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Federal Reserve, the Economy and CD Rate Forecast - March 19, 2019
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Rate Cuts at Ally Bank
POSTED ON BY Ken Tumin
With all the talk of Ally Bank being pressured by the ABA to cut deposit rates, I was hoping that Ally Bank would hold steady on its rates for a while. Unfortunately, that's not the case. Ally Bank made some sizable rate cuts today. The savings account rate fell from 2.25% to 2.05% APY, the 12-month CD rate fell from 2.80% to 2.49% APY and the 9-month no-penalty CD rate fell from 2.50% to 2.30% APY. The largest rate cut was on the regular 9-month CD. That rate fell from 2.60% to 1.90% APY. Now there's no reason to choose this classic 9-month CD when the no-penalty version has a higher rate. The table below shows the changes of all the rates:
What if you opened a CD at Ally Bank yesterday? I've been told by Ally Bank CSRs that the rate doesn't lock until they receive the funds. It seems like the best way to open a CD fast is to have the funds in your Ally Bank's savings or money market account. If you find that they've given you today's rate rather than yesterday's rate, you may want to call and see if they can adjust it. FW member Savemeister mentioned in this FW thread that he had opened a CD on a Thursday in January at GMAC Bank and the rates changed the next day. He called, and within a few days they corrected the rate back to the rate that was in effect when the account was opened.
Even though these are big rate cuts, the rates remain competitive, and the 9-month CD is still a good deal. It's a good way to lock in the rate without the worry of losing liquidity. I described some additional details of this no-penalty CD on Monday.
The ABA Issue and the FDIC Rate Caps
I doubt these new rate cuts are low enough to satisfy the American Bankers Association (ABA). They probably would like to see rates as low as the Weekly National Rates and Rate Caps that the FDIC now publishes. That table shows the national average savings account rate of only 0.22%. As I mentioned in my Sunday post, the FDIC's new rules to restrict deposit rates of banks that are not well capitalized won't go into effect until 2010.
The FDIC really needs a table of internet-only accounts. Forcing banks to lower their internet account rates to the rates in the current rate tables would be a big mistake. I don't see how those banks would be able to keep any of their internet depositors.
Voice Your Concerns
Ally Bank has a special page where you can read the ABA letter and the response of GMAC's CEO. There's also a contact form that allows you to voice your concerns to the ABA. In addition, if you want to give your opinions to the FDIC on this issue, I included contact information in my ABA-letter post.
For more information on Ally Bank and the savings accounts and CDs, please refer to this post. Ally Bank deposit accounts are FDIC insured (FDIC Certificate # 57803).
Account/ OLD Rates/ NEW Rates/ Change/
Term APY APY BPS
Savings 2.25% 2.05% -20
MMA 1.90% 1.90% nc
No-Penalty CD
9-month 2.50% 2.30% -20
Classic CDs
3-month 1.70% 1.60% -10
6-month 2.10% 2.00% -10
9-month 2.60% 1.90% -70
12-month 2.80% 2.49% -31
18-month 2.60% 2.40% -20
24-month 2.75% 2.55% -20
36-month 3.10% 3.00% -10
48-month 3.25% 3.00% -25
60-month 3.50% 3.50% nc
What if you opened a CD at Ally Bank yesterday? I've been told by Ally Bank CSRs that the rate doesn't lock until they receive the funds. It seems like the best way to open a CD fast is to have the funds in your Ally Bank's savings or money market account. If you find that they've given you today's rate rather than yesterday's rate, you may want to call and see if they can adjust it. FW member Savemeister mentioned in this FW thread that he had opened a CD on a Thursday in January at GMAC Bank and the rates changed the next day. He called, and within a few days they corrected the rate back to the rate that was in effect when the account was opened.
Even though these are big rate cuts, the rates remain competitive, and the 9-month CD is still a good deal. It's a good way to lock in the rate without the worry of losing liquidity. I described some additional details of this no-penalty CD on Monday.
