On The Money Latest Banking Posts
On The Money Latest Posts
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The crisis in this country’s banking and financial system is not just relegated to Wall St. fat cats. Nearly every dollar we earn goes through a bank in one way or another – we rely on banks to pay our mortgages and bills, to take out cash, to keep our savings safe. So it’s normal to get nervous when you wake up to hear about the largest bank failure in history, or another major bank being sold to a former rival.
As Carmen explained on Tuesday’s show, it is more crucial than ever to stay grounded through all of this. Grounded with the rules and facts that safeguard your money, grounded with knowledge so you feel in control.
Is my money safe?
Q: If my emergency fund is invested in American Funds in a money market account. Is it safe even though it is not officially FDIC insured? The return is only about 1.5%, should I move this money?
The FDIC only backs banks, not brokerages. It is more likely it is insured by SIPC, which backs many money market funds. Steve Harbeck, the president of SIPC, explained that the Treasury is also temporarily guaranteeing many money market funds, so it would be prudent to take advantage of that extra insurance as well. Carmen added that emergency funds should be as liquid as possible. She would move it into a high-yield savings account for a money market account with a bank, not a brokerage.
Q: I have $200K left on a $230K HELOC but I'm nervous the lender Chase will freeze it as they've done for my neighbors. Should I write a check out for $200K and put that money somewhere else?
Carmen would not recommend taking any equity out of your home right now. Keep your money in your home, she said, because it is the cornerstone for building a financial base. Joe LaVorgna, Chief Economist for Deutsche Bank, agreed that keeping as much equity as possible as home prices continue to fall is the safe bet. If you really need that line of credit, Bankrate.com’s Greg McBridge suggested petitioning your lender directly. If that doesn’t work, you can try refinancing the line of credit with another lender, he said.
Wachovia, as an administrator of your 401(k), doesn’t mix it with their investments, which means the failure/merger of the bank doesn’t affect the holdings. The new 401(k) will now just be administered by Citi, but the holdings will remain the same. Joe LaVorgna stressed that the “overwhelming majority” of funds and accounts are very secure.
Q: Are credit unions protected by NCUA as safe as banks insured by the FDIC? I have $70,000 in a money market savings account at a credit union and I don't want to lose it.
Yes, credit unions covered by NCUA are equally as protected as banks covered by the FDIC. But not all credit unions are NCUA-insured. Make sure yours is before you do anything else.
Q. Two weeks ago, I opened a 13 month CD at WaMu for $83,000.00 because they had a 5% promotional CD. This is my retirement, and I need to know if it's still safe at WaMu now that they're selling to JPMorgan. Should I leave it in or take it out?
JPMorgan confirmed to On the Money that it plans on upholding all WaMu CD rates.
What to do with my money now?
Q: I have a 403(B) with a company that does not match my contributions. I have not contributed to it in the last 2 years. Would now be a good time to get back in given how low the stock market is?
Start contributing now, Carmen urged, even if your company doesn’t match. It is pretax money and while the value of your IRA portfolio may go down with the market, the investments will rebound when the market swings back (which it will, eventually). Especially if you’re young, this is the time to be contributing. It’s a buying opportunity, Ben Popken of Consumerist.com said. Think of it as buying low and selling high.
Q: Me and my husband have good credit (800), own about half of our $350,000 home in OR, little debt, and we want to buy a second home in CA, have 20% to put down, but we are being quoted a high rate at 6.375 or more. Why can't we get a lower rate these days?
The tightening of the credit markets is making it difficult, even for immaculate borrowers, to get a good rate these days. Greg McBride said that is especially true for people looking to finance their second homes, as lenders get squeamish worrying that second homes are easier to walk away from if the economy worsens. This could all change in as soon as a few months, Carmen said, so be patient.
Q: The bank froze our home line of credit but we want to use it to invest. What can we do?
This is a byproduct of falling home prices, according to Greg McBride, as lenders are scaling back their exposure to housing. What you can do is appeal the decision or look to refinance with another lender altogether.
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