I could be wrong, BUT the Fed cannot just print money on a whim. They have to buy T-Bills. For every T-Bill they buy they COULD print an actual paper dollar, but instead they issue an internal bank deposit (IBDD) which a bank COULD redeem for paper dollars. If my understanding is correct, the only way for the Fed to “print more money” is to convince people to buy more T-Bills so that the Fed can afford to buy some of the older T-Bills back. It is intersting to note that the US government cannot buy back T-Bills simply by cranking up a printing press. If the government cannot afford to buy back T-Bills with tax money, it must convince the public to purchase new T-Bills by raising the interest rates. The US dollar in NOT a currency where paper money can simply be printed and distributed to the public.

One of the effects of having Japanese and Chinese purchase US T-Bills is that it allows the US government to increase the money supply the same amount. This lowers interest rates, increases the money supply, and is partly responsible for the credit boom we saw. These foreign investors lose big when the dollar gets devalued because of inflation.

I think the way this banking crisis will work out is that the Fed will have to raise interest rates on T-Bills to generate enough cash reserves to bail out the FDIC. THis increase in the T-Bill interest rates will drive up US interest rates in general, increase mortgage rates, drive down real estate prices, and attract more foreign investment. What is really wierd is that increasing the money supply should be an inflationary influence, but the effect of higher interest rates will also be a deflationary influence for real estate.

usctrojanman29 - 26 July 2008 05:40 PM

freedomCM - 26 July 2008 05:02 PM

should we start up a pool as to who goes down first:  Downey or WaMu?

Downey will go first, I’ll bet $100 on it.  I also think that Yineyard Bank will be right after Downey and then it will be WAMU’s turn.

In today’s LA times business section, Vineyard bank advertised a 3 month CD for 4.15% and a 6 month for 4.5% with only a $1,000 minimum.  Since they have an office in Irvine, I was going to ask if anyone had any information about them.

Failedagent - 27 July 2008 03:35 PM

I could be wrong, BUT the Fed cannot just print money on a whim. They have to buy T-Bills. For every T-Bill they buy they COULD print an actual paper dollar, but instead they issue an internal bank deposit (IBDD) which a bank COULD redeem for paper dollars. If my understanding is correct, the only way for the Fed to “print more money” is to convince people to buy more T-Bills so that the Fed can afford to buy some of the older T-Bills back. It is intersting to note that the US government cannot buy back T-Bills simply by cranking up a printing press. If the government cannot afford to buy back T-Bills with tax money, it must convince the public to purchase new T-Bills by raising the interest rates. The US dollar in NOT a currency where paper money can simply be printed and distributed to the public.

One of the effects of having Japanese and Chinese purchase US T-Bills is that it allows the US government to increase the money supply the same amount. This lowers interest rates, increases the money supply, and is partly responsible for the credit boom we saw. These foreign investors lose big when the dollar gets devalued because of inflation.

I think the way this banking crisis will work out is that the Fed will have to raise interest rates on T-Bills to generate enough cash reserves to bail out the FDIC. THis increase in the T-Bill interest rates will drive up US interest rates in general, increase mortgage rates, drive down real estate prices, and attract more foreign investment. What is really wierd is that increasing the money supply should be an inflationary influence, but the effect of higher interest rates will also be a deflationary influence for real estate.

Who is going to tell the Fed they can’t print, (electronically enter numbers on their computers)?  And who is going to penalize the Fed if they do exactly that?  Congress created the Federal Reserve and the Fed reports to Congress, but the Fed is not accountable to Congress.  The only thing Congress can do if the Fed breaks the rules of it’s charter is to pass a law.  And that would just be more closing the barn door after the animals are out.  My guess is the treasury dept. will print, (electronically), T-bills, the Fed will buy them, (with electronically created dollars), and the treasury will hand the money to the FDIC.  Just a guess.

McCain’s son allegedly just resigned from Silver Something Bank.

Didn’t Profette say something bad about this bank?  So maybe the
son is getting out before the old man is embarrassed.  Supposedly
he hasn’t be involved long enuf to be guilty of anything.

So, Calculated Risk points to an article in the WSJ today about Option ARMs exploding and its effect on First Fed. 