The ABA Issue and the FDIC Rate Caps
I doubt these new rate cuts are low enough to satisfy the American Bankers Association (ABA). They probably would like to see rates as low as the Weekly National Rates and Rate Caps that the FDIC now publishes. That table shows the national average savings account rate of only 0.22%. As I mentioned in my Sunday post, the FDIC's new rules to restrict deposit rates of banks that are not well capitalized won't go into effect until 2010.
The FDIC really needs a table of internet-only accounts. Forcing banks to lower their internet account rates to the rates in the current rate tables would be a big mistake. I don't see how those banks would be able to keep any of their internet depositors.
Voice Your Concerns
Ally Bank has a special page where you can read the ABA letter and the response of GMAC's CEO. There's also a contact form that allows you to voice your concerns to the ABA. In addition, if you want to give your opinions to the FDIC on this issue, I included contact information in my ABA-letter post.
For more information on Ally Bank and the savings accounts and CDs, please refer to this post. Ally Bank deposit accounts are FDIC insured (FDIC Certificate # 57803).
First, ABA filed the complaint with FDIC regarding ALLY interest rates not on behalf of the major banks, but on order from Ben Bernanke, who likes to keep the interest rates low, so that FEDs will finance the budget deficit with cheap money.
I can not give anymore details since that make jeopardize my job.
And then several days later, his bank slashes its CD and deposit account rates almost across the board. And Ally is NOT under capitalized, remember!!!
With that kind of "sticking up", I think I'll look to keep my money elsewhere.
If we spend the money on cheap Chinese imports, the same money that are supposed to stimulate the economy will wind up in China.
SAVERS DO STIMULATE THE ECONOMY.
I agree with posters above that savers and those who live off the income of their savings are being punished.
Bernenke, in a testimony to Congress sometimes back said that the interest rates the banks pay are to high and he wanted to keep them low for the same reasons the Anonymous, at 8:09 AM, June 05, 2009 said.
Thank you for choosing ALLY Bank. I do apologize for the inconvenience, however when you process an account on-line there are disclosure that have to be agreed to before the application process can begin.
In these disclosures is a rate disclosure which reads that our rates are subject to change daily and the rate you receive is based on when the account has been funded. These disclosures are placed to let you know that we cannot guarantee a specific rate for an account. Again I do apologize for the inconvenience this has caused you.
If there is anything further I can assist you with please let me know.
Please feel free to contact an ALLY Bank Customer Care Specialist with any questions you may have. Call us toll-free at 1-877-247-2559. We are open 24 hours a day 7 days a week for your convenience.
Thank You
Laura Thomas
Customer Care
ALLY Bank
I am neither of the above, but I find this so appalling, that I am going to curb my spending as much as possible. I will not be seduced or forced into buying goods or stocks to suit the interests of people who want to reinflate the credit bubble, and plan to be out of the way when it collapses even worse than last year. And if I have to, I'll put my money in foreign banks, so that the cheap institutions which started this debacle and are now fat and happy again with taxpayer money, won't be able to lend my 1% funds out at 6% rates.
Ally's ads are appealing, and the CEO's anti-ABA bravado is appealing.
But that's all an act. Guess that's what the focus groups told them to do. We shouldn't be surprised since the CEO used to be the CFO of big, bad Bank of America.
Of course, now that BofA savaged Countrywide's CD rates, I don't deal with them anymore.
Yay for part of my CD ladder making me renew my 12-mo Ally CD last week instead of this week :) Of course, if gold goes to $1500 this year I'll feel lame having dollars.
We are turning in a society where we should rob Peter to Pay Paul.
Disgusting at least to say.
Oh well.
In other news, my checking account rate also went down a half % and one of my rewards checking went down 1% recently.
The good news is many of my stocks have went up.
http://www.ally.com/privacy-security/online-privacy.html
I have opened a few 1 yr cd's with them over the past month and it took about 1-2 days to process the ACH. This time, it took 4 days ... and they debited the linked bank account at 7:15 am on a Saturday!!
