It used to take new owners at least a couple of months to decide whether they would honor the CDs they acquired from failed banks.

Now it’s only taking a couple of weeks.

A recent story in the Milwaukee Journal Sentinel tells the story of Tom and Carol Spidell, who were customers of Maritime Savings Bank, which failed on Sept. 17.

Before the month was over they “received five letters – one for each certificate of deposit they had with Maritime — informing them that the interest rates on their CDs had been slashed.

“For the Spidells, that meant the interest on a CD that doesn’t mature until next spring will be paying about a half-percent instead of the 3.05% they signed up for a couple of years ago. Other Maritime CDs with interest rates ranging from 1.5% to 1.95% also were pared to 0.45% or 0.55%, all of them with roughly a year to go before they mature.”
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Banks are still whining about the so-called “skin-in-the-game” requirement that was part of the financial reform bill Congress passed last summer.

And I’ve got to say that those complaints are soooooo unattractive.

What the law does is require banks to maintain at least a 5% interest in the mortgages, credit card debt and auto loans they bundle and sell to investors.

The idea is that they’ll vet borrowers more closely if they can’t pass all of the risk along to someone else.

Some loans Congress considers safe, such as traditional 30-year fixed-rate mortgages with at least a 20% down payment, are even exempted from the 5% requirement.

So what we’re really talking about is trying to make the banks act more responsibly when they agree to more risky loans such as interest-only or adjustable rate mortgages.

In my view, this is the absolute least we can ask of the banking industry.
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There’s a breakthrough story on the front of today’s New York Times that finally acknowledges two big problems with the economy that we’ve been writing about for months.

First, I’ve been complaining about big companies hoarding cash since last summer.

Just last week Jen Stryker touched on the same theme, explaining why consumers can’t rescue this recovery, but cash-rich companies can.

In a story headlined “Easy Borrowing By Corporations Spurs Few Jobs”, the Times explains how companies are using ultra-low interest rates created by the Federal Reserve to borrow billions of dollars they’re just stuffing into the mattress.

Few “of them are actually spending money on new factories, equipment or jobs. Instead, they are stockpiling the cash until the economy improves,” the Times says.
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Two more banks in Florida and Washington were seized by regulators yesterday, pushing the total number of failed banks to 129 for the year.

The Federal Deposit Insurance Corp. immediately sold their deposits and branches to new owners, which should have those offices reopened no later than Monday.

The failed banks are:

Wakulla Bank, of Crawfordville, Fla., which was sold to Centennial Bank based in Conway, Ark.

Shoreline Bank, of Shoreline, Wash., which was sold to GBC International Bank based in Los Angeles.

Click on the name of each failed bank to see the FDIC closure report.

After Jen mentioned the economic stimulus bill in Tuesday’s post I thought it might be worthwhile to set the record straight about this unpopular effort to pull the country out of the recession.

The $787 billion stimulus bill passed in February 2009 divided that money in roughly equal thirds among:

• Tax cuts for individuals and businesses.
• Aid to states and cities.
• Programs that President Obama had campaigned for, such as computerizing medical records, providing grants to innovative schools, and investing in clean energy sources.

Many Americans have decided it was a failure because the unemployment rate still soared and has remained stubbornly high since peaking at just over 10%.

Yet most reasonable economists, including those in the nonpartisan Congressional Budget Office, credit the stimulus bill with shortening the recession and reducing the unemployment rate by about 2 percentage points.
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I find it incredibly ironic that so many economists want to blame the painstakingly slow economic recovery on our refusal to spend more and save less.

These are often the same guys who, back during the housing and credit bubble of the early 2000s, were complaining that we should save more and spend less.

They probably had it right the first time.

As the recession has shown, way too many of us had way too much debt and way too little savings.

Now we’re socking more away. The savings rate has risen from literally zero to more than 5% of our income.

And we’re paying off – or at least down – all of those credit card bills.

The amount we owe on revolving credit (mostly credit cards) has fallen from its 2008 peak of $989.1 billion to $822.5 billion.

Unfortunately, that’s still a lot of debt and the unemployment rate remains over 9%.
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Two banks, one in Florida and another in Washington, were seized by regulators yesterday, pushing the total number of failed banks to 127 for the year.

The Federal Deposit Insurance Corp. immediately sold their deposits and branches to new owners, which should have those offices reopened no later than Monday.

