Dedicated to Deposits: Deals, Data, and Discussion

Indymac Bank's CD Rate Increase and Latest News

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Update 7/11/08: FDIC puts Indymac Bank into conservatorship. See post for more details.

Update 7/03/08: Indymac rates are jumping around. CD rates are down: 4.10% APY 1-year and 4.40% APY 3-year. There are new higher rates for large balances on the E-Money Market Account (up to 4% APY for $75K+).

Update 7/01/08: Indymac Bank just came out with some new CD specials. The 12-month CD is now up to 4.35% APY. There's also a 5.00% APY 36-month CD. Below if the full list of special CD rates and terms:

Term APY
6-month 4.00%
10-month 4.10%
12-month 4.35%
13-month 4.10%
18-month 4.20%
36-month 5.00%

Indymac Bank just raised the yield on its special 12-month online CD from 4.25% to 4.30% APY. The 6-month special CD yield remains the same at 4.00% APY. The minimum deposit is $5,000, and new money is required.

Please refer to my April Indymac post for more details about the CDs and my experience opening and closing an Indymac CD.

Indymac in the News

This Pasadena Star-News article which is titled "IndyMac appears close to collapse", may explain the lastest rate increases. As this recent LA Times article describes, depositors were lining up at some of its San Gabriel Valley branches to pull their money. Indymac stock closed today at 61 cents per share.

Some of the latest concerns were caused by a letter sent by Senator Charles Schumer to the FDIC and other bank regulators expressing concern about Indymac's financial deterioration. Indymac released a response to his letter on its corporate blog.

Schumer blames brokered deposits as part of the problem. He had made similar claims a month ago in regards to the failed bank ANB Financial. As I pointed out in this post, brokered deposits shouldn't be blamed. Indymac's corporate blog also makes this case.

The corporate blog post states that over 96% of their $19 billion deposits are FDIC insured. Indymac does admit that the letter and the related press coverage did result in a mini bank run in which about $100 million of the $19 billion deposits were withdrawn. So I guess we can thank Schumer for this latest CD rate increase.

As with any bank, make sure to stay below the FDIC limits (see my FDIC post). To review Indymac's financial details, refer to this FDIC page.

Thanks to the reader who emailed me news of this latest rate increase.

Other High Certificate of Deposit Rates

If you want the high CD rate with less worries about a bank failure, you can get a CD rate that's close at Wachovia. Please refer to my Wachovia post for details about Wachovia's new Featured CDs which include a 4% APY 7-month CD, a 4.25% APY 12-month CD and a 5.00% APY 36-month CD.

For more high CD rates, please refer to my Nationwide CD rate summary.
  Tags: CD rates

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Comments
27 comments.
Comment #1 by Anonymous posted on
Anonymous
Indy mac I think is skating on thin ice,stay under FDIC rules or you might pay the price.

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Comment #2 by marc (anonymous) posted on
marc
I like that their dividend yield is 123% on stock price of 62 cents. I would say the odds are so high of them going under that it might not be worth the hassle to put new money in with them, even under the FDIC, unless they really paid well.

1
Comment #3 by rjm (anonymous) posted on
rjm
Im sure this was touched on before, but what exactly happens if I own a CD with these guys and they get taken over by the FDIC.

Does my deposit STOP earning interest right away ?

Does the new bank decide to keep or make me break the CD ?

Im in the market for some CDs and was thinking of going with them simply because its easier than going down to a wachovia and dealing with the idiots in a branch.

I called and they cant fund a CD from my ING account at Wachovia.

She was sure but a higher up was supposed to call me back and he didnt...almost a week ago.

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Comment #4 by Banking Guy (anonymous) posted on
Banking Guy
This post from last year describes what happened when Netbank failed and ING Direct took over the CDs. The new bank does have the right to close the CD, but they can't charge you an early withdrawal penalty.

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Comment #5 by Anonymous posted on
Anonymous
Applied for CD online with Wachovia. Sent email responce and never received ANY REPLY. When I submitted the application online I got an error .

I think its safe to say that Wachovia as a bank is messed up. I am afraid now to put money in. Thank goodness I applied for a Featured CD and selected the wire or ACH fund option where Wachovia has to contact me. But they never have yet and so they don't have my money.

Will likely try Indymac instead as an alternative.

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Comment #6 by Anonymous posted on
Anonymous
Why does the FDIC not insure deposits if you buy CD's through a brokerage? I see IndyMac CD's on Vanguard's Brokerage site everyday and it states they are FDIC insured (under 100K of course). Where is Chuck getting this information about brokered CD's not being insured??

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Comment #7 by Anonymous posted on
Anonymous
I really think you should stop pushing Indymac and a viable choice for CD's. It's almost totally bankrupt and has become a penny stock! So stop it!!!!!!!!!!!1

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Comment #8 by Anonymous posted on
Anonymous
In my uneducated opinion IndyMac will not be in business at the end of July. Rates we been getting from IndyMac and Cwide are desparation rates. Imac stock at .62 from a 52 wk high of over 31 and in 2006 it traded at 48. The stocks of other big banks have also taken a crap.
close today 52 week
Bac 24 53
Key 11 37
Wac 15,50 53
Citi 16.75 53
Wamu 5 44
Nat c 5 34
L Bros 20 77

I sure hope FDIC doesn't have an empty lock box like Soc Sec does. I think many smaller banks have problems we never hear about. Make a good office pool on what bank will be the last one standing.

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Comment #9 by alexmoskalyuk (anonymous) posted on
alexmoskalyuk
That Pasadena Star News link generates a nasty 'attack site' warning in Firefox 3 for some reason.

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Comment #10 by O-Qua Tangin Wann (anonymous) posted on
O-Qua Tangin Wann
The US Government would never ever allow the FDIC to run out of funds.

