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The Plummeting Savings Accounts and CD Rates


This has to have been the worst week since I started this blog for savings account and CD rates. The 75 basis-point rate cut by the Fed on Tuesday was a shock, and banks have been quick to respond. Here are some of the recent large cuts:

I'm afraid we'll be seeing more cuts in the weeks to come, especially since we are likely to see another Fed rate cut next week. However, it may not be a 50-basis-point cut that many had been expecting (see Marketwarch article). I'll have a full list of updates including the CD rate cuts for tomorrow's weekly update.
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Anonymous   |     |   Comment #1
FNBO Direct still has a 5.05% rate. I hope it lasts!
Bozo   |     |   Comment #2
Timing is everything, I guess. I gave Alliant Credit Union $50,000 a few days ago. They are paying me 5.4% APY for two years. Today, you can borrow the same amount on a 3/1 ARM for less. Weird.

I will never be able to time the market.


larkin   |     |   Comment #3
Just checked the FNBO Direct site (11:48am ET)--down to 4.30%.
Anonymous   |     |   Comment #4
I can confirm, just got an email.

Dear (sad person),
As a result of recent decreases in market interest rates, your FNBO Direct Online Savings Account rate will now be 4.30% APY¹.
Anonymous   |     |   Comment #5
AmTrust Direct is still at 5.11% for 3 months. Just signed up yesterday to lock in the rate.
Anonymous   |     |   Comment #6
Alliant's CDs rates are now 4.65% (jumbo) (The savings account rate is still 4.85%) and FNBO new rate is 4.30%
mark   |     |   Comment #7
RateEdge just dropped from 4.85% to 4.45%.
H   |     |   Comment #8
WaMu online savings still offers a 4.75 apy. But, I expect them to lower it to 4.3% align with most banks.

Their only 6-month CD is 4.85%, not too bad.

Perhaps, it's time to jump back in the stock market if banks lower their rate below 4.5%?
Anonymous   |     |   Comment #9
Poor BankGuy.....
I have probably a dozen different accounts, and have been scrambling this week to keep track of how the big rate changes are affecting each one.
But, I'm only writing all this week's changes in pencil, because there will probably be another round of cuts by most institutions after the upcoming month-end Fed meeting.
But BankGuy... geez... you're tracking gotta be more than 100 savings, checking, CD, reward, accounts, etc etc etc. It would be enough to drive anyone CRAZY!!!!
But there is a lesson in all this: For anyone who can afford to lock up their funds for the longer term, now's the time to get out of MMAs and into those 5-6-7 year CDs at better than 5% before they all disappear.
Odds are, based on past interest rate trends, it's likely going to be quite some time from now (I'd bet some years) before we see the return of most MMAs breaking the 5% threshhold again.
-John in Los Angeles
GoldenGirl   |     |   Comment #10
Yes, I too, received the sad news from FNBO Direct via an email about the drop in their Direct Online Savings Account rate to 4.30%

Thank goodness I had the good sense to look in a 5.25% 9 mo. CD when they were offering it!
Anonymous   |     |   Comment #11
Quote, h :
"Perhaps, it's time to jump back in the stock market if banks lower their rate below 4.5%?"

I really think that is part of the Fed's game plan in order to prop up the sagging stock maket. Lower the rates low enoungh to force people to take their hard earned money out of safe cds and mm accts and put it into a risky stock market market. Senior citizens will almost always suffer in this situation and present economic environment.
Anonymous   |     |   Comment #12
Closed my Bank of America 'Defenders of Wildlife' account after it went below 3.00%
Anonymous   |     |   Comment #13
5% 5%, oh no, there goes my 5%!

you can get 5% by buying altria (mo) and a host of other companies + capital appreciation.
Anonymous   |     |   Comment #14
i just got massage from FNBO, it's dowa to 4.75%...
Anonymous   |     |   Comment #15
WaMu 7 month add-on CD (5.10%) will be available through Monday, 1/28 in branches (at least in NJ). WaMu Checking is required.

Bozo   |     |   Comment #16
To: Those who plan to bail on CDs and throw everything into the stock market, etc. etc.

Folks, you should always be diversified. Some stuff in cash, some stuff in stocks, some stuff in bonds, some stuff in real estate, etc. etc.

The point is to try for an average yield in ALL your stuff of 5% or better (anything over 5% is a gift, as I always say).

So, if your stocks average 5%, and your CDs average 5%, and your real estate averages 5% (hmmm, remember, "averages"), you average 5%, Right?

When you retire, you take out 4% per year. Your gains are 5%. It's called the "formula", the percentage used by endowments all over the world. It's not rocket science.

That's why I have always said: "anything over 5% is a gift".