The failed banks are:

Haven Trust Bank Florida, of Ponte Verde Beach, Fla., which was sold to First Southern Bank based in Boca Raton, Fla.

North County Bank, of Arlington, Wash., which was sold to Whidbey Island Bank based in Cupeville, Wash.

Click on the name of each failed bank to see the FDIC closure report.

Here’s a problem some consumers are having.

They get on their computers to obtain the free credit reports they’re entitled to under federal law.

They want to go to annualcreditreport.com, which is the site the three major credit reporting agencies — Experian, TransUnion and Equifax — established to provide those.

If they type “annualcreditreport.com” into the address bar of their browser, they go right to the site. (The image above is what you’ll find on the real deal.)

But some consumers are going to Google and searching for that URL.

When they do that, first links that appear on the page are paid advertisements that are out to trick unsuspecting consumers with names like “Annual Credit Report” or “Annual Credit Report.com.”
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If you saved when others didn’t.

If you resisted the temptation to buy a home you couldn’t really afford.

If you refused to run up big balances on your credit cards.

Then it’s OK to be a predator now.

You shouldn’t feel a shred of guilt about driving a hard bargain on cars, collectibles, electronics or anything else you’d like to buy from cash-strapped sellers who didn’t have the same good sense that you did.

Being a nice predator will get you farther than being a mean one.

But expressing sympathy for a seller’s financial plight does not mean you shouldn’t drive a hard bargain.
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Five banks are still paying 4% on high-yield checking accounts open to all savers regardless of where they live.

That’s really remarkable, because it’s about what the best high-yield or reward checking accounts were paying this time last year.

We certainly can’t say that about the top returns on CDs, savings or money market accounts.

They’re all paying significantly less than they were in September 2009, and significantly less than the best high-yield checking accounts.

That’s why the reward checking accounts offered by hundreds of community banks has been one of the few bright spots to come out of the financial crisis and recession for savers.

You can earn 4.01% APY on balances up to:
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Oh great.

The Wall Street Journal editorial pages agree with me.

The president’s gambit to make Elizabeth Warren the de-facto leader of the new Consumer Financial Protection Bureau without Senate confirmation is a bad idea.

Of course the Journal is the financial industry’s ultimate apologist and comes to that conclusion from a completely different point of view than I do.

The president made the Harvard law professor a special adviser rather than the bureau’s first director in an attempt to circumvent a potentially difficult confirmation hearing.

The Journal fears that Warren will wield all of the power of the director without the financial industry having had a chance to block her appointment.

Wall Street’s concern is clear: What’s the point of spending millions on lobbyists and senators if you can’t use ‘em when you need ‘em to get your way.
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A reader recently posted an irate comment that accused Discover of lying about the reward program for its More credit card.

We don’t think that’s the case.

All of the rules are spelled out on the card’s Web site.

But we understand why he’s angry because Discover has made its reward system needlessly complicated and confusing.

The rebates it promotes to new customers – 1% on everything you buy and a 5% bonus rebate on some types of purchases – come with too many strings attached.

So let’s grab a magnifying glass and take a look at the fine print:
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Another six banks were seized by regulators yesterday, pushing the total number of failed banks to 125 for the year.

The failed banks were in four states – New Jersey, Georgia, Ohio and Wisconsin – and the Federal Deposit Insurance Corp. immediately sold their deposits and branches to other banks.

Those branches will reopen no later than Monday under the management of their new owners

The failed banks are:

ISN Bank, of Cherry Hill, N.J., which was sold to Customers Bank, which is based in Phoenixville, Penn.

This marks the first time we can recall that a bank was seized when it was at the top of any of our rankings of the best national CD, savings or checking accounts.
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No. No. No.

President Barack Obama is appointing consumer advocate Elizabeth Warren to be special adviser overseeing the creation of a new consumer protection bureau, but he’s not appointing her to be the bureau’s first director.

Why?

Because he’s worried the Senate might not confirm the 61-year-old Harvard law professor who has been a smart and relentless critic of how the banking industry treats its customers.

Making her a special adviser doesn’t require Senate approval and I’m sure the White House sees this as a clever way to avoid a contentious hearing and nomination battle.

But as I said in my last post on this topic, We’re Not After An Easy Confirmation.

Warren’s only sin is to speak truth to power.