The US Government can always print more money (higher inflation).

No one has ever pushed IndyMac.

Everything published is for information purposes only. Not to push any agenda.

Banking Guy is always fair and informative, always warning everyone of any dangers present.

~O-Qua Tangin Wann

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Comment #11 by Anonymous posted on
Anonymous
Wait....Indy just increased their 12 month apy from 4.25% to 4.30% a day ago and now they've bumped it again to 4.35%. Desparation is setting in and there will not be a bail-out by BofA like C-wide.
I'd stay away from these CDs.....

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Comment #12 by Anonymous posted on
Anonymous
"IndyMac Bancorp, Inc. felt the pain of a mini bank run this past week, thanks to a leaked letter from New York Senator Charles Schumer that questioned the bank’s solvency and led to widespread press coverage last week, the Pasadena-based thrift said in a filing with the Securities and Exchange Commission late Monday."

STAY AWAY!!!!!!!!

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Comment #13 by rjm (anonymous) posted on
rjm
I cant help but laugh at the idiot who continues to post STAY AWAY from a federally insured CD.

eVEN IF THEY GO under, worst case is one gets higher than money market rates on terms shorter than the CD.

Why not buy some longer term CDs here ?

What if they go belly up in 6 monhs ?

We'd get 5 year rates in exchange for our money only being tied up for 6 months.

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Comment #14 by Anonymous posted on
Anonymous
RE: Wachovia - I also applied online for a 1 year cd 4.25%. I did get an email response back within a day...there was some issue as to whether a checking acct is needed for that rate. The rep said NO, and the actual application I printed mentions this nowhere. I actually tried to open a small checking account, but they say it takes 2 weeks to MAIL ME (then why apply online?) the welcome kit...the CD rate lockin is only good for 10 days. I actually drove a long distance to a Wachovia Fin Center, who was supposed to be able to printout the CD Cert and take the deposit. The BRANCH MGR had no clue about handling a CD, nor the Corp. support she called. She would take the app and my check for 50K (gee thanks), but no CD would be printed nor the CD printed at the branch! DUMB. I'm glad I didn't use an ACH transfer to open the account. Anyway, as I had a valid application with ALL terms, rates etc we signed it and I Express mailed to Wachovia myself. I expect it will be handled fine....or mostly. I'l post back my good or bad experience!

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Comment #15 by Anonymous posted on
Anonymous
I can't help but laugh at the idiot RJM who continues to post why NOT to STAY AWAY from a federally insured CD at Indymac. Do some research clown - if they do go under all funds immediately get tied up and if you are lucky and they don't prematurely close out the cd early then you'll be waiting a heck of alot longer than your initial term to have the FDIC step in to get you your money back.

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Comment #16 by Anonymous posted on
Anonymous
I agree with the substance (if not the name-calling) of RJM's last post. Notwithstanding IndyMac's problems, it seems to me that taking advantage of these higher one-year rates entails no risk if the insurance limit is not exceeded. I recall last August when Countrywide was offering an above-market rate on its one-year term when it appeared to be in the throes of financial distress; everyone who bought those CDs was rewarded. Even if Indy goes down, insured deposits will be returned at a point when rates are likely to be higher than they are now.

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Comment #17 by Bozo (anonymous) posted on
Bozo
To: All
Re: Buying a CD from a troubled institution

If FDIC insurance rates were set based on a financial institution's solvency, you'd see these interest rates even out in a flash. The irony is, a potentially insolvent institution can offer much higher rates (to raise capital, duh?) with absolutely no risk. Worst case scenario, it goes bust, the FDIC swoops in, the assuming bank (if any) calls the CDs.

Now, if these flaky banks had to pay higher rates for their insurance (sort of like homeowners living on the edge of a tinder-dry forest with no fire hydrants near), they might not be able to get away with these rates.

Alas, until that happens, there is no reason, I repeat no reason, to avoid taking advantage of these rates. The worst that can happen is that the CD gets called when the bank fails, but you still get the interest through that date, plus all your principal back.

It's called "failure arbitrage."

Yours,

Bozo

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Comment #18 by RJM (anonymous) posted on
RJM
So is Mr. Stay Away short IMB stock and scared he might be WRONG ?

History shows us that in modern times, nobody under the FDIC limit has lost money.

And, if indeed IMB fails, it HELPS the CD depositor if he ends up getting a 3 year rate without having to tie his money up for 3 years.

But, brains arent required to post "STAY AWAY".

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Comment #19 by Anonymous posted on
Anonymous
STAY AWAY guy may be correct.
FDIC payout on Cds may exclude the interest payment.

Only the principal is insured and not the accumulated interest.

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Comment #20 by Banking Guy (anonymous) posted on
Banking Guy
Regarding FDIC insurance of accumulated interest, please refer to this FDIC article. From the article:

Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest.

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Comment #21 by Anonymous posted on
Anonymous
brokered cd's are special deals made with a bank by large investors who accept the risk for higher return. Do not confuse buying cd's thru a brokerage house with brokered cd's they are not the same. Bank's prefer not to use brokered funds as the cost of funds is high.

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Comment #22 by Anonymous posted on
Anonymous
The IndyMac management must be bi-polar; the July 4 rate on the one-year is back up to 4.35% APY. I have never seen such manic rate-changing from any other bank.

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Comment #23 by Anonymous posted on
Anonymous
Gee rjm, whose the idiot now?

1
Comment #27 by Boby (anonymous) posted on
Boby
Hello. I find your blog very interesting. I think that everyone had something to do with banks. It is hard to choose a good and reliable one. After so many banks I had to deal with I should say that Indymac Bank is the best one. I learned about it from www.****edconsumer.com. Although the feedbacks about the company were not very positive I still ran a risk and went there.

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