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Author: Foolferlove Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35361  
Subject: Not happy! High interest CD 'taken' from me. Date: 5/11/2010 7:02 PM
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Just need to vent. My emergency money is in CD ladders (5 year maturity, 1 CD maturing each year).

2 of my rungs were at about a rate of 5.0%. And today the bank I have them with (held at Vanguard Brokerage) went under (R G Premier back of PR). So now I've lost that high rate which was otherwise 'locked in' for the next couple of years.

Sigh. A risk of CDs I had not considered when I bought them several years ago.

That's all, nothing I can do about it. Just wanted a sympathetic ear.

Carry on.

FFL
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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30825 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 7:38 PM
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Normally a CD is insured through Federal Deposit Insurance. You should get your money back, but the interest rate is up in the air, and it may take awhile. Y

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30826 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 7:41 PM
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Hi FFL,

A CD should be covered under Federal Deposit Insurance. That will cover your principal, assuming the bank in question had the insurance, which a properly licensed bank is pretty much required to do.
You expect another bank to take over the debts of the one that failed. Your principal should be safe, although it may take awhile to get it back, and the acquiring bank probably won't give you that high rate of interest.

Best wishes, Chris

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Author: jaroman Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30827 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 8:27 PM
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I had a CD through Vanguard at RG Premier too. Gone.
Another CD is gone also.
I guess a phone call to Vanguard may tell us where the money is.
The FDIC site didn't help me much.

It looks like RG Premier was taken by Scotiabank of Puerto Rico.
My other dead bank, Broadway Bank Chicago, is now completely taken by the FDIC.

Wow! That shot my latter also.

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Author: Foolferlove Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30828 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 9:51 PM
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thanks for the messages. I know that I will get my principle back, as a matter of fact, the principle is already in my account today (the actual 'failure' happened several day ago, but I didn't notice the transaction until I updated quicken today).

So it's nice to know that the FDIC has backed me up. But what I can't get back is another CD at 5%!

In the long run, a minor setback, but I'm still mildly peeved.

I had previously had some CDs with IndyMac bank which went under a couple of years ago. So I've been through this before. But at that time interest rate 'loss' was minimal.

As I said, live and learn!

FFL

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30829 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 10:30 PM
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If one bank is taken over by another, they have the right to call the CD, but you have the right to withdraw your money. I went about doing that one time and the new bank offered me a CD at an even higher interest than the one they were calling but the wanted it for 7 years. I was happen to comply.

I might say however, that E*Trade won't bargain. In fact they have told me that when my CDs mature, they will send me the proceeds.

brucedoe

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30830 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 10:32 PM
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Crossenfield,

You wrote, You expect another bank to take over the debts of the one that failed. Your principal should be safe, although it may take awhile to get it back, and the acquiring bank probably won't give you that high rate of interest.

Actually the FDIC usually acts very quickly. They will probably send out a notice to CD holders in just a day or two. But exactly what happens depends on whether or not the deposit accounts were sold or if they were taken over as part of a new federally chartered bank.

A newly chartered bank may continue the existing terms. When IndyMac went under, the newly chartered bank actually offered very good terms to try to keep depositor assets while it unwound some of its more problematic assets and looked for a buyer.

If the deposit accounts get sold, expect the new bank to offer "special" terms or offer to otherwise redeem the CD early without penalty.

- Joel

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30831 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/11/2010 11:48 PM
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Redeem without penalty, yes. But will they, to maintain good will, continue to pay 5% interest? I doubt it. Hopefully the OP will keep us informaed as to how this comes out.

Best wishes, Chris

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30832 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 2:07 AM
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Crossenfield,

You wrote, Redeem without penalty, yes. But will they, to maintain good will, continue to pay 5% interest? I doubt it. Hopefully the OP will keep us informaed as to how this comes out.

Actually after I wrote that I realized this was a brokered CD. The odds are those would get redeemed immediately regardless of your wishes.

- Joel

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30833 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 11:23 AM
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You probably saw his post that he already got his principal back.

CR

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Author: richinaz Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30834 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 12:41 PM
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I don't do much with CDs but is it possible that banks that offer higher than norm rates do so because they are in trouble?

I know PenFed (Hope I got that name right) often seems to have higher rates and haven't had any troubles but often there is a reason for the higher rates (they need or want deposits) and it is a risk you assume.

It isn't necessarily a bad risk since the money is insured, just an inconvenience.

Rich

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Author: hockeypop Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30835 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 4:12 PM
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FWIW, I was going to use a high interest rate checking account from a bank that turned up here. I might use this as a filter.

http://calculatedriskimages.blogspot.com/2010/05/unofficial-...

Courtesy of Doug Short at dshort.com

Hockeypop

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30836 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 5:31 PM
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richinaz

I think it can be sort of what you say. When E-Trade Bank first started getting into baking trouble, they used to offer some good rates, especially on their savings account But now, not only are their rates poor, but they are getting out of banking and will refund your money as your CDs mature.

Though PenFed always seems to have among the highest rates, they do come down and now at 3% APY on their 5 yr CD. I believe they will still give you a quarter percent bonus if you let your CD roll over. Their rate on savings accounts has always been zilch since I became involved with them.

brucedoe

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Author: brucedoe Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30837 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/12/2010 5:45 PM
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Boy, a very interesting list. Thanks for posting it.

brucedoe

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30840 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/13/2010 12:02 AM
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richinaz,

You wrote, I don't do much with CDs but is it possible that banks that offer higher than norm rates do so because they are in trouble?

That used to be the case before and just after the credit crisis. It's less so now.

About a year ago, the FDIC put certain caps in place that limit how high a "troubled" bank can raise interest rates. This was ostensibly to prevent banks from chasing depositors to temporarily improve their liquidity. There may have been some changes to this rule this January; but it's still in effect.

See Section 337.6
http://www.fdic.gov/news/board/May29no8.pdf
http://www.fdic.gov/news/news/press/2009/pr09082.html
http://www.fdic.gov/regulations/resources/rates/index.html
http://www.fdic.gov/regulations/examinations/supervisory/ins...
http://www.google.com/url?sa=t&source=web&ct=res&...
http://www.bankrate.com/finance/savings/fdic-reins-in-troubl...

If your bank offers you a rate that is above the amount listed in table in the 3rd link, they're either going to get a cease and desist from the FDIC; or the FDIC considers them well-capitalized.

- Joel

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Author: blacktreechaser Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 30843 of 35361
Subject: Re: Not happy! High interest CD 'taken' from me Date: 5/13/2010 10:01 AM
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What do you have if there are a bunch of R G Premier CD holders in your basement?


A whine cellar.

This happened before during the S and L collapse in the 80's...folks lost out on a lot juicier yields than 5%.

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