Update: December 4, 2011
Move your money out of Citigroup, Bank of America, Wells Fargo. Find a financially sound community bank or credit union near you at http://moveyourmoneyproject.org/find-bankcredit-union.
Take Action: Move Your Money Out Of Citigroup, Bank of America, Wells Fargo (2011)
Short Film: Why Gas And Food Prices Going Up (2011)
Full Movie Documentary: Inside Job (2011)
Foreclosure Fraud on 60 Mintues: Forged Housing Documents (2011)
Harry Dent: “Major Crash” Coming for Stocks, Gold, Silver (2011)
Bob Prechter: Stock Market Will Crash To New Lows (2011)
Homeless Kids in America: Parents Are to Blame, Not the Recession (2011)
Update: August 1, 2009
After a year of observing what the government has been doing to prop up the financial institutions, it appears that many banks are insolvent regardless of the rating systems. Most ratings are inaccurate because many banks don't report certain losses and are taking advantage of accounting loopholes. Without the government's bailout programs (your tax money), Citigroup and Bank of America would have filed for bankruptcy long ago. Banks of all different sizes are still failing every week and the situation is only getting worse! No banks are safe! It's just a matter of time that your bank will fail. So what to do? I suggest that you spread and diversify your cash around several different banks. Also, make sure your deposits are under the FDIC limits. Be prepared! The worse has yet to come...
Tuesday, August 12, 2008
Is your bank safe?
This has been a very popular question these days especially after the IndyMac bank failure, so I've decided to put a list together so you can quickly see the ratings of all the popular banks across the nation. I would be very concerned with any bank that has a D rating or below. If you have an account in these banks with weak financials, make sure you are within the FDIC limit of $250,000 per account. But in an event of a bank failure, it may take days to access your account which could be devastating to those running a business and need daily access to their bank. Folks, there is no need to take any chances and risk a bank failure that could cause major inconvenience and unnecessary headache. I suggest closing the account and deposit the funds into a relatively "safer" bank.
Interestingly enough, the two online banks (WTDirect and Savings Square) that I've reviewed on this blog have good ratings. In contrast, Washington Mutual and HSBC have problems. More specifically, Washington Mutual has been overly exposed to the mortgage market and now they are struggling due to high level of delinquencies. Take a look at the stock, WM has gone from $30 to $4.74 in the last 12 months which is another indication that the bank is in trouble. It's no wonder that the bank is offering a high interest rate for its savings account. Don't get fooled. Washington Mutual needs capital desperately to continue its operation and fund its businesses. Why else would they offer you a significantly higher yield than other banks? Beware of WaMu.
Ratings Scale
From BNET. "With ratings on a scale from A (Excellent Financial Strength) to E (Very Weak Financial Strength), TheStreet.com Ratings synthesizes thousands of data points into an easy-to-understand evaluation of each company's capitalization, asset quality, profitability, liquidity, stability, and reserve adequacy summarized in a one-page report."
Popular Banks (ratings as of 2/25/2009)
Bank of America.........B-
Citibank.......................C-
Capital One Bank.......B-
HSBC Bank USA.........C-
ING Direct...................B-
JP Morgan Chase........C+
Savings Square...........?
Wells Fargo..................C
WTDirect......................C+
For more banks, go to TheStreet.com Ratings Screener
Wells Fargo should have a better rating than bank of America
ReplyDeleteWhat about etrade? Is it safe?
eTrade's had a lot of trouble recently...might be worth staying away from. ING Direct also posted a 25% decline earnings today. ouch!
ReplyDeleteUnfortunately, there is no rating for etrade because the company is really a broker, not a bank. But if you take a look at the stock (ETFC), it's currently trading at $3 which I think spells trouble. I would stay away from etrade and close the account today.
ReplyDeleteI agree that Wells Fargo should have a higher rating than Bank of America. WFC is probably the "safer" banks today since they are less exposed to the toxic part of the mortgage market and that they are more diversified in terms of their business units. As for BofA, I think the Countrywide acquisition is an extremely dumb move. What is management thinking? Countrywide should have failed. But because of the buyout, it's just a matter of time that Countrywide will cripple BofA going forward. Keep an eye on BAC stock. It's currently trading around $29 which is ok for now. But not for long.
The HSBC rating is perhaps misleading. I'm sure that is just for their US subsidiary. The parent bank is one of the largest banks in the world. I'd be very surprised if the tiny US division could have much impact on the parent.
ReplyDeleteING is a similarly huge bank with a small, and relatively new US division. They also insure their savings accounts up to $500,000. Their decline in profits may well be due to people being forced to dip into their savings to pay the bills - while they do now have a checking account too, most of their customers in the US have savings accounts.
I also don't think you'll see any of these banks fail. The speed with which the government stepped in to arrange the purchase of BS should be an indication of what will happen should one get close to that state. And the large international banks like HSBC and ING are likely to be the purchasers in that scenario.
Thanks for your comments, John! You are correct that the ratings for HSBC and ING is for the U.S division only. And the likelihood of the parent company failing is probably slim. But the fact of the matter is that no one really knows how much bad debt these big banks are holding right now due to all the accounting tricks and manipulation. There is no doubt in my mind that we will continue to see more write-offs from all the banks worldwide in the coming quarters. More banks will fail. But my guess is that we won't see bottom until a big multinational bank collapses.
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