It appears that they intentionally delayed the transfers on millions of dollars ... to pay their customers a lower rate???
Warning: DON'T OPEN ACCOUNTS AT ALLY BANK based on the posted interest rate!
No one likes these low rates--I don't--but I also realize that there's no better option.
Do you ignorant people realize that the more you save in this environment, the more layoffs there will be? Who do you think is going to borrow the money you're saving? If people aren't buying and using their money, who's going to hire anyone? If no company is expanding--due to lower consumption--then what good is all your money in the bank?
We all want higher interest rates, but the current economy certainly does not support higher interest rates.
If anything, interest will continue to go lower. Only when inflation truly starts to take off will interest rates go higher. We have no inflation in sight. So expect more lower rates.
You can try moving your money around all you like but all banks will lower their rates.
"If anything, interest will continue to go lower."
Obviously you haven't look at the treasury rates lately: "Treasuries tumbled, driving two-year yields to an eight-month high, as traders began speculating the Federal Reserve will raise interest rates later this year after a government report showed smaller-than-expected job losses."
--Bloomberg June 5th
The bond traders don't seem to look at it your way. Thus, please be careful who you call "ignorant". Besides, it's pretty darn rude on this site to do so anyway.
I guess someone needs to get refresher course on economics 101 again, instead pretending to know economics. You think like Ben Bernenke, "If economy is down,expect low rates".
That is total lies and not true.
These interest rates are total fabrications and not realistic nor they are set by market economy.
We, the normal savers, know when we are gouged and fleeced by the banks and the FEDs.
If there is no savings, the banks will have to borrow money from China to finance the production and all of the money needed for short business financing.
Since China is reluctant to buy our treasuries, FEDs are printing money and giving it to the banks almost for free, and that is what is killing the interest rates.
Normal economics is being ignored by the FEDs, not the savers.
Printing money is a total destruction of our savings, US Dollar and accumulated wealth.
In your "magic book of economics 101", please quote a statement where is written that printing money, false inflation numbers, stated interest rates by FDIC instead of free market is a solution to the problem.
If you can not respond back, we will all assume you are wrong and ignorant, not us the savers.
FEDs, FDIC and Treasury Dept., laugh at anyone mentioning economics 101.
They have been ignoring your book for over 2 years now and have nothing to do with anyone mentioning it or using it.
Where have you been for the last 2 years?
Looks like you have been ignorant of our failed economy. Over 30 Million people depend on interest income to supplement the meager SS and pensions. If their income is down the purchasing power is down so is the economy.
It is a catch 22, if banks are paying very low interest rates, people stop buying stuff so the businesses suffer and the economy.
If people feel down so is the sentiment on the economy. Savers are intermediary boosters to the economy and not like your faulty thinking.
Please explain the FEDs inflation rate of negative 4.5% without excluding the food, energy, and all of the 10,000 items not included in the inflation index but we use and consume every day.
Dear Poster,
Your thinking is quoted above and I believe you just answered your question by not being able to post real inflation index number but want someone else to correct your negative (unknown) with real (none existent) numbers.
The inflation numbers are made up to serve the FEDs agenda and not the people. Get real and don't mix apple with oranges.
Do you know how the inflation index is calculated?
If you do, please post it so we can take your point of view, until then, please stop being panicy and offensive on things you have no knowledge off.
I respect your analysis of the situation. You seem to imply that the more we save the less the interest rates will be on our savings. On the opposite side of the coin, you seem to imply that by spending more the interest rates on our savings will go higher. Good, good, please go ahead and start spending your money like mad so that we savers can get a higher interest rate. We all would appreciate it greatly!
You are either drunk or the real ignorant person.
Your comment contradicts your thoughts or reason for interest rates and the economy.
