Ally Bank (formerly GMAC Bank) - an internet bank with good rates on money market and CDs

So, do I have this sequence of events correct?

1) The ABA writes a letter condemning Ally's rates.
2) The FDIC responds by introducing rate caps for poorly-capitalized banks.
3) It turns out that Ally is well-capitalized and the caps don't apply to them.

This seems downright weird. I would think the ABA could have looked up Ally's capitalization information before they started lobbying, and worked up a better argument.

The rep told me they are back logged on processing new no-penalty CDs due to a huge response when I opened three no-penalty CDs yesterday. I did write a note to the ABA protesting their attempt to bring Ally into line with other banks that pay next to no interest on savings, money market accounts and CDs. May Ally succeed and grow exponentially and the cheap banks attract no one.

Okay I thought I knew what was going on but now I'm confused. I must be missing something. I thought GMAC was found to be under capitalized in last month's stress tests.

http://blogs.reuters.com/felix-salmon/2009/05/07/the-stress-tests-biggest-loser-gmac/

Did something change in the last 4 weeks?

Edited to fix link.

kettledrum said: Okay I thought I knew what was going on but now I'm confused. I must be missing something. I thought GMAC was found to be under capitalized in last month's stress tests.
The stress tests were a Fed effort that "allowed supervisors to measure how much of an additional capital buffer, if any, each institution would need to establish today to ensure that it would have sufficient capital if the economy weakens more than expected." The FDIC definitions of capitalization levels are based on analysis of current values of assets and liabilities, weighted for risk. So, a bank could be well capitalized by FDIC measurements, but have a collection of assets that would do badly enough in the Fed's worst-case scenario to be considered a risk.

ThePessimist said: kettledrum said: Okay I thought I knew what was going on but now I'm confused. I must be missing something. I thought GMAC was found to be under capitalized in last month's stress tests.
The stress tests were a Fed effort that "allowed supervisors to measure how much of an additional capital buffer, if any, each institution would need to establish today to ensure that it would have sufficient capital if the economy weakens more than expected." The FDIC definitions of capitalization levels are based on analysis of current values of assets and liabilities, weighted for risk. So, a bank could be well capitalized by FDIC measurements, but have a collection of assets that would do badly enough in the Fed's worst-case scenario to be considered a risk.

So it's an apples to oranges comparison then. I see. Thanks for the clarification!

I applied for a new no-penalty CD on Monday. Interestingly, the CD funded on Tuesday, but the funds didn't debit from my Alliant account until today (Wednesday). It seems that the CD funding is different from savings account funding, and you can actually gain a day of interest.

The next time I open one, I'll apply on a Thursday. Maybe my CD will fund on Friday, and my Alliant account won't debit until the following Monday.

ThePessimist said: I applied for a new no-penalty CD on Monday. Interestingly, the CD funded on Tuesday, but the funds didn't debit from my Alliant account until today (Wednesday). It seems that the CD funding is different from savings account funding, and you can actually gain a day of interest.

The next time I open one, I'll apply on a Thursday. Maybe my CD will fund on Friday, and my Alliant account won't debit until the following Monday.
In my limited experience with CDs, I've found that they start to accrue interest on the day I've opened them, even if the check hasn't cleared yet, or the ACH funding hasn't been received yet. Perhaps it has to do with the fixed-length term of the CD. For example, if you've opened a 90-day CD, that means that you'd earn interest for the full 90 days from the date of opening. Just a guess, though.

mrvirgo said: I opened three no fault CDs on Tuesday (6/2) over the phone with a rep's help. On Wednesday, the balance was zero for all three accounts, but I found the funding for the CDs in my Ally "pending transfers" which means the money will be pulled from Alliant by tomorrow, Thursday. The rep said the CDs begin to earn interest when the funding is in the CD accounts. It looks like I haven't lost a day's interest. I moved to Ally because my fear is that Alliant will continue to drop its rates. Now, at least, I'm locked in at 2.50% for 9 months unless I need the money.

Is there a reason you opened three CD's instead of one?

