBC is reportings as 'bad debt', then even that is possible. Just buy SRPIX or short XLF. However this is completely off-topic for Bank Deals Blog.)

- SVG

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Comment #11 by Anonymous posted on
Anonymous
I am not saying that HSBC going out of business, but if they will you’ll be last to know. By time you’ll hear about this on public news all accounts will be frozen and it will take long, long time until this case will come out of court system and even longer until you see your money from FDIC.

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Comment #12 by SVG (anonymous) posted on
SVG
Anon,

>>svg, for your information HSBC in the process of closing over 100 branches<<

Thanks for the info.

If they close the branch in Cupertino, CA ... Hmmm ... then I'll have to think about what to do ...

- SVG

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Comment #13 by Anonymous posted on
Anonymous
svg, I think it mostly in England.

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Comment #14 by scott (anonymous) posted on
scott
Anonymous said...
I am not saying that HSBC going out of business, but if they will you’ll be last to know. By time you’ll hear about this on public news all accounts will be frozen and it will take long, long time until this case will come out of court system and even longer until you see your money from FDIC.

9:57 AM, February 09, 2007

That's not true, You would have your FDIC insured funds most likely the next business day. FDIC is very quick

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Comment #15 by Anonymous posted on
Anonymous
Scott, can you please give me any example of it. How many billions of dollars under HSBC management? So, HSBC going to say – We going bankrupt, and FDIC going to come with billions of dollars on the next day without of any investigations. This is hard to believe.

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Comment #16 by Anonymous posted on
Anonymous
This is for HSBC US Operations.

Those branch closings are in the UK MARKET, not in the USA where they are indeed closing 100 branches.

The USA market in fact is not closing any branches as far as I am aware. It is OPENING NEW BRANCHES up however.

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Comment #17 by SVG (anonymous) posted on
SVG
Anon,

I'm not Scott. But I'll give my take.

>>How many billions of dollars under HSBC management?<<

The issue of how many billions are there under HSBC management is irrelevant. How many millions/billions are there under FDIC insurance @ HSBC is relevant.


>>So, HSBC going to say – We going bankrupt<<

In real-life no NYSE company has ever said 'We are going bankrupt' on one fine morning ! *smile* There are a lot of signs of troubles at publicly traded company available to general public (Yes ... even for the likes of Enron, the signs were present and known beforehand.)


>>and FDIC going to come with billions of dollars on the next day without of any investigations. This is hard to believe.<<

Various government bodies will be involved in investigation including the FDIC.

And Yes ... (in theory) FDIC indeed will come-up with sufficient funds to full-fill the obligation it has towards those insured (almost) overnight.

- SVG

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Comment #18 by Anonymous posted on
Anonymous
There are NO HSBC BRANCH CLOSINGS for the USA that have been announced.

100 BRANCH CLOSINGS ARE FOR UK.

There is a branch Ive passed that has an HSBC sign in front but they never broke ground yet to build it. It got a permit approved and it should be completed I would hope by year end.

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Comment #19 by Anonymous posted on
Anonymous
This list includes banks which have failed since October 1, 2000.

Bank Name Closing Date Updated Date
Metropolitan Savings Bank, Pittsburgh, PA February 2, 2007 February 2, 2007
Bank of Ephraim, Ephraim, UT June 25, 2004 December 31, 2006
Reliance Bank, White Plains, NY March 19, 2004 December 31, 2006
Guaranty National Bank of Tallahassee, Tallahassee, FL March 12, 2004 December 31, 2006
Dollar Savings Bank, Newark, New Jersey February 14, 2004 September 30, 2006
Pulaski Savings Bank, Philadelphia, PA November 14, 2003 July 22, 2005
The First National Bank of Blanchardville, Blanchardville, WI May 9, 2003 December 31, 2006
Southern Pacific Bank, Torrance, CA February 7, 2003 December 31, 2006
The Farmers Bank of Cheneyville, Cheneyville, LA December 17, 2002 October 20, 2004
The Bank of Alamo, Alamo, TN November 8, 2002 March 18, 2005
AmTrade International Bank of Georgia, Atlanta, GA September 30, 2002 September 11, 2006
AmTrade International Bank of Georgia, Atlanta, GA
Spanish Version September 30, 2002 September 11, 2006
Universal Federal Savings Bank, Chicago, IL June 27, 2002 December 31, 2006
Connecticut Bank of Commerce, Stamford, CT June 26, 2002 December 31, 2006
New Century Bank, Shelby Township, MI March 28, 2002 March 18, 2005
Net 1st National Bank, Boca Raton, FL March 1, 2002 December 31, 2006
NextBank, N.A., Phoenix, AZ February 7, 2002 December 31, 2006
Oakwood Deposit Bank Company, Oakwood, OH February 1, 2002 December 31, 2006
Bank of Sierra Blanca, Sierra Blanca, TX January 18, 2002 November 6, 2003
Hamilton Bank, N.A., Miami, FL
Spanish Version January 11, 2002 December 31, 2006
Sinclair National Bank, Gravette, AR September 7, 2001 February 10, 2004
Superior Bank, FSB, Hinsdale, IL July 27, 2001 December 31, 2006
The Malta National Bank, Malta, OH May 3, 2001 November 18, 2002
First Alliance Bank & Trust Company, Manchester, NH February 2, 2001 February 18, 2003
National State Bank of Metropolis, Metropolis, IL December 14, 2000 March 17, 2005
Bank of Honolulu, Honolulu, HI October 13, 2000 March 17, 2005

