When Washington Mutual collapsed about a year ago, it was offering an eye-popping 5% interest rate on certificate of deposits when its competitors were offering half that. Everyone knew that WaMu was in trouble and we all ran into the open arms of the 5% CD because it was FDIC insured. Were we right in thinking the higher rate a good indicator of a bank’s weakness?
But I can say, with a little data to back me up, that a bank on the verge of failure may not show it in its CD interest rates. Corus Bank, one of the banks that failed on Friday, was on my list of best CD rates. Since June, I’ve been populating that table with the help of a database on the back end. That also means that I have historical rate information, which will come in handy to see if we could’ve predicted a bank failure based on CD interest rates.
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