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Just checked that Countrywide Bank (part of the Countrywide Financial Corp.) is offering FDIC insured 5.65% APY online one year CD.

Anybody care to comment on the offer with the backdrop of the crisis going on at Countrywide Financial Corp?

TIA.

-DU
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Just checked that Countrywide Bank (part of the Countrywide Financial Corp.) is offering FDIC insured 5.65% APY online one year CD.

Anybody care to comment on the offer with the backdrop of the crisis going on at Countrywide Financial Corp?


If it is FDIC insured, you should get your money back, even if they go broke. But you can probably find a 1-year CD elsewhere pretty close, so it may not be worth the risk.
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Supposedly, the bank has a "firewall" between it and the loan company. If the loan company goes bankrupt, presumably that will not affect the bank. At any rate the CDs are FDIC insured.

brucedoe
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"Anybody care to comment on the offer with the backdrop of the crisis going on at Countrywide Financial Corp?"

I put my money there last week. Worse case scenario would be for them to file for bankruptcy, and some government agency taking over and handing your money back to you before the 1-year term date. Chances of that happening are slim to none, in my humble opinion (knock on wood).

As for any FDIC deposit, keep it under $100K (just in case).
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Has anyone actually been thru the situation of bank going bad? What happens? Is your money tied up for awhile?
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Has anyone actually been thru the situation of bank going bad? What happens? Is your money tied up for awhile?
___________________________________________________
It happened to me a long time ago.

The bank "failed", it was announced, over the weekend,and opened Monday mornging as a subsidiary of the bank that had taken it over.

The FDIC had been orchestrating the thing for some time.
Even if they do end up owning the bank for awhile, the'll end up selling it to some other bank in a very short period of time.

Sometimes they sell "selected assets" to the new bank, which agrees to assume the liability for deposits. And the FDIC ends up holding the REALLY BAD loans.

Bill
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It happened to me a long time ago.

"The bank "failed", it was announced, over the weekend,and opened Monday mornging as a subsidiary of the bank that had taken it over.

The FDIC had been orchestrating the thing for some time.
Even if they do end up owning the bank for awhile, the'll end up selling it to some other bank in a very short period of time.

Sometimes they sell "selected assets" to the new bank, which agrees to assume the liability for deposits. And the FDIC ends up holding the REALLY BAD loans."

Bill



Thanks Bill,

So, there's really not anything to worry about if your deposits are under the FDIC amounts for regular and retirement accounts. You wake up one morning and everything is the same except the name of your bank.
That's good to know. It would almost have to be that way to keep depositors confident and thus preventing runs.
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So, there's really not anything to worry about if your deposits are under the FDIC amounts for regular and retirement accounts. You wake up one morning and everything is the same except the name of your bank.
That's good to know. It would almost have to be that way to keep depositors confident and thus preventing runs.

________________________________________
WELL,,,,that's if everything works right. It did in the case I experienced. I can recall other events where it took longer to resolve.

If they can't find a buyer, the bank usually continues in business, a la Chapter 11, as a "debtor in possession", with the FDIC as receiver. The smoothness of those deals can vary.

But, if you're under the $100K insured amount, ultimately you will get your money out.

Bill
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I don't think there is much to worry about, but for a few bucks why bother. Assuming you can only get 5.25% somewhere else (I think you can actually do better than that), is the .4% worth it? Even on $ 100,000 there is a difference of $ 400 or more likely $ 150. If you are the least bit worried, then why bother? Is 5,650 per year that much more than $ 5,250?
Norm
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jdb52,

As Wradical details most of the times the bank closes and the assuming institution (one that buys the old bank) will open the next business day with just a name change. You probably will not even know until you get some mail announcing the change.

Sometimes there is no buyer found by the time the chartering agency shuts down the bank. In that case the FDIC will be appointed as receiver and will either:

1) Shut the bank down and disperse the insured portion (usually available the next business day) and provide receiver certificates (IOU's) for the unisured. This portion is exposed to loss so make sure you maximize the insurance.

2) Operate the bank until a new buyer can be found.

In any of the three outcomes your FDIC insured portion will most likely be available the next business day.


d(Next Day)/dT
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But, if you're under the $100K insured amount, ultimately you will get your money out.

How much interest is paid on the account between failure and "ultimately"?
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How much interest is paid on the account between failure and "ultimately"?

Not much because ultimately is pretty darn quick:

How long does the FDIC take to pay insurance on deposits after an insured bank fails?

Federal law requires the FDIC to make payment as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. Deposits purchased through a broker may take longer to be paid because the FDIC may need to obtain the broker's records to determine insurance coverage.


Source: http://www.fdic.gov/deposit/deposits/insured/faq.html#general
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Federal law requires the FDIC to make payment as soon as possible. Historically, the FDIC pays insurance within a few days after a bank closing either by establishing an account at another insured bank or by providing a check. Deposits purchased through a broker may take longer to be paid because the FDIC may need to obtain the broker's records to determine insurance coverage.

I think the real issue would be if there is such massive bank failure, FDIC doesn't have the capital on hand to cover it. This seems unlikely at this point, but the question remains whether, for a one year CD, getting the highest available rate is worth any level of anxiety.
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"Has anyone actually been thru the situation of bank going bad? What happens? Is your money tied up for awhile?"

Yes, during the savings and loan collapse in the late 80's early 90's. I wondered why savings and loans across the country were offering insured CD's that were yielding 4 to 6 percentage points above treasuries. So I got as many as I could. Lets see, one was S and L was in Florida, yielding 11 percent for 5 years or so...so I invested in some. One to two years later, Crocker Savings and Loan was taken over by some government agency that was set up for all the S and L's that went belley up. I got my CD handed back to me, with accrued interest up to that date. I thought I should have been entitled to the interest for the entire term for the CD (5 years). I wasn't.
If interest rates had gone north instead of south, and Crocker stayed solvent, do you think they would have paid me more interest, or let me out of that CD early with no penalty? Nope.

One other S and L did the same thing to me, can't remember which one it was. I had CD's with 5 or 6 of them, as their offerings on CD's kept getting better and better.
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Thanks to all for answering my question. Very helpful information.
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A warning on the $100,000 FDIC limit--that includes interest. So, factor in the interest you'll earn when determining what amount of CDs to buy.

2old
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