Banks do fail, but in HSBC's case, the margin is not even close to becoming a failing bank just yet.

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Comment #20 by Anonymous posted on
Anonymous
Svg, still would be nice to have a one example of overnight refund from FDIC. Do you know how much paperwork I received over past two years from court on Refco’s case? No one on this earth will give billions of dollars away without of any fight.

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Comment #21 by Anonymous posted on
Anonymous
According to FAQs on HSBCDirect website "HSBC is the second-largest financial company in the world and among the largest in the U.S." It is not 3rd largest!

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Comment #22 by SVG (anonymous) posted on
SVG
Anon,

>>Svg, still would be nice to have a one example of overnight refund from FDIC.<

Indeed it would ... however we don't ! (And perhaps it speaks volumes about how robust the US financial system is, that there was no need for such a pay-out for so long.)


>>Do you know how much paperwork I received over past two years from court on Refco’s case?<<

I don't. But I can guess !


>>No one on this earth will give billions of dollars away without of any fight.<<

Not quite ! Mr Buffet gave away 37 billion very happily to charity ! *smile*


Comparing HSBC to Refco is very very far-fetched.

- SVG

1
Comment #23 by Anonymous posted on
Anonymous
SVG, How do you profit from bad debts? What is SRPIX?

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Comment #24 by Anonymous posted on
Anonymous
Svg, as far as I know FDIC not a charity organization and Buffet didn’t give away his money to pay off HSBC’s debts :). And I am not comparing HSBC and Refco, but I am sure banks and/or brokerages will end up in the same court room with the same lawyers and the same judges. And it’s only optimistic thinking that you’ll get your money on next day if there are no examples of FDIC’s refunds in the past.

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Comment #25 by SVG (anonymous) posted on
SVG
Anon,

>>SVG, How do you profit from bad debts? What is SRPIX?<<


The way to profit from 'bad=debt's is to find the sub-prime lenders and to short their stock.

>>What is SRPIX?<<

It is a mutual fund that shorts REITs. REIT stands for Real Estate Investment Trusts - the companies that do business in real estate.

As I wrote before, discussing shorting or SRPIX on this forum is completely off-topic. Typically traders (yes - me) take advantage of these swings. It involves lots of risks. And there is absolutely no (zilch ... zippo ... zero) FDIC coverage for mutual funds.

- SVG

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Comment #26 by SVG (anonymous) posted on
SVG
Anon,

>>Svg, as far as I know FDIC not a charity organization and Buffet didn’t give away his money to pay off HSBC’s debts :).<<

True ! However you mentioned that no one on earth will give billions of dollars ... therefore I had to give an example (since I could). *smile*

>>And I am not comparing HSBC and Refco, but I am sure banks and/or brokerages will end up in the same court room with the same lawyers and the same judges.<<

Sure. I know. And since the comparison is not even apple to orange (may be apple to ... say a gold coin) it is hard to imagine if HSBC will ever need to face those particular judges.

>>And it’s only optimistic thinking that you’ll get your money on next day if there are no examples of FDIC’s refunds in the past.<<

Optimistic ? Nope ... I guess I'd say it is based on the trust I have in the US financial system.

- SVG

1
Comment #27 by Anonymous posted on
Anonymous
We've had money in a few banks or SL's that were about to go under and the Fed steps in and has another bank take them over. Don't know how it works but it always does and its a smooth transition. And your money is safe and usually stays with the same rate for CD's (Or they let you cash them.) The money market rate might fall.

