The Wall Street Journal-20080113-Tip of the Week- How to Find Top Interest
Return to: The_Wall_Street_Journal-20080113
Tip of the Week: How to Find Top Interest
It may sound crazy, but consumers shopping around for attractive savings rates might want to consider companies that are knee-deep in the subprime mortgage mess.
Countrywide Financial and E*Trade Financial, both hurt badly by the credit crunch, have recently been offering some of the best rates around on money-market accounts and certificates of deposits.
Even as Bank of America announced plans on Friday to buy Countrywide for $4 billion in stock, both Countrywide and E*Trade were offering some bank products yielding 5% or more -- well above the Federal Reserve's target short-term interest rate of 4.25%.
The reason? They need your deposit money to make loans to borrowers. Those deposits are a cheaper funding source than certain types of borrowing, particularly for companies that are in financial difficulty.
Although Countrywide (countrywide.com) is primarily a mortgage lender and E*Trade (etrade.com) primarily an online broker, deposits at their banking units -- like more traditional banks -- are insured by the Federal Deposit Insurance Corp. up to specified limits.
"As far as safety goes, your money is as good as if it was at any brick-and-mortar bank out there," says Randy Rosen, deposit research manager at Informa Research Services in Calabasas, Calif.
