Tuesday, November 18, 2008

Bank Distress

I'm a little confused, and have drawn the conclusion that certain banks are still under considerable distress.

The Fed Funds Rate target is 1%
3-Month Libor is 2.22%
Prime is 4.0%
(All three according to Bloomberg.com as of today.)

I can get FDIC insured CDs for
3.41% APY for 3 months at GMAC
4.00% for 6 months at HSBC-Direct
4.00% for 12 months at ING-Direct
4.25% for 12 months at GMAC

(GMAC rates from Bankrate.com, HSBC and ING from their websites.)

CD rates are typically close to the Fed Funds rate, usually below it. Banks are screaming out for increased deposits. For investors looking to stash less than a quarter million at a time, CDs are still very attractive, so I'm not anticipating a huge flow of funds into stocks or commercial bonds until this changes.

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