Banking 
5
comments

My (Virtual)Bank Failed!

Despite the exclamation point, this is actually not a big deal. Remember Virtual Bank? It was one of the first online bank accounts I had and it was included in an early 2007 “state of the high yield online savings account” post, a post I never revisited. Those were the days… most online banks offered rates in the high 4% with some breaking 5%. Then the financial industry broke and now we’re happy to see 1% rates!

Well, Virtual Bank’s parent, Lydian Private Bank, failed at the end of June 2011. That’s right, it failed over two months ago, close to three months, and I had no idea. I just received a letter over the weekend, dated August 25th, explaining that Virtual Bank was under new ownership. You wouldn’t know it looking at the homepage because nothing has changed about it and that’s because it was acquired by Sabadell United Bank. Lydian Private Bank had $1.70 billion in total assets and $1.24 billion in total deposits, which is pretty sizable. Fortunately it would cost the FDIC’s Deposit Insurance Fund a “mere” $293.2 million.

As for me, I had $21.90 stashed in the account, an eMoney Market account that I completely forgot about because I failed to add it to my financial network map! Had I remembered, I probably would’ve closed it long ago when I closed so many other accounts. After a short period I closed nearly half of my online savings accounts, a number that is now in the mid-single digits, rather than in the mid-double digits. :)

What happens next? I thought it would be seamless, I would just have a new account, but it appears I have to claim ownership of my deposits. According to 12 U.S.C. Section 1822(e), I have to claim ownership of the deposits at the new institution within 18 months (this is all included in a letter I received from the FDIC). All I have to do is take some action on the account – deposit or withdraw funds, executing a new signature card, providing a change of address, or just writing them a letter. Otherwise, if I fail to claim it, the funds go back to the FDIC and the FDIC sends it to the state as unclaimed property.

All I did was log into my account and request that it be closed, so we’ll see how painless of a process that is!


 Banking 
8
comments

What Happens If Ally Bank Buys ING Direct?

Allying DirectLast week, there was news about Ally Bank in talks to buy ING Direct. It would be a marriage of my two favorite online banks*.

The biggest question I had, as a customer of both, is what should I expect after an acquisition. I know it’s still early but I’m curious to know, so I called Greg McBride of Bankrate, one of the most knowledgeable people I know, and he gave me a good idea of what to expect (if anything, many times these “talks” become nothing).

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 NEWS 
8
comments

$250,000 FDIC and NCUA Insurance Limits Permanent

The Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173) has gotten a lot of press lately because it represents the biggest reform of Wall Street in quite some time. While the pundits will surely be debating the strengths and weaknesses of the bill, what it went too far on and what it erroneously avoided, one part of the bill touches each and every one of us in a meaningful way – deposit insurance limits.

For years, the FDIC and NCUA insurance limits were set at $100,000. During the economic crisis, this protection limit was raised to $250,000 (in October 2008) to help assuage the fears of many Americans who “ran” on their banks, not realizing in many cases it was the run itself that killed the bank. The limit was raised to $250,000 temporarily, set to expire by 2013, but the Wall Street Reform and Consumer Protection Act, signed on July 21st, 2010, has made this limit permanent.

In fact, the act made the limit retroactive to January 1st, 2008 to the benefit of 9,000 depositors who had more than $100,000 at banks that failed between January and October 2008.

It will be interesting to see how the other parts of the bill play out in the wild.


 Banking 
1
comments

Adding a Joint Account Holder at Ally Bank

When I opened my Ally Bank account, I set it up as a joint account because it would be easier to manage. While I manage the bulk of our finances, it’s always easier when there is more access because then anyone can make adjustments and changes as necessary. We subscribe to the joint finances philosophy so a joint account is very natural for us.

However, when I started opening certificates of deposit at Ally, I erroneously made them single accounts. This left me as the single account holder on record and only I could make changes to the accounts. Normally, this isn’t an issue but if changing it is easy, I’d prefer it the other way. Here is what you need to do to add a joint account holder to your CDs at Ally Bank.

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 Banking 
31
comments

More Fun Bank Failure Facts

Fail StampI really enjoy trivia posts and had a lot of fun researching facts to include on my fifty fun facts about bank failures post, so I thought I’d bring it back. This time I wanted to cut out all the other stuff, like FDIC insurance facts and “first bank failure” type facts, and just look at the list of failures themselves.

The statistics were calculated from the FDIC’s list of failed banks and we used data going back to 2000.

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 NEWS 
1
comments

FDIC $250,000 Insurance Limit May Become Permanent

FDIC LogoYou may have read some recent news reports about how the financial reform bill (which the Senate passed last week) has become bloated with unnecessary and irrelevant amendments. Fortunately there are a few necessary and relevant amendments, such free credit scores for those rejected for credit. Another amendment included in the bill has to do with FDIC insurance. In the midst of the economic crisis, the FDIC insurance on deposit accounts was raised from $100,000 to $250,000. That increase in coverage was set to expire on at the end of 2013, January 1st, 2014 to be specific (it was extended once already through the Helping Families Save Their Homes Act from its original expiration date).

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 Banking 
23
comments

How to Combine ING Direct Accounts

My lovely wife and I both opened individual ING Direct accounts before we were married. In the latest step towards consolidating our financial accounts, we’ve decided to take all of our individual accounts and work towards combining them when it made sense. We’ve left investment and retirement accounts alone but online bank accounts are perfect for combining. Our latest move was to combine those ING Direct accounts into one.

I called a CSR yesterday to discuss consolidating our accounts and learned that the process is much simpler than I imagined. You can’t consolidate two separate ING Direct login accounts but you can add a joint account holder to an existing savings or checking account. This will turn an individual savings account into a joint savings account, let’s see how easy it is.

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 Banking 
5
comments

Do CD Rates Rise Before Bank Failures?

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?

Perhaps.

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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