During the financial crisis, government officials often talked about performing “stress tests” on the financial institutions to see how they would fare if the financial crisis worsened. I didn’t really understand what they meant by “stress tests” because I didn’t see how you could do traditional stress testing, as you would on like a chair, on a bank. If you’ve ever been to an IKEA, you’ve probably seen them demonstrate durability with stress tests (the classic robotic pushing down on the POÄNG Chair and the labeled floorboards that talk about the number of people who have walked over them), but how do you stress test a bank?

In reality, a bank stress test is simply scenario analysis. What would happen if the stock market, say the S&P500 index or the Dow Jones Industrial Index, fell by 20%? 50%? What happens if the yield on the 30 year Treasury increases or if the Fed increases the federal funds rate? Analysts run these various scenarios and look to see how the bank will perform (i.e. survive) under these extreme conditions.

In learning that’s what stress tests were, I was surprised these weren’t part of the usual risk analysis process. I’ve always understood risk analysis to be a look at the probability and severity of a event happening, it appears that banks, perhaps in their zeal, ignored anything with a low probability even if it might sink the firm. As an investor, I’d like to know what the various risks to a company should things go north or south.

Then again, when your bonus is tied to annual performance, big wins in 2010 followed by catastrophic losses in 2011 still means a huge 2010 bonus.

This week Liz Weston wrote about how to shop for a new bank and it made me think about how we chose the banks we work with now. For us, the criteria for judging a checking account differed from the criteria for judging a savings account. We use the two different types of accounts for different purposes, so the criteria for picking the “best” for us will vary between the two.

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This post is part of the one day blog event “The Spectrum of Personal Finance.” In this event, comic book nerd Brian of My Next Buck, will discuss 8 different emotions (taken from the Green Lantern comic series) and relate them to personal finance. Here at Bargaineering we will be looking at Fear. To view the rest of the event look at the bottom of the page to see the other blogs hosting articles.

When I started looking through the personal finance blogosphere a year ago I was frightened of all the information I was gathering. There was so much out there and I didn’t necessarily understand what I was reading. I didn’t want to make a misstep with my hard earned cash, so I didn’t do anything at first.

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I remember the first day I set foot at college, it was a mixture of excitement and fear at the prospect of being on my own. I arrived in Pittsburgh, PA a few days early and had the opportunity to wander around an empty campus. Carnegie Mellon University, especially in 1998, wasn’t a large campus, you could walk from one end of the campus to the other in less than twenty minutes, but it was still intimidating. After five years, a few degrees, and a great experience, I departed for the “real world.”

One thing I wish I had when I started college was a list of things I had to do for my finances like I did for my academics. College is where you set many of your life’s foundations. Whether it’s spiritual, physical, academic, or financial, your foundations are laid in your youth but set when you’re in college. I was fortunate enough not to make too many missteps and managed well enough, but I wish I had a list… so I wrote one, I hope it can help you whether you’re starting college or just starting over. I hope it helps. (and it sure beats reading another list of best paying careers!)

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Two weeks ago, I applied for an account at Ally Bank, the new rebranded name for GMAC Bank. Their rates have fallen in recent weeks but are still competitive, so I wanted to open an account to take advantage of certificate of deposit rates while they were still strong.

Ally claims the account opening process takes only 10 minutes, which, after my experience, is probably accurate if you don’t run into any problems (more on that later). It’s also important that you have all the information present, including but not limited to your social security number, your driver’s license, and any banking information for the accounts you want to link to your Ally account (ABA routing number, name, account numbers, etc.) It’s all fairly standard stuff.

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Near the end of May, the FDIC Board of Directors approved a rule that capped the interest rate “less than well capitalized institutions” could offer. For quite some time they listed weekly national rates. It was only until last month did they institute rate caps, which are defined as 75 basis points above the national rate. The national rate is just the simple average of rates paid by all insured depository institutions and branches for which data are available.” If a region has a much higher prevailing rate, then banks in that region will be allowed to use local averages plus 75 basis points as the rate cap. This rule wouldn’t go into effect until January 1, 2010.

The idea is that a bank that isn’t well capitalized will be in dire need of some liquidity and boosting your rates is a great way to increase deposits but put you in a difficult spot down the road. When Washington Mutual offered 5% APY certificates of deposit, everyone knew that it was a play for deposits. This rule would make that impossible.

What do you think? Is this a good idea or a bad idea? Do you think that the government is overstepping?

Incidentally, the current rate cap, effective 6/8/2009, on a savings account is 0.96% and a 12 month CD is 1.98% APY. Those are some pretty sad rates.

In this latest video I take a step away from the whiteboard and talk about something my wife and I did over the weekend, we consolidated our financial and personal documents. We’ve been married for about a year and a half but never went through the process of consolidating all of our important documents. In this video, I talk about how we did some hardcore spring cleaning and how long you should be keeping financial documents.

As always, everyone has slightly different opinions and one opinion I respect is that of Jeff Rose, a Certified Financial Planner in Illinois. Just a few short weeks ago he wrote about how long you should be keeping financial documents so please read his advice as well.

The key to finding the best online savings account at the best online bank comes down to interest rates. The bells and whistles are nice but ultimately it’s about the money and the bank with the highest interest rates will win. That’s why we’ve included a table of the best interest savings account rates followed by a review of some of the more popular online banks. The best online bank for you may depend on a lot of factors outside of the interest rate, which is why minimum balances, fee, and other details are included in the table. One thing is clear, online savings accounts always pay more than a regular brick and mortar.

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