Emigrant Direct article on US News World Report

[pyotr]

read about it HERE.
Like I've said before, this is an amateurish operation and I wouldn't trust my money with them.

[BTC]

A link to that article, which doesn't necessarily pertain exclusively to Emigrant, but to internet banking in general, and primarily savings, has already been posted. Emigrant Savings Bank is one of the oldest banks in the nation and they're currently paying one of the best rates available. I have no problems with letting them borrow my money until something better comes along.

it highlights the reason why I feel better with debit card / checkbook access to my account, just to know I can leverage the money if needed without waiting or much worse dealing with possible website issues at the time I need it.

the part about the banks not knowing what exactly to do with all the extra deposits was interesting.

[CJsoccerchic]

Hmmm... it seems like it would be a good idea to put our money into high interest CD's that will be good for at least another 5years judging from what i get from that article...

this opinion has no basis in reality but I would imagine the first time the Fed backs down a notch on rates, 5 year CDs will begin selling like mp3s on a russian website.

[WellManicuredMan]

Nothing I read in that article was negative towards Emigrant. Basically it said their rate is so attractive that they have received more deposits than they know what to do with at the moment.

[pyotr]

So, then WMman, did that article make you feel good about keeping your money with ED?

[WellManicuredMan]

Originally Posted by pyotr

So, then WMman, did that article make you feel good about keeping your money with ED?

It really didn't affect me one way or the other. It was a pretty neutral article in regards to me worrying about keeping my money with them.

[pyotr]

Well I don't know about you WMman, but I'm feeling a bit neutral about this thread.

[WellManicuredMan]

Originally Posted by pyotr

Well I don't know about you WMman, but I'm feeling a bit neutral about this thread.

Yeah, this thread is going nowhere fast.

[CRFSaver]

Originally Posted by WellManicuredMan

Nothing I read in that article was negative towards Emigrant. Basically it said their rate is so attractive that they have received more deposits than they know what to do with at the moment.

This has actually been an issue with a lot of banks over the last couple years. Both branches as well as the internet savings banks have gotten quite efficient at collecting deposits in this time.

Lending has been a very large issue with banks big and small. With a flat yield curve it is difficult to find assets that have a positive spread on your funding costs. Add to this the emergence of national scale lending and many banks are having a hard time finding assets to invest in.

Credit Cards used to be a local bank product, now the top 10 banks control 94% of the market. The captives as well as the large national scale banks own auto lending and look at how many people use a broker for their mortgage anymore.

[LuxLiving]

Emigrant is fine - long time bricks and mortar bank. It's hard for anyone to find a highly profitable place to invest their money at the moment without volatility risks. Even us lil' peeps!

[joseblanco]

I think the article is illustrating the dual edged sword that banks are dealing with in an inverse yield curve situation. In the old days of banking there was one rule 3-6-3: 3% on savings, 6% on loans (Mortgages) and 3 O'Clock Tee time.

Now we have huge volumes of deposits coming in due to high APYs and long term lending rates less than 100 basis points off and short term rates pegged just slightly higher. So with such a narrow spread and lending demand down, the profit margin on the deposits is thin, but its still in postive territory. The rate war has abated and a bank being flush with cash is not always a bad thing. Businesses and individuals must borrow money, and the spread will be sufficient to make a proper profit. Remember the spread does not have to be as thick as the old 3% rule because the amount of overhead to maintain the deposits is lower for online banks. Where it should be I do not know but I think the article is just highlighting the pros and cons and growing pains of a new way to bank. I see neither anything overly negative nor overly positive about the article and the current situation.

BUT FYI because these banks have larger traditional deposits that are still earning a huge 500 basis point+ spread then I think they are just fine and they are leveraging this profit to beat INGdirect which being purely internet might explain why ING cannot compete on rate!!

[gotalkmoney]

That's an interesting read.

Some banks that make me really wonder about them are the one's that usually pop out of nowhere and offer a competitive rate with a bunch of fine print and question marks, those are the banks that make me scared

Right now, I still like be able to walk into a branch and talk with someone. I've yet to put all my money solely online. I'm sure one day I might....

[joseblanco]

Originally Posted by gotalkmoney

That's an interesting read.

Some banks that make me really wonder about them are the one's that usually pop out of nowhere and offer a competitive rate with a bunch of fine print and question marks, those are the banks that make me scared

Right now, I still like be able to walk into a branch and talk with someone. I've yet to put all my money solely online. I'm sure one day I might....

Thanks. Yes, I would never jump right into any bank that popped up on the net. I have moved the bulk of my savings over to online banks because I am a USAA member and they've had online services for about a decade. I am a big advocate of presidential bank because they were an internet bank pioneer but they are also a well managed local bank from metro DC. INGDirect was the first pure internet bank I used but I prefer the advantages of having both brick-n-morotar & internet. HSBC was an easy choice as it is the 3rd largest bank in the world and has been around a very long time. ED has both brick-n-mortar & internet but they firewall the two from each other. If your in a big metro area or the Mid-atlantic area I recommend HSBC, if in Metro DC go with Presidential.

[joseblanco]

If anyone is worried about the health of a bank then I'd look at the businessweek article I've linked. It makes ED's situation look totally harmless!! BankUnited out of Florida offers 5.25 w/ a 5K minimum online savings. However, just look under the article sub-section "camoflaged losses" BankUnited is soo heavily into negative amortized option arm mortgage products that the deferred interest they booked in the most recently reported quarter was enough to take a 15 million USD loss and report it as a 24 million USD profit. Do you think they will ever get all that deferred interest? Or will they just get a bunch of overpriced condos & houses when the uber exotic negative amortization option arm adjusts payments through the roof (no pun intended) and owners start walking away!! Mind you that will be after several more quarters of 40 million in phantom interest is tacked on to their mortgage balances and reported as profits for the bank. I for one have decided not to lend my money to a bank that offers and heavily relies on such an unstable and exotic mortgage product to be "paper" profitable. Plus it speaks to their credibility and civic reponsibility to not be a predatory lender. This product seems no different that a payday/check cashing loan shop.

http://www.businessweek.com/magazine...eek+exclusives

[Potato_Picker]

I also did not see this article as any kind of indictment on Emigrant Direct. Full disclosure: I do have a savings account there, but I wouldn't hesitate to yank it if I thought I'd lose a dime.

I don't think these banks knew how much investment these high-interest savings accounts would generate, and I think it exceeded their expectations. Sounds like the challenge for them over the next few years is to figure out how to put that money to work.

In my unresearched opinion, this happens quite often in banking and investments. If a mutual fund is 'hot', everybody starts throwing money at it. The fund company then closes the fund to new investments so it can figure out what to do with all of the excess capital. This happens to many great, respected companies like Fidelity, Vanguard, and Dodge and Cox. Having excess cash on hand is a challenge, but I think it's one most banks and investment companies would welcome.

[joseblanco]

Originally Posted by Potato_Picker

I also did not see this article as any kind of indictment on Emigrant Direct. Full disclosure: I do have a savings account there, but I wouldn't hesitate to yank it if I thought I'd lose a dime.

I don't think these banks knew how much investment these high-interest savings accounts would generate, and I think it exceeded their expectations. Sounds like the challenge for them over the next few years is to figure out how to put that money to work.

In my unresearched opinion, this happens quite often in banking and investments. If a mutual fund is 'hot', everybody starts throwing money at it. The fund company then closes the fund to new investments so it can figure out what to do with all of the excess capital. This happens to many great, respected companies like Fidelity, Vanguard, and Dodge and Cox. Having excess cash on hand is a challenge, but I think it's one most banks and investment companies would welcome.

Good observation/point & well said. I concur.