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Comment #28 by Anonymous posted on
Anonymous
Comparing Refco to HSBC is like comparing apples and oranges. Isn't Refco a brokerage? which is not insured by FDIC and is not even insured by SIPC that I can see from the website.
The other curious thing is that Bauer Financial rated HSBC 4* based on the same sept 30 financial report so I wonder how different the criteria are between bankrate and Bauer.

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Comment #29 by Anonymous posted on
Anonymous
Anonymous said...
We've had money in a few banks or SL's that were about to go under and the Fed steps in and has another bank take them over. Don't know how it works but it always does and its a smooth transition. And your money is safe and usually stays with the same rate for CD's (Or they let you cash them.) The money market rate might fall.

.... Anonymous that is true when Banks are small. But if a bank like Citibank, BOA,Chase, WAMU, Wachoiva, Wells Fargo, even HSBC failed I think it would be hard for FDIC to find a buyer as these banks are almost to large to be bought.

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Comment #30 by Anonymous posted on
Anonymous
Yes, Refco was a brokerage, but your cash still insured, but not by FDIC. The reason I even talk about HSBC because I don’t like that three days scam transfer. Three days money in + three days money out (6days). I can get 5.00% interest in local Credit Union and I won’t risk a penny for extra 0.05% interest if I have any doubt that HSBC in trouble. With each 10K in 6 days transfer you’ll lose $8.22 and with extra 0.05% you’ll gain 5 bucks a year.

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Comment #31 by Anonymous posted on
Anonymous
>> Anonymous said...

>> Yes, Refco was a brokerage,
>> but your cash still insured, but
>> not by FDIC. The reason I even
>> talk about HSBC because I don’t
>> like that three days scam
>> transfer. Three days money in +
>> three days money out (6days). I
>> can get 5.00% interest in local
>> Credit Union and I won’t risk a
>> penny for extra 0.05% interest
>> if I have any doubt that HSBC in
>> trouble. With each 10K in 6
>> days transfer you’ll lose $8.22
>> and with extra 0.05% you’ll gain
>> 5 bucks a year.
>>
>> 2:31 PM, February 09, 2007

I don't think you are listening to what has been said. Use ATM or USPS or FREE CHECKING.

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Comment #32 by Anonymous posted on
Anonymous
What are you talking about? How long would it take to withdraw just 10K? 20 days. If you have 10 bucks with them it may work for you. And what should I do with cash put under my pillow or mail it to you for good advise. How long USPS usually takes? + how long does it take to clear your check?

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Comment #33 by Anonymous posted on
Anonymous
The largest bank failure in the US was Continental Illinois National Bank.
At the time it started to go downhill in 1981 it had $45 billion in assets. In comparison, the two largest banks at the time, B of A and Citibank had $118 and $104 billion.

In 1984 when the crisis came to a head, the FDIC could not find a bank willing to merge with Continental. To keep Continental open while they searched for a final resolution, the FDIC made a $2 billion loan and a group of 24 banks provided $5.3 billion in unsecured loans to Continental.

The final resolution had the FDIC buy $4.5 billion in bad loans from Continental and buy $1 billion in preferred stock.

Finding a merger partner is not the only resolution to a bank failure.

Most of these posts seem to imply that the value of a bank's assets falls from $x billion to $0 overnight. I really doubt that you will ever see that happen unless the whole economy collapses. A bank can become insolvent quickly, but that hardly implies that its assets are zero and that the entire insured deposit base must be paid out from the FDIC's funds.

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Comment #34 by Anonymous posted on
Anonymous
I am agree and I am sure FDIC are watching. However did you hear of Bakings Bank in England. I think in 1995. Bank collapsed over one person over one night and got sold for One dollar.

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Comment #35 by Anonymous posted on
Anonymous
>> Anonymous said...


>> What are you talking about?

Too bad you a too ignorant.


>> How long would it take to
>> withdraw just 10K? 20 days.

How?

Transfer 10k to FREE CHECKING & write a check.


>> If you have 10 bucks with them
>> it may work for you.

I have more than 80K & it works!


>> And what should I do with
>> cash put under my pillow or mail
>> it to you for good advise.

You keep it. Based on your lack of understanding of simple financial matters, I know you need it! :-)


>> How long USPS usually takes?

