Every crisis brings opportunity, and today’s credit crunch is no exception.
Some banks are hurting so badly for funds that they are offering terrific deals to ordinary depositors.
Like Seattle-based bank Washington Mutual. It’s been one of the worst hit by the housing and mortgage collapse. It’s taken billions of dollars in losses and the shares have crashed more than 90%.
But you don’t need to go to Wall Street to make money off the company’s distress. You can just open a Certificate of Deposit.
Washington Mutual’s offering a remarkable 4.9% interest rate on one-year CDs. You have to apply online to get the deal. But the minimum deposit is just $1,000. And unlike stockholders and bondholders, your money is guaranteed by the federal government. The CDs are insured by the FDIC up to $100,000 per depositor.
This kind of deal should not really be a surprise. That money’s a cheaper way for WaMu to get its hands on some much needed cash than it might find in the stock or bond markets.
And it’s not alone. Banks everywhere are feeling the strain. Credit markets have run dry. Anyone with cash is in a lender’s market, and that includes you and your Aunt Sally.
I wouldn’t really want to lock up my money for five years, but it’s worth pointing out these CDs are paying a more than 3.05% offered on five-year Treasury Notes. Money parked for five years at 5% will gain 28% before tax.
As always, you need to check the fine print on any deposits, including minimum deposits, withdrawal penalties, and other terms and conditions.