Dedicated to Deposits: Deals, Data, and Discussion

Countrywide Tries to Soothe Fears with National Ads and High Rates

POSTED ON BY

Countrywide Bank published ads today in newspapers around the country to downplay the impact of the mortgage problems to the safety of their customers' deposits. The ads also mentioned their 5.65% APY 12-month CD which is currently the top one-year bank CD rate that's nationally available. I had posted on this CD and their new savingslink account yield of 5.50% APY on Friday. Below is the content of today's ad:

STRAIGHT TALK FROM COUNTRYWIDE BANK.

In light of recent media attention, we'd like to offer some reassuring facts.
Countrywide Bank, FSB is a well capitalized federal savings bank with more than $100 billion in assets that offers depository products that are FDIC insured.

The highly publicized issues related to the mortgage market do not impact the safety of FDIC-insured deposits at Countrywide Bank.

The three major credit agencies give us investment grade ratings.

Our trained experts help customers with their accounts to maximize the FDIC protection available to them.

We serve our customers through 105 financial centers across the U.S., along with a strong Internet presence and call center.

Offering consumers highly competitive rates on savings products has always been core to Countrywide Bank.

Take for instance (as we hope you will) our Countrywide Bank 12-month CD which earns 5.65% APY*.

So, the future is bright. Which helps explain why we've become the third largest federal savings bank in the U.S.

If you'd like to learn more about Countrywide Bank, visit countrywidebank.com or one of our locations. We look forward to helping you maximize your savings. Thank you.

Sincerely

Timothy Wennes
President and Chief Operating Offer
Countrywide Bank, FSB

Countrywide Bank
CountrywideBank.com

You could look at this as a good opportunity to take advantage of some high rates. It might not be worth the worry, however, if you're skeptical of both Countrywide and the government. As I mentioned in my last post, you might want to review the Top 10 FDIC Misconceptions. This FDIC article points out that FDIC pays out insured deposits quickly and in most cases, the FDIC will provide each depositor with a new account at another insured bank. Also, the FDIC is required to pay 100% of all insured deposits including principal and interest. According to the FDIC, "Since the start of the FDIC in 1933, no depositor has ever lost a penny of insured deposits."
  Tags: CD rates, savings account

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Comments
8 comments.
Comment #1 by Anonymous posted on
Anonymous
Though the FDIC pays both insured principal and interest, it does not explain how it handles accrued but unpaid interest. For example, if the bank fails on the 27th and interest is normally due and payable on the 1st, does one lose the 27 days of unpaid and not yet due interest? The FDIC website is not clear on this--and I have gotten contradictory answers from FDIC information officers.

If is clear, however, that the FDIC fully pays accumulated actually paid interest (below the FDIC principal and interest limit) if that interest remains at the bank at the time of bank failure.

1
Comment #2 by Anonymous posted on
Anonymous
"Ascertainable accrued interst" up to the date of the bank failure is covered by insurance.

So, for an ordinary CD where they tell you the exact interest rate that you will get, yes the accumulated interest will be paid up to the date of the bank failure even if it has not yet been credited to the account.

But if you have an exotic CD, for example, a CD whose payout is based on the value of the S&P 500 index five years from now, the accrued interest may not be covered. This is because the value of the S&P 500 index five years from now cannot be ascertained as of the date of the bank failure.

Here is an FDIC ruling
http://tinyurl.com/26onkb
that brings this into perspective. It involves a hybrid CD that has a guaranteed interest rate plus a special interest payment based on the value of the Consumer Price Index at maturity. The FDIC ruled that the guaranteed portion of the interest will be paid until the date of the bank faulure, but the portion of the interest based on the CPI will not be paid, since the future value of the CPI cannot be determined.

1
Comment #3 by Anonymous posted on
Anonymous
I read someplace that Countrywide short term bonds are yielding as much as 25 per cent in the market. Anyone know anything about this and how does one buy?

1
Comment #4 by Anonymous posted on
Anonymous
Call up your favorite full service brokerage firm and open an account. They will be glad to help you buy any bonds that you may want.

But, seriously, if you have to ask this question, you are probably not ready to be speculating in bonds. The Fed may step in to rescue the big hedge funds, but if you mess up, you'll be all alone twisting in the wind.

1
Comment #5 by Anonymous posted on
Anonymous
Because I've always opted for the highest yields, I've had two banks so far "shot out from under me"; means the banks went belly up with my money inside. This is because the weakest banks often pay the most interest. I think one bank was in TX and the other was in AZ (not sure). I live in PA. Anyway, in both cases the FDIC was all over the situation. I had my money back so fast it made my head spin. In the case of the AZ bank I had a bit over $100K on the line because of accrued interest. Three years later the FDIC was STILL sending me money against the UN-insured portion of my account (the insured portion was paid to me instantly). Heck, I had already written off that money and still came out ahead. But the FDIC remained on the case relentlessly. The extra money they sent me was just icing on the cake.

1
Comment #6 by Cyclone (anonymous) posted on
Cyclone
It is likely that as the other assets of the bank were sold off (or other similar effect), the funds became available to pay out uninsured dollars. But besides that, glad to see you get the quick payout. I always thought as much.

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Comment #7 by Anonymous posted on
Anonymous
That's quite an interesting story about the FDIC coming through like it did. I wonder if the NCUA would have done an equally good job if your money had been in a credit union instead of a bank. I'm not so sure you'd have received the same treatment from the NCUA - not sure at all.

1
Comment #8 by Anonymous posted on
Anonymous
I wonder how today's Bank of America investment will impact Countrywide's stability and future.

1