Are you new to US? Don't you know even this? What you obviously don't know is USPS does not take your money while it is delivering your mail. You money still stays in your bank. Unless you normally store it under the pillow! :-) So if your money is still in the bank it keeps on getting interest. Don't you worry, USPS does not take it! I assure you. :-)


>> how long does it take to clear
>> your check?

How does it matter? It is either at your bank or at HSBC in either cases it is getting interest.

If all this makes no sense to you, seek out some medical help or join an elementary school!

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Comment #36 by Anonymous posted on
Anonymous
First of all my checking account doesn’t earn any interest. But this is not a point. Point is this is internet banking dude. I don’t want to go USPS, I don’t want to write a check, I want to sit next to my computer and do my transactions on line. This is 21 century. I don’t know if I need to go to elementary school, but you probably finished yours about 100 years ago.

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Comment #37 by Anonymous posted on
Anonymous
Regarding the complaints on HSBC hold. I'm not the poster who suggested ATM/USPS or Free Checking but it took only 3 days from the time that I mail(USPS) my deposit check to HSBC for it to start earning interest. The check was already from a high yield account (5%+) so there was no interest lost while enroute.
As for withdrawing money from HSBC, there are several ways to do it namely originating the transaction from an external account that has a quick transfer time. I've heard good feedbacks on GMAC/E-Loan (next day availability). Personally I used either USAA or CapOne as my pull account. If I really want a same day pull I would use my brokerage account (4.96% APY). Or as the Free Checking option suggested, merely establish a HSBC checking account, transfer the money to it, usually it's available immediately and then write a check and deposit it back to your local bank (for example BoA @ 5.37%APY). I don't really understand why people are stuck on HSBC hold when there are so many work-arounds and none of them is that hard to undertake.

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Comment #38 by SVG (anonymous) posted on
SVG
Anon,

>>I'm not the poster who suggested ATM/USPS or Free Checking<<

Err .. I'm afraid I'm that poster.


>>but it took only 3 days from the time that I mail(USPS) my deposit check to HSBC for it to start earning interest. The check was already from a high yield account (5%+) so there was no interest lost while enroute.<<

Indeed ... I also have similar good experience.


>>Personally I used either USAA or CapOne as my pull account.<

I did not know HSBC allows pull directly from their e-saving. ... Interesting.


>>I don't really understand why people are stuck on HSBC hold when there are so many work-arounds and none of them is that hard to undertake.<<

Me neither. Bypassing the hold is too easy.

- SVG

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Comment #39 by Anonymous posted on
Anonymous
Why would you even bother to transfer from 5% interest to 5.05% interest? So you can make $50 a year on 100K or $500 on 1M. With this amount you can find much better place for your money, instead of any money market out there. I think point is to make some kind of money by doing all this transactions and to it fast and easy. Even if your time not important to you, with this kind of increase in interest it going to take you a few days just to break even with cost of your stamp :)

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Comment #40 by Anonymous posted on
Anonymous
Ummh, do people read post and process information anymore? Regarding the previous post on why bother to transfer fr. 5% to 5.05%. The OP was about the 6% promotion, so for 300K, it's an additional $750 for 3 months and then transfer the money out of HSBC to chase the next HY deal. And as mentioned before, there are many many ways to do without loosing a single day of interest in some case, you end up with double dipping on both ends of the banks involved. As for the time involved put some thoughts in setting up a 'system' and it takes less than 2 minutes to write HSBC a check and walk to your mailbox to put it in. Some people have a significant 'cash allocation' to manage besides other types of assets so this is part of the effort involved not unlike picking stocks or funds for the rest of the portfolio.

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Comment #41 by Anonymous posted on
Anonymous
Well, it hard to believe that someone who just wrote a check for 300K sitting and arguing with kids. You must be a very rich man or someone who wants to see him self as of very rich man. But hey congratulations on your allocations. Please take my advise and do not withdraw 300K by ATM. It may take some time. Thank you for making my working day shorter by talking to me. See you on Monday, maybe.

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Comment #42 by Caro (anonymous) posted on
Caro
How difficult would it be to add Bankrate.com's "Safe and Sound" rating for each financial institution listed on your national deal list?

In light of HSBC's problems, this might be a feature that would be useful/appreciated by your readers! :)

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Comment #43 by Banking Guy (anonymous) posted on
Banking Guy
Caro, when I get some more time, I'll look into adding the ratings to my weekly summary. In the mean time, I'll keep including the Safe and Sound ratings in my posts for each deal. I include links to many of these posts with the rates that I list in the weekly summaries.

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