ProfessorB   |     |   Comment #17
My strategy is to put less funds in money market savings accounts and more in stable stocks that pay dividends higher than the average money market APY.
glxpass   |     |   Comment #18
From Bozo:

"The point is to try for an average yield in ALL your stuff of 5% or better (anything over 5% is a gift, as I always say)."

I'm a novice about this stuff, but are you considering inflation? If not, I'd quibble with your average yield %.

I agree that diversification is important, but I'd caution that there's no simple rule to come up with optimum yield %, and how much of your money should be where.

There are many factors to consider, among them, years until retirement, retirement income needs, etc.

Sorry to take this OT, but I don't think there's any one magic number here.
Bozo   |     |   Comment #19
Comment to "glxpass":

Yes, I consider inflation, deflation, and all else. And, since I am retired, I consider what one needs in retirement. My point was simple. If you take OUT less from your nest-egg than you are putting IN your nest-egg, your nest-egg grows. Even when you are retired. That's why I shoot for 5%.

With regard to taxes, since my wife still works, we shunt all the gains into her 401K; thus, they are sheltered.

This is not rocket science, as I said.


Anonymous   |     |   Comment #20
It's official: FNBO just announced its new rate at 4.30%!
Anonymous   |     |   Comment #21
I heard an explanation this evening, the best I've heard so far, re what gave rise to Bernanke's panic, an angst that has meant loss of interest income for us all: Regardless we did not learn of it until several days later, apparently Société Générale became aware of their catastrophe last weekend. They began on the MLK holiday (on Monday) to try to unload their huge quantities of unwanted stock, in an effort to regain some footing for the bank. It was a shaky market to begin with, in Europe, and our markets were closed here. Bottom line everyone knows what happened, or what appeared to be happening. IMO the Société Générale nightmare wasn't the straw that broke the camel's back . . . it was more like the pallet of concrete blocks that took out our beloved camel. I believe Gentle Ben was not fully aware of the Société Générale trigger until AFTER he already had dropped his 75 basis point bomb on us. The bank was flying under the radar to the extent possible, trying to unload their crap as quietly as they could to hold up prices. It's JMHO, but I believe Ben way over reacted. He did not allow time for something like this to become known. He just dropped his fat nuke on us all and went back into his hole. I'm betting he drops some more ordinance this coming week as a cover, to suggest the 75 was not a mistake. So much for gradualism at the Fed.
Anonymous   |     |   Comment #22
That is just why people like us depend on insured CDs yielding a reasonable rate of return for income rather than trust the stock and bond markets. Too many hidden secrets and back door transactions. By the time the general public is made aware of such things, it is too late to act.
ShraZZy   |     |   Comment #23
Emigrant Direct 4.30%
WAMU CDs all dropped. 4% 6M now
saving square 4.8%
FNBO Direct 4.3%
Anonymous   |     |   Comment #24
Ben said "I will not accommodate the stock market", He did.
Ben said "There is no inflation bigger then 3%", is more likely or actually close to 8%.
Ben said "Trust me I will keep an eye on inflation", he did by telling us with the other closed eye.
Ben said "Economy is in good shape", but was cutting rates left and right like there is no tomorrow.
Ben said "We, USA needs to save money", after he butchered the interest rates, who likes to save.
We can go on and on pages and pages like this, but the bottom line is: Ben has no longer valid
say on my ears. I will just ignore his speeches.
Anonymous   |     |   Comment #25
I agree about the Ben comment, his
credibility is down in the pits.
Anonymous   |     |   Comment #26
And FNBO's e-Savings from 5.05% to 4.30%
Bozo   |     |   Comment #27
To: All who Love Ben Bernanke (joke)

Remember, Ben Bernanke was brought to you by George Bush, you know, the same guy who might happen to be President for a tad longer. The same guy (Bush) who has a former head of Goldman Sachs as his Treasury Secretary. Don't get me started on Cheney, but you get my drift.


Anonymous   |     |   Comment #28
Zions Deseret Money Market Acct top tier rate has dropped to 4.51%
Anonymous   |     |   Comment #29
That Société Générale horse swoggle wasn't chopped liver. It was a $7B event. So, yeah, it could have caused more than just a minor ripple in the markets. But I don't care how unusual and unexpected it might have been. Bernanke should have known what was going down. He should have based any rate cut on certifiable market activity, or lack thereof, and not on activity brought about by a one-time transient event. What he did was a big deal that hurt a lot of people. There was no room for the kind of ridiculous error he made. This is why Greenspan's gradual approach was so much better. Bernanke lacks experience and is not qualified to hold his position. He took a huge divot out of my financial hide, I can tell you that, and I am ****ed. The guy needs to resign.
SVG   |     |   Comment #30


    >>Remember, Ben Bernanke was brought to you by George Bush, you know, the same guy who might happen to be President for a tad longer.