And the powers on Wall Street don’t like it.
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There’s a lot of talk about putting an end to Fannie Mae and Freddie Mac — the federal government’s biggest involvement in the mortgage market.

But what about the mortgage deduction?

The ability to deduct the interest you pay on your home loan has long been portrayed as one of the two, great middle-class tax breaks. (The other is tax-deferred retirement accounts.)

But why should Washington subsidize the cost of buying and owning a home?

When you take a closer look at this deduction you find that it’s just as unfair as most tax breaks, with most of the benefits not really helping the middle class at all.

Here’s why we should ditch it:
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Former Secretary of Labor Robert Reich is the latest economist to warn the Federal Reserve that continuing to drive interest rates down, down, down won’t boost the economy or create more jobs.

That’s a little surprising coming from Reich, who is certainly not a conservative devotee of free-market economics.

Reich, who now teaches at the University of California at Berkley, is a liberal guy who believes in Keynesian economics and the government’s ability to successfully manipulate the economy.

Yet he’s telling Fed Chairman Ben Bernanke that “the sad reality is that cheaper money won’t work” right now.
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I am a single, child free woman. I am not in the habit of buying toys.

So imagine my shock when, as part of my daily morning routine, I logged into my checking account and found a $112 purchase at the Lego store.

I’ve been a victim of debit card fraud before, but it happened on a massive scale.

Someone cloned the card while I was on vacation, and racked up hundreds of dollars in charges at gas stations and grocery stores, before I found the purchases and had the card cancelled.

I’d never seen just one instance of fraud before.
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After taking a couple of weeks off federal regulators went back to work yesterday, closing one failed Florida bank.

Horizon Bank in Brandenton was seized and all deposit accounts, excluding brokered accounts, were sold to Bank of the Ozarks, which is based in Little Rock, Ark.

Horizon Bank’s four branches will reopen Monday as Bank of the Ozark branches.

That brings the total number of failed banks to 119 for the year.

We aren’t happy about this.

Almost half of all checking account customers opted into their bank’s overdraft protection, according to a new study released by the American Bankers Association.

Overdraft “protection” is that nasty little program where banks will cover relatively small debit card purchases even if you don’t have enough money in your account – and whomp you with a fee for doing so.

Polls have shown that a significant majority of consumers would rather have their transactions declined.

But these fees were so lucrative for the banks that many routinely signed customers up for this “protection” unless they specifically asked to opt-out.
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This is really unforgivable.

Tennessee Commerce Bank jumped to the top of our rankings of the best savings accounts in late August by offering 1.50% APY, with a minimum deposit of just $250.

Anyone who entrusted more than $150,000 in one of its Classic Savings accounts could earn an even better 1.75%.

Now the small bank, which has a single branch in Franklin, Tenn., has slashed its return to 0.40% APY for balances below $150,000, and 0.50% APY for balances between $150,000 and $250,000.

We have seen some outrageous rate cuts since the financial crisis and recession struck two years ago, but rarely have we seen savers hosed like this.

That leaves two banks paying 1.40% APY, as the new leaders in nationally available savings accounts:
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American National Bank of DeKalb County is offering northern Illinois residents a very good high-yield checking account.

It’s paying 4.25% APY on balances up to $25,000.

That’s a quarter-point more than you can earn with the best nationally available high-yield or reward checking accounts.

American National, with branches in DeKalb and Sycamore, limits this account to a swath of northern Illinois that reaches as far east as suburban Chicago.

Call the bank at (800) 200-6344 to find out if your zip code is on the eligibility list.

If it is, you can apply online through Kasasa Cash, a Web site that opens new accounts for many small banks.
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If you’re planning to do a lot of toy or baby shopping this holiday season the Toys “R” Us Christmas Saver’s Club can help your money go a little further.

It’s sort of like the Sears Christmas Club.

You can sign up at any check-out lane at Toys “R” Us or Toys “R” Us Express stores.

You’ll receive a special gift card that you can add money to any time you wish, at any Toys “R” Us cash register, now through Oct. 16, 2010.

The store will add 3% to the final total on your card and you can start spending the balance on Oct. 31.
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If you have a Bank of America credit card you can qualify for up to $220 in bonuses for opening a new checking account.

You receive a $100 credit on your credit card statement when you open the account and establish a qualifying direct deposit within three months.

Then you earn another $20 each month for up to six months by paying your Bank of America credit card bill online using your new checking account.

