Dedicated to Deposits: Deals, Data, and Discussion

Large Rate Cuts on Countrywide Bank's Savings Account and CDs

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Countrywide Bank made several large rate cuts today. Its savingslink account yield dropped from 5.25% to 5.00% APY for balances over $10,000. The CD rates even had larger cuts. The largest cuts were on the 9 and 12 month CDs which had their rates cut by more than a percentage point to 4% APY. The yield on the 3 and 6 month CDs fell by 50 basis points to 4.75% APY. The rates on all terms over 12 months fell by one percentage point to 3.75% APY.

It looks like the effects of Bank of America's buy-out of Countrywide may be having an effect. But as I reported last week when the news about this deal was first announced, a Countrywide official had been quoted as saying they were planning to cut rates before this deal since "cash inflows have so greatly exceeded expectations."

Thanks to the readers who mentioned this new rate change in the comments.
  Tags: CD rates, savings account

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Comments
8 comments.
Comment #1 by Anonymous posted on
Anonymous
Disappointing, but I can't say I didn't expect it. I also noticed something mentioned about a new interest rate tier coming Febuary 8. This was on my statement. I have a feeling you will need a larger than 10 grand deposit to get the best rate.

Anybody know or hear anything about this?

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Comment #2 by Anonymous posted on
Anonymous
FNBO

9-month CD was 5.25%APY

now...
9-month ?4.26%APY

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Comment #3 by tu (anonymous) posted on
tu
See link below for WSJ columnist observation that investors are expressing skepticism that the BofA deal will actually get done.

http://blogs.wsj.com/deals/2008/01/18/countrywide-investors-foreclose-on-bofa-deal/

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Comment #4 by Anonymous posted on
Anonymous
Tu commented on a WSJ article about doubt of the deal going thru between CW and BAC. I beleive the orginal offer was valued at about $7 per CW share. Since BAC stock has declined the offer is worth less than $7. I saw a figure of $6.4? some place. Since CW stock closed today at $4.96 today the smart money must have spotted a fox either in or lurking near that chicken house. I wouldn't want to influence anone into buying or selling any of the stock involved of either BAC or CW but this chicken doesn't want to be in that chicken house. I beleive BAC has already lost a lot of value from the 2 billion they already invested in CW. I've heard the figure of 1.5 billion but don't know if that is correct. Anyway, it sure would surprise me if the marriage is consumated. Don't think they will throw good money after bad.

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Comment #5 by Anonymous posted on
Anonymous
The Feds will want this BofA takeover of CW to go through...and very fast, since if CW goes under, the Fed will have to pay out a lot of money under the FDIC to cover all of the insured CD's and Savings accounts, etc. Plus, the Fed will not want CW to go under, and if the BofA takeover falls apart, CW will most likely not survive.

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Comment #6 by tu (anonymous) posted on
tu
FWIW, I think there's little chance of BoA walking from the deal. Keep in mind that the purchase price is the equivalent of what BoA earns in 1-2 MONTHS. It's really a nothing for them.

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Comment #7 by Anonymous posted on
Anonymous
I don't think the Fed has much to say about this merger or buy out whatever you call it. Ever hear of shareholders. Banking Guy would know more about this than I do but I beleive shareholder approval would be required here. In a merger the surviving CO receives all assets and assumes all liability of the company that is being bought out. This is where I probally need Banking Guy as I think in a failure when the Fed takes the bank over its about the same as bankruptcy where the Fed would assume and guarantee all insured deposits first and then any thing left would go to over limit deposits, creditors, and bond and stockholers. As some one who has owned stock in several companies who went bankrupt there is very little or nothing left for stockholders. If the Fed shut CW down and then asked Bac to take over management Bac would not be assuming any unsecured liabilities. Banking Guy or someone please advise me I don't what I'm talking about here.

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Comment #8 by tu (anonymous) posted on
tu
WSJ article today re: background of CW/BofA deal includes the following statement:

"Countrywide's deposits from consumers, attracted by unusually high interest rates of more than 5% on certificates of deposit, grew rapidly in recent months, expanding by $2.3 billion in December alone. Countrywide could attract that money, despite its financial problems and $1.2 billion third-quarter loss, because the deposits are insured by the Federal Deposit Insurance Corp."

http://online.wsj.com/wsjgate?subURI=%2Farticle%2FSB120156712819123841-email.html&nonsubURI=%2Farticle_email%2FSB120156712819123841-lMyQjAxMDI4MDIxOTUyNjk3Wj.html

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