Remember George Bush was brought to you the second time by ... well ... perhaps by the guy/gal in the mirror, his/her friends, relatives, co-workers, neighbours, fellow citizens ... I'm sure you get my drift. *smile*

Bottom line - There is no point in putting the blame (if any) at the feet of an individual. We all are a part of this society/economy and should take collective responsibility for the blame (or benefit).


SVG   |     |   Comment #31

Banking Guy,

Provident CU has lowered their 16mo and 60mo yields to 4.65% APY (old 5.01%) and 4.75% APY (old 5.01%) respectively.


SVG   |     |   Comment #32


I guess there is hardly any support on this blog for the action our Federal Reserve is taking on our behalf to fulfill its dual mandate that we have charged it with.

I, for one, am happy to note that our Federal Reserve, is acting to save/support/sustain our economy. I am quite satisfied with the action the Federal Open Market Committee is taking to guide our monetary policy.


Anonymous   |     |   Comment #33
It's an interesting contrast, Bernanke's nuclear approach vs. Greenspan's gradualism model. It's worth pointing out Bernanke was not Greenspan's choice of successor. Bush did that. Bernanke is a young man, unseasoned in his lofty position; a man with much to learn. Sadly, his lessons are coming at our expense. As for blind loyalty, well, that kind of silly thinking was discredited years ago. This is supposed to be the big leagues. Regrettably, after last week, it appears to be more the Bush leagues. Bernanke was shown up by some no-account, wet-behind-the-ears, kid trader at a bank in France, for goodness sake. It's pathetic, and would be funny, had we all not lost so much money.
Anonymous   |     |   Comment #34
Well good for you, SAV, but it appears that most of us have an opposing point of view of the Fed and the present direction of interest rates.
SVG   |     |   Comment #35


While we are on Dr Ben Bernanke, here are some quotes from our elected representatives.

Senator Richard C. Shelby (Republican) Chairman of U.S. Senate Committee on Banking, Housing and Urban Affairs: 'Dr. Bernanke is more than an esteemed academic. Dr. Bernanke served with distinction as a member of the Board of Governors in the Federal Reserve System. This experience gives him an inside knowledge of the Federal Reserve and also financial markets.'.

Senator Charles E. Schumer (Democrat): 'We need a careful, non-ideological person who understands that the Federal Reserve's main job is to fight inflation, and Ben Bernanke seems to fit that bill.'.


Anonymous   |     |   Comment #36
Wall Street wants our money, period! It's a fool's game, where our gov't doesnt't want us to save, rather to increase our debt.

Why should we be forced into a rigged market? The rich get richer, as the middle class gets wipped-out!

Sorry for the rant, but I am sick and tired of our gov't causing bubbles, and we the savers have to pay for them.
Anonymous   |     |   Comment #37
So you're sick & tired of the government. Why don't you convince enuf people by November 08, to change it?
Bozo   |     |   Comment #38
When I get real get frustrated, and have nothing better to do, I switch on my MusicBox and turn on Semper Fidelis. I crank the volume up so high I blast out the cat.

Luckily, we're on an acre, so I don't get turned in by the neighbors.

An acre, in Northern California, now that's a parcel.


Anonymous   |     |   Comment #39
I want to associate myself with the first poster, above, who mentioned Société Générale, while throwing in an important correction to the person who followed up on that first post: Sir or Madam, it was not a $7B event, as you stated. $7B, give or take, was the amount of the loss sustained by Société Générale. More important to all of us here, they sought starting on MLK day to unload roughly $80B worth of securities. That's eighty Billion dollars in stock, dumped onto the market on a day the US markets were closed!!! Did prices plummet? Of course. Should Bernanke have known what was going on? Yes, he should have known. Did he know? My sources indicate he did not know the reason for the price decline at the time of his conference call with other Fed members, the outcome of which was the precipitous rate drop. Make of all this what you will. My principal point is that it was an $80B event on Monday, and not a $7B event as stated earlier. That's a critical and decisive difference. The earlier post grossly understates, by more than a factor of ten, the size of the Monday Société Générale dump. Also as a footnote, I agree with Banking Guy and the (first) earlier poster that Bernanke will drop interest rates again this coming week. It's a bad time, a very bad time, for savers.
Anonymous   |     |   Comment #40
Very bad time for savers, indeed!

And, our government keeps telling us that we have to save more for our own retirement.

Of course, that was before the stock market started going south. Now our government is tell us savers that we need to spend more.

