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WSJ Article: Banks Wage Rate War For Deposits

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This WSJ article looks into the condition that we've seen this year in which banks are fighting for our deposit dollars. Interest rates on CDs and savings accounts have stayed reasonably high this year when you consider how much the fed funds rate has declined. Banks are in need of deposits to make new loans. The article also mentions another reason banks are so interested in attracting deposits:
Banks covet deposits because of this year's failures of IndyMac Bank, Washington Mutual Inc.'s banking operations and other institutions. Bank executives have been rattled by those seizures and the woes of beleaguered banks such as Wachovia Corp. and National City Corp., from which panicky customers yanked their money. Many lenders are now ratcheting up rates to shore up their deposits.

However, we may not see too many great deals from weak banks:
In recent weeks, federal regulators have intensified their scrutiny of bank deposits. Among other things, they are examining the rates banks are paying, according to people familiar with the matter. Regulators often consider rising rates as an indication that a bank might be in peril.

Perhaps that's the reason Downey Savings Bank and BankUnited are no longer offering great CD deals like they were in previous months.

Note, if you have trouble accessing the article, try accessing it via Goolge News. Thanks to the reader who emailed me the link to this article.


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