Funny thing is, sitting on my desk is a postcard from First Federal Bank of California announcing the opening of their new branch in Irvine on 8/13.  (There will be wine!  And hors d’oeuvres!)  Think they are trolling for deposits?  The WSJ piece was probably not the publicity they were looking for in advance of the new branch opening.

ABC123 - 27 July 2008 04:17 PM

usctrojanman29 - 26 July 2008 05:40 PM

freedomCM - 26 July 2008 05:02 PM

should we start up a pool as to who goes down first:  Downey or WaMu?

Downey will go first, I’ll bet $100 on it.  I also think that Yineyard Bank will be right after Downey and then it will be WAMU’s turn.

In today’s LA times business section, Vineyard bank advertised a 3 month CD for 4.15% and a 6 month for 4.5% with only a $1,000 minimum.  Since they have an office in Irvine, I was going to ask if anyone had any information about them.

My buddy works there and basically he mentioned that he wouldn’t be surprised if the bank gets taken over the Fed before year end because they’ve stopped commercial real estate lending.

So, our new cue to a bank’s demise is: Those offering the highest interest rates for savings are going under soon.

I wouldn’t necessarily say that high rates = going under, but I do remember when Indymac and Countrywide were advertising the highest interest rates.

Speaking of high rates, SharePlus Federal Bank advertised a 5% CD in the Irvine paper.  Since the branches seem to be located in all of the Yum Brands corporate offices, I would say their depositor base is pretty strong.  One can never eat too much Taco Bell and KFC in times like these.

And voila! The LA Times is reporting today that Vineyard is in big trouble.

ABC123 - 07 August 2008 07:31 AM

I wouldn’t necessarily say that high rates = going under, but I do remember when Indymac and Countrywide were advertising the highest interest rates.

Speaking of high rates, SharePlus Federal Bank advertised a 5% CD in the Irvine paper.  Since the branches seem to be located in all of the Yum Brands corporate offices, I would say their depositor base is pretty strong.  One can never eat too much Taco Bell and KFC in times like these.

The SharePlus CD is limited to $5K.  Bummer…  I am still need to fire up a few more CDs.

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

tmare - 06 August 2008 09:28 PM

So, our new cue to a bank’s demise is: Those offering the highest interest rates for savings are going under soon.

Wamu is advertising all over the place with high interest savings accounts… so, if this holds true, Wamu will be next?

Girl In the OC - 07 August 2008 10:58 AM

tmare - 06 August 2008 09:28 PM

So, our new cue to a bank’s demise is: Those offering the highest interest rates for savings are going under soon.

Wamu is advertising all over the place with high interest savings accounts… so, if this holds true, Wamu will be next?

I don’t know if it’s really true, it’s just an obvious recent observation and we do know that WAMU is in trouble also.

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

ipoplaya - 07 August 2008 12:18 PM

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

I believe it does.

tmare - 07 August 2008 12:22 PM

ipoplaya - 07 August 2008 12:18 PM

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

I believe it does.

Guess I’m going to have to visit the branch and find out for sure.  The person that picked up the customer service line said that 4.5% 6-month CD is still a valid offering.

ipoplaya - 07 August 2008 12:31 PM

tmare - 07 August 2008 12:22 PM

ipoplaya - 07 August 2008 12:18 PM

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

I believe it does.

Guess I’m going to have to visit the branch and find out for sure.  The person that picked up the customer service line said that 4.5% 6-month CD is still a valid offering.

Let us know, I’m curious. Check out the story in the LA Finance Blog today though.

I think the article said they are just not allowing anymore brokered accounts arranged through financial intermediaries.

It’s pretty bad when (government) regulators have to tell you to find “experienced and competent individuals” to fill the CEO position.

tmare - 07 August 2008 12:38 PM

ipoplaya - 07 August 2008 12:31 PM

tmare - 07 August 2008 12:22 PM

ipoplaya - 07 August 2008 12:18 PM

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

I believe it does.

Guess I’m going to have to visit the branch and find out for sure.  The person that picked up the customer service line said that 4.5% 6-month CD is still a valid offering.

Let us know, I’m curious. Check out the story in the LA Finance Blog today though.