If spending money will revive the economy and not the savings, then we are ok, since the Government was spending money left and right for the last few years, we should be in a golden age by now and not in a rot like this.
You can not spend printed money and expect prosperity, but saved money will bring prosperity....got that.
Good, now go back to what ever you were doing before posting your nonsense.
Please ignore him (her), since he (she) has no idea what we are talking about and the his (her) posted thoughts are inaccurate.
On a side, when searching for bank accounts and deals, i was wondering if everyone clicks the search results from the search engines' sponsor ad, or from the list of searches? For example, type in ally bank in yahoo or google, do you click the slightly colored link to ally bank, or the others from the list? dont click on a blog's links, cuz then the blogger gets the dough.
You stated, “dont click on a blog's links, cuz then the blogger gets the dough.” This is true; however, if you are going to open an account at one of those banks, you might as well use a link from this website so that Banking Guy can get a very small commission. After all, doesn’t he provide us with very good banking information?
Thank you Banking Guy for your blog site.
When you exclude food, energy, transportation, utilities and thousands upon thousands of other items, you don't get the real inflation rate, but make believe numbers.
I know exactly what is in the index and will tell you just few of them:
Entertainment, resorts, mom and pop motels, skis, motor homes, sports ware and hundreds of items rarely bought or used and things that always go down in price when the economy goes down.
If you believe on inflation index then we might as well believe that Santa Claus really exists.
Well Sir, it is just that an Index like S&P 500. Let say the price of the stocks that we buy goes up and those stocks are made up of companies that sell us stuff that we use every day.
At the same time the price of companies that sell motor parts, body parts, railroad material, asphalt and so on their stock goes down in price even more.
What do we get when we average all those prices: zero or negative or positive, depending on the day.
And that is an example of index pricing. Means nothing, it is false and is inaccurate and the effect is not a real number.
Dear Saver:
Thank you for your recent comments, which will be forwarded to the appropriate staff internally. The Board of Directors of the Federal Deposit Insurance Corporation (FDIC) recently issued a final rule changing the way the FDIC administers its statutory restrictions on the deposit interest rates paid by banks that are less than well capitalized.
The Federal Deposit Insurance Act requires the FDIC to prevent banks that are less than well capitalized from soliciting deposits at interest rates that significantly exceed prevailing rates. The FDIC's current regulation ties permissible interest rates paid by these banks on some deposits solicited nationally to the comparable maturity Treasury yield, and ties permissible interest rates on deposits solicited locally to undefined prevailing local interest rates.
If you would like to read more about this rule, you may read the FDIC's press release announcing the change at www.fdic.gov/news/news/press/2009/pr09082.html , or the Financial Institution Letter sent to banks at www.fdic.gov/news/news/financial/2009/fil09025.html .
We hope this information is helpful.
Sincerely,
Consumer Response Center
Federal Deposit Insurance Corporation
Division of Supervision and Consumer Protection
Consumer Response Center
2345 Grand Boulevard, Suite 100
Kansas City, MO 64108
1-800-378-9581
Fax number 703-812-1020
Anonymous, at 4:39 AM, June 06, 2009 - I'm sorry to say the least that you are an IDIOT, for your information ACH stands for Automated Clearing House, you know what that means? It is a separate institution that deals with all transfers. When you set up a transfer from ANY and I mean ANY bank it goes through the ACH all the bank simply does is send the request the ACH takes care of the rest so if your ACH took longer than you thought it would IT IS NOT THE BANK's fault! I worked as a rep for Bank of America TRUST ME...
You all just seriously look for something to complain about! Take a hobbie!
holdings with different financial institutions as the concern over
bank failures was increasing.
Through the GMAC / ALLY transition they effectively reduced my 2.65%
APY to 2.6% APY on my CD's. This is BULL S$IT Ally. I am Finance
Major and I know how to calculate NPV equations.
ALLY will never receive another penny from me. I am staying with ING.
ALLY you are crooks!!!!