Those credits will be applied to that part of your balance being charged the highest interest rate too, not the lowest.
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Here’s a troubling report: More people are taking hardship withdrawals from their 401(k) plans, or borrowing against their retirement accounts.

According to Fidelity Investments, which administers 401(k) plans with 11 million participants, 62,000 workers initiated a hardship withdrawal in the second quarter.

That’s up from 45,000 in during the same three months (April through June) in 2009.

About 22% of all accountholders now have outstanding loans against their retirement accounts, up two percentage points from last year.

It’s pretty clear that too many Americans are still struggling to make ends meet.
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Chairman Ben Bernanke says the Federal Reserve still has ways to rescue our flagging economic recovery.

Regrettably, it seems most of those options involve pushing interest rates even lower than they are right now.

Good grief. Does Mr. Bernanke really think the economicrecovery is faltering because interest rates just aren’t low enough?

We know everyone was upset last week when existing home sales fell 27% in July.

But does he really think we’re not buying houses because mortgage rates are too high, when the average 30-year fixed-rate loan is going for 4.59%?

How cheap does he think mortgages need to be?
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The debate over the Federal Reserve’s punishing interest rate policy moves to the central bank’s annual party, I mean symposium, in Jackson Hole, Wyo., today.

Raghuram Rajan will carry the banner for all of us who have endured two years of lower and lower returns on our savings.

The University of Chicago professor, and former chief economist for the International Monetary Fund, will tell the Fed that it simply has to raise the rate banks charge each other for overnight loans by at least 2 percentage points.

The Fed has the overnight rate currently set at 0% to 0.25%, which means banks can get money for virtually nothing, and that’s why they can pay us virtually nothing for our savings.

Note that Rajan isn’t urging the Fed to go hog wild and allow interest rates to rise to market levels.
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A new report by TransUnion says we’ve cut the amount we owe on our credit cards to the lowest level in more than eight years.

The average combined debt for bank-issued credit cards – typically Visa and MasterCards — fell to $4,951 by the end of June, down 13% from $5,719 in at the end of June 2009.

Those balances range from a high of $7,148 in Alaska, to a low of $4,753 in Alabama.

The credit reporting agency said it was the first time our combined credit card debt had fallen below $5,000 since early 2002.

The optimistic spin to put on this is that we’re all making a determined effort to pay down our balances. And there’s undoubtedly a lot of truth to that.

But you can’t ignore the fact that at least some of the decline was due to all of the bad credit card debt the banks have written off this year.

Click here to read more about the latest report on credit card debt.

As we had feared, ShoreBank was among the eight banks regulators seized over the weekend, pushing the total number of failed banks to 118 for the year.

ShoreBank was the first bank we can recall that actually failed while it was in any of our rankings of the top CD rates and savings accounts.

In this case, the Chicago-based bank was third on our list of the best nationally available 6-month CD rates, offering 1.19% APY on a 6-month CD.

We urged savers to hold off buying certificates of deposit from ShoreBank until it was closed and its deposits sold to a new owner.

That has now been done.

All accounts have been transferred to Urban Partnership Bank, a newly formed company led by ShoreBank’s management and backed by money many of the nation’s biggest banks, including Citigroup, Bank of America, JPMorgan Chase and Goldman Sachs.
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Why aren’t savers marching on their local banks and demanding better rates?

I suspect it’s because we don’t have anyone to get us organized and out the door.

Foreclosures are an easier, more emotional topic to get up in arms over.

Many left-leaning community, religious and labor groups have been organizing protests about the way banks are treating families who fall behind on their mortgage.

I went to one last week to see what it was like.

About 100 protestors gathered in front of the Bank of America building in Chicago before taking their bullhorns right into the ornate lobby.
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Pawn shops. Payday loan stores. Check cashing services. Tax preparers hawking refund anticipation loans.

In Broke, USA, author Gary Rivlin gets cozy with giants of what he calls Poverty, Inc. — the multi-billion dollar industry of making money off the poor.

It’s shocking how open these guys are in discussing their work him.

He must have been a sympathetic listener who seemed to accept that the creators of this financial underworld actually has its customers’ best interests at heart — despite the backbreaking fees and triple digit interest rates.

But that’s certainly not how these morally-challenged manipulators are portrayed in Rivlin’s book.
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