Go figure.
Anonymous   |     |   Comment #41
I have tried my best not to get on my soap box and post here but cannot resist any longer. To the posters who said its a bad time for savers I say there is no bad time for savers. Maybe its not as good as it was last week or last month or last year but if you are saving money you are not in bad times. What about the person who is paying the interest. would you sooner be getting the interest or paying it. We have too many people who see the glass as half empty. Look for something positive. Its out there. Pfizer is paying a dividend 5.60% . I bought some perferred stock this week that pay 6.50%. The perferred and Pfizer both qualify for the 15% tax rate. I bought a muni bond that pays 5.10% tax free and a few shares of a canadian royality trust that pays 14%. These are allturnatives not recommendations. Everybody has different circumstances and should invest accordingly. There is risk in investing and is not for everybody. But I do think more people should see the glass as half full. I just came back from the store where I went to buy a steak for dinner. I took the risk of being killed in a car accident but if I was going to have steak I had to take that risk. The steak cost $10.00 per lb when just a couple of years ago I could have bought it for $6.00 per lb. Should I **** about the $10.00 while I'm eating it or smile and enjoy it because I had the $10.00 to buy it. I'm 73 years old and my glass is still half full. In those 73 years I have been thru some bad times and beleive me these are not bad times. Guess it is time for this old man to get off of the soap box and eat my steak while I still have teeth. Hope the spelling was not too bad.
SVG   |     |   Comment #42

To 73-year old man,

Good post ! I like your positive attitude of glass half-full.

    >>I bought some perferred stock this week that pay 6.50%. The perferred and Pfizer both qualify for the 15% tax rate. I bought a muni bond that pays 5.10% tax free and a few shares of a canadian royality trust that pays 14%.

Marketplace is always full of opportunities. Vanguard CA Long-Term Bond is paying tax-free yield of 3.94%, which translates to 6.30% for those in 28% federal tax-bracket. And translates to 6.84% for those in 33% tax-bracket.

... Enjoy your steak !


Anonymous   |     |   Comment #43
Obviously we could argue high rates verses low rates for ever. With rate swings, some people gain, some people loose.

And there are always thoses that can not afford $10 steaks, nor afford to risk their money in the stock market. To those that can, good luck. To those that can't and depend on interest earnings from cds and mm accts., sorry, the Fed seems to be compelled to lower the rates in order to prop up the stock market to soften the blow to the gamblers.
Anonymous   |     |   Comment #44
I read it here first. But now I'm also hearing commentators, several of them, referring to Bernanke's having acted in haste, prompted by market activity which came as result of a fraud, rather than by natural market activity. This is bad for our country. We need a more temperate, a more seasoned hand on the financial tiller. The way Bernanke did what he did was irresponsible. One would hope he might apologize for his error, and for the damage he has done. That's not going to happen. God save us from such incompetence in this very powerful man.
Anonymous   |     |   Comment #45
What did Bernanke do? I thought 12 members of FOMC voted unanimously for rate cut.

Give names of 12 more temperate & seasoned people instead of once we have currently have who are willing to serve on FOMC.
Anonymous   |     |   Comment #46
12 people did not vote for the rate cut.

William Poole did not vote for the cut and has been pretty consistent in opposition to what the current fed is doing. Last year when rates were kept steady he was pushing for a raise in interest rates.
Anonymous   |     |   Comment #47
This is for Anomymous who posted at 9:31 1/27/08. You seem to want to blame the STOCK MARkET for interest rates going down. The market was doing just fine until your BANKERS ****ed the whole system with their lending policy. As long as they could keep lending they could pay you more for your deposits. They could stand in front of the bank with a fist full of money and tell everybody that came by that we have money if you want to buy a house. We don't care who you are, what your income or assets are , or if you can make payments cause we are going to sell your loan to someone else. While we are selling this loan making our prifit up front we can probally sell some more CD'S and then we can go out front again and maybe this time we will have enough to catch two fish. And since you seem like a nice guy we will loan you 125% of the value of the house so you can get all new furniture for the house you can't afford and won't be able to make payments on. Of course we will keep enough cash on hand to pay the bank and investment CEO"S large retirement and severence packages for causing this mess. The FED RES let this go on but if you want to blame them you need to go back and include Alan as Ben inherited some if not most of this problem from him. I agree older people with tight finances should not be in stocks. But any young person who is trying to save and get ahead should own some stocks as long as it is not money they will need in the short term. BOZO says to diversify and I agree with that i00%. I like to think in terms of 8% rather than 5% but he seems to know what he is doing. I guess the reason I could afford that $10 steak is because I didn't buy a house I couldn"t afford with one of those 125% loans. By the way, I have several CD'S that mature in the next 24 months so I will have to settle for lower rates also. I guess I will accept whatever rate can be had at the time or look for an allturnative with a little more risk. Whatever, life goes on. I did manage to chew that steak with what teeth I have left.
Anonymous   |     |   Comment #48
"I guess there is hardly any support on this blog for the action our Federal Reserve is taking on our behalf to fulfill its dual mandate that we have charged it WITH."

A man of your obvious intellect would know that you should never end a sentence with a preposition:)
Anonymous   |     |   Comment #49
I disagree completely. First, SVG is self evidently a woman, not a man as you suggest. And second, women of her intellect end sentences any way they darn well please!

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