Gretchen
12-02-2007, 01:37 PM
hmm. i have a citi credit card. I wonder if they will sell my debt elsewhere? It happened to my other card once- got sold to BoA
I'm in the same boat. I have an interest checking and savings with a good rate with them. My oldest (and most used) credit card is with them. I like citi because I can get 4.5% interest on my savings accounts instead of a paltry 0.7% like most other large banks.
I'm debating if its worth switching. I travel a lot and want a bank with online checking and one that I don't have to worry about if I'm without internet for a week.
I'm finally trying to do my finances the right way next year and I was just trying to hook up Quicken and open a new savings account with Citi today when I saw this thread. I'd rather switch banks now than find out Citibank is going to have serious issues in the future and have to pull money out then. I have a good chunk in savings but I'm an investment newbie (yes, I'm reading Dollar Den religiously ;D) I figure if I start now (I'm 21) being frugal with savings I'll be ok in the long wrong. Starting in January ill be stripping full-time and traveling instead of just doing it for spare cash outside of school. I want to start everything out on the right foot and do my taxes the correct way.
/end threadjack
Any ideas as to a good, stable bank that I can count on and can help me with investing? Should I use a credit union and a large bank (Wachovia, Wells)?
Or should I just stick with Citi? I like them but I'm thinking I should take preventative measures before I succumb to this death pool.
StrawberrySwitchblade
12-02-2007, 01:59 PM
I have student loans through Citibank. Should I be worried? :(
Melonie
12-02-2007, 06:00 PM
at this point, the $7.5 billion dollars worth of 'money from Allah' has covered 50% of Citi's 'KNOWN' short cash position, and their 4th quarter business profits will probably cover the other 50%. But the 50 billion dollar question is how much farther Citi's 'subprime' exposure might actually go beyond the $15 billion they have admitted to.
as to Wachovia ...
(snip)"Lee wasn't worried about the institutions' bottom lines. His criticism was that Bank of America and Wachovia, along with other Wall Street firms, were helping boost the subprime lending industry by creating an investment market for the loans. Now an increasing number of these subprime borrowers face payments they can't make and foreclosure on their homes.
Of his concern, he said: "I hate to say it's been validated."
Subprime timeline
• June 2000: Wachovia predecessor First Union says it will shutter subprime lender The Money Store.
• August 2001: Bank of America says it's getting out of subprime lending.
• June 2004: Wachovia says it's buying SouthTrust, which comes with subprime lender EquiBanc Mortgage.
• Sept. 2005: Wachovia says it's buying autolender Westcorp and mortgage lender AmNet (now Vertice). Both made some subprime loans.
• Jan. 2006: Wachovia stops making subprime loans through AmNet.
• June 2006: Wachovia says it's selling HomEq Servicing, a Money Store remnant that administered payments on subprime loans.
• Dec. 2006: OwnIt Mortgage Solutions, a subprime mortgage lender partially owned by Bank of America, closes.
• Jan. 2007: Wachovia closes EquiBanc.
• Nov. 2007: Wachovia says it expects a $1.1 billion writedown to fourth-quarter earnings because of subprime-related investments. Bank of America says it expects $3 billion in subprime-related writedowns."(snip)
as to Wells Fargo ....
(snip)" Wells Fargo has so far avoided some of the pitfalls of other mortgage lenders. The bank said it wasn't offering exotic home loans such as option adjustable-rate mortgages, which allow borrowers to choose to pay less than the monthly minimum. It did offer mortgages requiring little or no proof of income, but only to more creditworthy borrowers, the company added.
That's been reflected in Wells' share price, which was in positive territory through early October this year as stocks of rival mortgage lenders plunged.
However, Wells did buy mortgages originated by outside brokers and other firms. It also bought second mortgages that stood behind home loans originated by other lenders and brokers, rather than its own loans. These are the types of home loans that have triggered Wells' $1.4 billion provision.
Chart of WFC
Wells Fargo shares have slumped roughly 20% since early October.
The $11.9 billion of home loans that were acquired through outside sources will now be liquidated. They represent roughly 3% of total Well Fargo loans outstanding, but are the riskiest held by the bank's National Home Equity Group, the company said.
Wells Fargo will now stop many of the practices that left it holding these types of home loans.
It will stop originating home-equity loans through wholesale sources like mortgage brokers where the combined loan-to-value ratio of the first and second mortgages is 90% or higher, or where the second mortgage is not behind a Wells Fargo first mortgage.
The bank already has stopped buying home-equity loans through so-called correspondent relationships, which include other financial institutions and mortgage companies.
What Wells didn't do
Wells Fargo Chief Financial Officer Howard Atkins also reeled off a list of other problematic credit-market products and activities that the bank mostly avoided in recent years while some rivals piled in.
The bank has "minimal exposure" to collateralized debt obligations, or CDOs, and it didn't sponsor any structured investment vehicles, or SIVs, to hold assets off its balance sheet.
CDOs are a bit like mutual funds that buy asset-backed securities, including those backed by mortgages. SIVs are funds that helped several large banks including Citigroup Inc. make money on the difference between yields on short-term and longer-term debt, while not using precious capital from their balance sheets. SIVs have bought CDOs and mortgage-backed securities.
As delinquencies and foreclosures on subprime mortgages surged this year, some CDOs have been downgraded sharply and many SIVs have lost access to the short-term borrowing they needed.
Wells Fargo's Atkins also noted that the bank didn't take part in big leveraged buyouts that were financed with debt sporting fewer covenants for investors. Wells has never made a market in subprime-mortgage securities and it has little direct exposure to hedge funds, he added."(snip)
Essentially, any big US bank and most big European banks have a whole lot of risky loans and/or derivatives on their books ... so attempting to pick one over the other for potential risk is merely a matter of degree. From that standpoint, Wells Fargo's risk would SEEM to be lower than some of its competitors. But then again there's really no way to tell 100% since all of the big banks have not only had opportunities to cut CDO and SIV deals of their own, but have also inherited such deals as well as 'shaky' loans from other financial institutions that they have acquired along the way.
Another factor to consider is that while 'subprime' mortgage losses are the big news item right now. However, there are reportedly similar maelstroms brewing for 'subprime' car loans, 'subprime' credit card debt etc. From that standpoint, banks who escaped some of the mortgage default losses may be in line for car loan losses and/or credit card losses yet to come !
As to credit unions, as long as they are somewhat diversified in terms of membership and coverage aread they probably present a more stable banking institution than the major US commercial / investment banks do ! The risk with credit unions of course is that some of them have heavy ties to a single large employer or to a single city, such that a localized economic downturn could cause MAJOR damage ! The scenario of course is that 25% of credit union members could lose their jobs all at once if a major local employer closes down a factory, or that a lot of the mortgage equity held by a credit union (or sold by a credit union to the secondary mortgage market, which the credit union could be forced to buy bank) could vanish if a local real estate market totally tanks.