Dedicated to Deposits: Deals, Data, and Discussion

More Concerns about Countrywide

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This was an especially tough day for Countrywide. I wonder if we'll see any deposit rate increases like we saw in August when their credit problems started to make headlines. This CNN article summarizes the problems Countrywide had today. Problems included a New York Times report that said Countrywide fabricated bankruptcy documents, a pessimistic profit report by a Lehman Brothers analyst, rumors (that Countrywide denied) that the company was planning to file for bankruptcy itself, and shares of Countrywide falling 19.2%.

I cannot say how much risk there is in Countrywide going under. I always recommend to keep your deposits under the federally insured limits at any bank or credit union. For those with deposit accounts at Countrywide Bank, you may want to review what happened at NetBank last September when it went under. Here's the FDIC page on NetBank and here's one of my posts on the closure which includes many comments from readers sharing their experiences as NetBank customers during this closure. As is common when a bank goes under, the FDIC gets another bank to assume the insured deposits of the failed bank. In the case of NetBank, it was closed Friday, and by Monday customers had full access to their money.

Here are some of my relevant posts regarding Countrywide and the FDIC:

Related Posts

Comments
11 comments.
Comment #1 by tu (anonymous) posted on
tu
Although your advice about staying under FDIC limits is spot-on, I think the situation at Countrywide is very different from Netbank, on a number of fronts. The deposit-taking business at CW is essentially a sideline to their core business. Rather than outright failure, I think the more likely scenario is an exercise by Bank of America of its option to acquire CW.

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Comment #2 by Anonymous posted on
Anonymous
I think I worry more about the crap rate I might get if taken over by somebody like ING...

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Comment #3 by Vinny (anonymous) posted on
Vinny
If I were to open the high yield CD today, what would happen if another bank takes this over? Would I still get the 5.45% or would the new bank be free to change the rate I was receiving?

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Comment #4 by trinidon2k (anonymous) posted on
trinidon2k
Vinny, I think the assuming bank would probably just end the CD and give you the option to put the money in another account or CD or to withdraw the money. The terms of the CD with the failed bank would not continue.

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Comment #5 by Anonymous posted on
Anonymous
And you wouldn't be hit with a penalty if you decided to just take your money.

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Comment #6 by Ade (anonymous) posted on
Ade
Oh no! I have a yet better rate with them - 5.65% so if another bank takes over surely will cancel this and offer me less or...the door!!!

I wish this happened when all the other banks were offering those lip-licking rates! Now we'll take a loss... Adela

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Comment #7 by Anonymous posted on
Anonymous
Just finished reading Bloomberg's article re Countrywide - the sixth update thereof. Things appear ominous. I wonder if/when Countrywide fails what it will take down with it. This is bad stuff and I don't like it at all. I wish I had not opened my Countrywide CD but I did, a while back, so now I have to live with this situation. Don't anticipate losing money . . . . . but still I am uncomfortable. I've had two other banks fail with my $$$ inside. Never lost a dime. But in neither case was one of those banks as large, anywhere near as large, as Countrywide.

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Comment #8 by Anonymous posted on
Anonymous
Wall street rumor. BANK OF AMERICA to take over COUNTRYWIDE. The key word here is rumor. BAC investment in CW stock has already lost 1.5 billion in value. Will they pull their toe out of the water and dive in head first. Stay tuned.

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Comment #9 by grobe (anonymous) posted on
grobe
It sounds like more than just a rumor:
http://money.cnn.com/2008/01/10/markets/markets_0405/?postversion=2008011016

If Bank of America does take them over they would probably lower Countrywide rates to match BOA rates, wouldn't they? (if not simply merge completely)

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Comment #10 by Anonymous posted on
Anonymous
I think if BoA bought CFC, they will have to honor the existing CDs issued. Don't they?

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Comment #11 by Anonymous posted on
Anonymous
Rumor was true. BAC buying CW. Price seems to be about $7.00 per share. Since this is a buy out of a operating bank I would assume BAC would honor CW cd's without changing terms. Maybe Banking Guy could shine a brighter light on this than I can as I am sure many people are wondering what will happen with their CW cd's.

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