Best Savings Account Rates - Everbank 2.25% APY, Southern Community Bank 2% APY

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The best savings account rates remain near the 2% range this week. Everbank tops the list with their guaranteed 2.25% 3-month promo rate for new money. Southern Community Bank has the highest non-promo rate with their Ready Saver Account.

The best savings and money market account rates remain near the 2% range this week.

Everbank tops the list with their guaranteed 2.25% 3-month promo rate for new money. Southern Community Bank has the highest non-promo rate with their Ready Saver Account, offering 2%.

I've liked the the Everbank account for new money for several reasons. It comes with a 3-month rate guarantee. So, it's an essence a liquid 3-month CD. The top 3-month CD rate is only 1.10% APY. Anyone considering a 3-month CD should be putting their money into the Everbank account. After 3-months, the rate drops down to 1.25% APY. The blended 1-year APY is 1.51% APY. That's not bad but it's the 3-month boost I like the best.

Southern Community Bank's 2% APY is well above the average BestCashCow savings rate of  1.46% APY. Other banks above the average include:


Bernanke Says Interest Rates to Stay Low for Extended Period

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In the Fed's semiannual report to Congress, Chairman Ben Bernanke reiterated that rates will stay low for an extended period. How long is an extended period? Certainly through 2010 and perhaps longer in my opinion.

Here's what Bernanke had to say in his prepared statement:

“Although the federal funds rate is likely to remain exceptionally low for an extended period, as the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures."

In other words, rates are staying rock bottom until the economy shows that it has some life. And that certainly hasn't happened recently. In his remarks, he said that much of the pick-up at the end of last year was attributed to companies repleneshing inventories and not due to an increase in demand.

“As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services,” he said.

There were a couple of very interesting and almost humorous exchanges, humorous in a pathetic way. Ron Paul, the arch-nemesis of the Fed insinuated that the Fed had helped finance the 1972 Watergate break-in as well as bankrolled Saddam Hussein. Bernanke replied:

“The specific allegations you have made are absolutely bizarre. I have no knowledge of anything remotely like what you’ve described.”

Both the allegations and the response made me chuckle.

And then I also sat and watched as Congressmen and Congresswomen botched basic economics, confusing the Discount Window with the Federal Funds Rate. One representative (a woman whose name I did not catch) kept pressing Bernanke to release the names of banks who borrowed from the Discount Window in the name of transparency. That of course, would defeat the very purpose of the Discount Window,which is to help stave off a financial panic. What bank is going to borrow if the fact they are borrowing becomes public knowledge?

It's sometimes scary to listen to the testimony and realize just how little our legislators understand how the financial system works.


Is your Banker/Financial Planner Loyal?

Is your Banker/Financial Planner Loyal?

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Following a mass migration of brokers from Merrill Lynch after the buyout by Bank of America, some high-ranking executives and brokers are returning. Is this an exhibition of disloyalty and conflicts of interest between brokers and you, the client?

The financial world, and banking in particular, is built on trust. An evaporation of trust, no matter how good your liquidity or credit might be, results in bankruptcy (just ask Lehman Brothers). Loyalty, however, appears to be a quality in shorter supply than Federal surpluses.

I read with disapproval recently a report in the Wall Street Journal with the following content:

“Sam Chapin and Todd Kaplan, who left Merrill Lynch & Co. amid an exodus of top investment bankers as the securities firm was sold to Bank of America Corp., are returning to their old firm, according to people familiar with the situation. The pair were among a large group of veteran investment bankers and top executives who bolted before and after the deal was completed at the start of last year.”

After the sale of Merrill Lynch to Bank of America, an entire host of financial advisors and investment banking staff left the firm. A lot of them joined rivals including Smith Barney, which was ironically also sold, to Morgan Stanley. During the darkest days at Merrill Lynch, the exits compounded the situation and left very many clients in the hands of new brokers when they would least afford it.

At the time, Merrill Lynch head John Thain was fired after spending ridiculous amounts redecorating his office. Former Merrill Lynch President Greg Fleming, who played a central role in the firm’s survival and subsequent sale, also left for Morgan Stanley. Thain, a former NYSE Chief Executive Officer, is now at CIT Group, which recently emerged from bankruptcy. His office decoration costs have yet to be disclosed.

In order to lure more brokers back to Merrill, the firm set aside $4 billion in compensation, which is apparently similar to 2006 levels. The firm has also managed to slow down the huge number of exits. It’s unclear whether or not the record high compensation had anything to do with that.

Brokers are free to move between firms and often take their clients with them. However, a broker moving from Merrill Lynch to Smith Barney is going to come under considerable pressure to change the portfolio of his client from Merrill products to those provided by Morgan Stanley. In that case there is a definite conflict of interest - the broker is chasing higher commission and compensation versus the best interests of their client.

While this is no new phenomenon when it comes to the provision of financial services and the brokerage industry in general, it’s crucial that you establish and iron out any conflicts that arise. A broker is employed by a big firm to sell you products that meet a specific need, but at the end of the day they operate out of the profit motive. Merrill is posting big profits not because they have a big client base. It’s because they have a big client base that pays them big fees. The same can be said of Smith Barney and all the other big firms that pay exorbitant bonuses based on no loyalty at all.

If you are unable to mange your own finances and require the assistance of a financial planner, always ensure that your interests are aligned with his. A classic “deal-breaker” would be to question why you have in your portfolio a security issued by his employer firm over that of another firm. It the answer is because it’s a better product, be warned – it probably pays a higher commission too!