Story is here.  Looks like they would take and actually are striving to obtain consumer/retail deposits. I guess “hot money” are deposits arranged through financial intermediaries…

ABC123 - 07 August 2008 01:47 PM

I think the article said they are just not allowing anymore brokered accounts arranged through financial intermediaries.

It’s pretty bad when (government) regulators have to tell you to find “experienced and competent individuals” to fill the CEO position.

I’m thinking the extra $200 over the next six months vs. Countrywide probably isn’t worth the hassle of moving the funds when they go under…  Countrywide Bank is offering 4.1% on 7 months and IndyMac Federal amazingly is offering 4.15% on 9 months.  I can’t find much better out there.

ipoplaya - 07 August 2008 01:53 PM

ABC123 - 07 August 2008 01:47 PM

I think the article said they are just not allowing anymore brokered accounts arranged through financial intermediaries.

It’s pretty bad when (government) regulators have to tell you to find “experienced and competent individuals” to fill the CEO position.

I’m thinking the extra $200 over the next six months vs. Countrywide probably isn’t worth the hassle of moving the funds when they go under…  Countrywide Bank is offering 4.1% on 7 months and IndyMac Federal amazingly is offering 4.15% on 9 months.  I can’t find much better out there.

Downey Savings is now offering 4.15% on 6 months and Wamu 4.25% on 8 months.  Can’t find anyone else over 4% on a short-term CD…

Downey and Wamu are both supposedly in trouble. 

Man, you must be sweating ipop…..“where do I put it so it’s safe?“.... 

(mattress) 

Trooper - 07 August 2008 04:21 PM

Downey and Wamu are both supposedly in trouble. 

Man, you must be sweating ipop…..“where do I put it so it’s safe?“.... 

(mattress) 

I think the trick is Troop find the bank that is hurting but will survive.  I want ones that will sit on the bitter edge for the next year, offering up fat rates to depositors, but not going out of business…

Actually I don’t much care about them going under except for the hassle of moving the money if they do.  I am going to use Countrywide, OCTFCU, Downey, and Wamu to hold my cash, all with just enough that when the CDs mature they won’t quite hit the $100K FDIC insurance limit.  OCTFCU CDs opened last week and funded the Countrywide 7-month 4.1% CD today.  Gonna hit Downey tomorrow and open up a 6-monther.  Wamu is trying to attract deposits with a 3.75% savings account so I’m going to hold some cash there for a month and see if CD rates tick up more.

ipoplaya - 07 August 2008 01:50 PM

tmare - 07 August 2008 12:38 PM

ipoplaya - 07 August 2008 12:31 PM

tmare - 07 August 2008 12:22 PM

ipoplaya - 07 August 2008 12:18 PM

tmare - 07 August 2008 10:49 AM

Federal regulators have ordered Vineyard National Bank of Corona to stop accepting so-called hot-money deposits that are considered too risky for the money-losing bank.

Does that mean they won’t let me open up a $97.5K CD at 4.5%?

I believe it does.

Guess I’m going to have to visit the branch and find out for sure.  The person that picked up the customer service line said that 4.5% 6-month CD is still a valid offering.

Let us know, I’m curious. Check out the story in the LA Finance Blog today though.

Story is here.  Looks like they would take and actually are striving to obtain consumer/retail deposits. I guess “hot money” are deposits arranged through financial intermediaries…

Hot money is a brokered deposit or as Ipo said, “ arranged through financial intermediaries”, and usually goes wherever the highest interest rates are being paid.

ipoplaya - 07 August 2008 01:53 PM

ABC123 - 07 August 2008 01:47 PM

I think the article said they are just not allowing anymore brokered accounts arranged through financial intermediaries.

It’s pretty bad when (government) regulators have to tell you to find “experienced and competent individuals” to fill the CEO position.

I’m thinking the extra $200 over the next six months vs. Countrywide probably isn’t worth the hassle of moving the funds when they go under…  Countrywide Bank is offering 4.1% on 7 months and IndyMac Federal amazingly is offering 4.15% on 9 months.  I can’t find much better out there.

IndyMac is probably one of the safest places you can keep your money right now.  I am not being sarcastic.  If you open a CD with IndyMac, you are actually opening a CD with the FDIC and whomever the FDIC later decides to transfer your deposit to.