Yes. If I need some fast cash, I can break one of the two small CDs leaving the other small one plus the largest CD to continue getting 2.50%. If I had one single large CD and suddenly needed say 5K, I'd have to cash in the entire amount. Who knows what the rate will be in a few months? By setting up three I can guarantee myself that the remaining CD(s) will grow at 2.50%.

Savemeister said: According to the Bankrate.com website rates will drop tomorrow(6/05/09)on the Online Savings: 2.25% > 2.05% APY

Also, it looks like CD rates will fall as well......better open account tonight if you want the better rates!

ally 1 year CD: Currently 2.80% > 2.49% effective 06/05/2009 other terms also going down.
How does Ally determine the CD rate? Is it on the day the CD is opened or on the day that the CD is funded? If it is determined on the funding day, it would be too late unless the money is already sitting in one of Ally's savings account.

If this yield curve keeps getting steeper it's only a matter of time for the ST yields to follow one would only think. I kind of hoped we had seen the last of the rate drops...

(setting aside the latest ruling on caps to start next year)

I opened a penalty free CD tonight @ 2.5% APY in order to get in before any rate changes. I'm guessing that even though the ACH funding hasn't gone through I'll still get the 2.5% since that was the rate tonight?

scanchain said: mrvirgo said: When I opened my 3 no fault CDs on Tuesday, the rep said they would start to earn interest on the day they were funded. They were indeed funded today, Thursday. However, it can't hurt to call and see if there's a way to still open and fund a CD. Ally normally has changed its rates on Fridays.
I opened two no fault CDs when it first started 2 weeks ago. This morning, I opened another. I will keep my fingers crossed to see if I can get the higher rate.
Just saw that my no penalty CD was funded and the APY is 2.3% instead of the 2.5%. Missed it by 1 day ...

Just remember:

- same old cow, different skin.

pcassell said: Yeah looks like I got in @ 2.3% even though it said 2.5% earlier. Oh well, still good.

Give them a call! I had this happen to me back in january when I opened a new CD on a thursday and the rates changed the next day. I called, and within a few business days they corrected the rate back to the original rate that was applicable when the account was opened.

Not really. As far as I remember, Ally's policy has always been that the date the account gets funded is the date the interest rate takes effect.

alright well looks like i'll be closing the accounts then. Good thing they are no fee!

I was hoping the 2.8% rate on regular CDs would last 11 more days when my CD rolls over

At least I had sense enough to put all the rest into no-penalties yesterday. Who knows, inflation may kick-in in a few months. And I'm completely liquid in case I want to switch to Alliant. Prolly won't. I doubt they will be any better. And I feel loyality to GMAC since they've have been so good for so long.

oopsz said: I don't think they've mis-priced it- GMAC/Ally needs capital and this is an attractive way to inject some. They've matched the high savings account rate with a slightly more captive product making it more attractive for investment. If you start with the assumption that rates are going to decrease steadily over the next nine months, then this is a smart way for Ally to increase their deposit base and it's a smart way for chasers to lock in a high(ish) rate

Actually, if they drop the CD rate accordingly (ie, if the high rate next month is 2.25% and Ally reprices their CD at that rate), this will keep on attracting capital. People who got in this month will congratulate themselves and people who get in next month will be happy to have that month's high rate locked in.

The more I think about it, the more I think it's a compelling product for rate chasers and a smart product for Ally.

I'm quoting myself because I think this is going to dictate future rates.

Looking around, the no penalty CD still beats the high liquid rate at alliant and is very competitive with other CDs, liquid or not. I'm going to bet the ally no penalty CD is going to closely match high online savings rates.

scanchain said: scanchain said: scanchain said: mrvirgo said: When I opened my 3 no fault CDs on Tuesday, the rep said they would start to earn interest on the day they were funded. They were indeed funded today, Thursday. However, it can't hurt to call and see if there's a way to still open and fund a CD. Ally normally has changed its rates on Fridays.
I opened two no fault CDs when it first started 2 weeks ago. This morning, I opened another. I will keep my fingers crossed to see if I can get the higher rate.
Just saw that my no penalty CD was funded and the APY is 2.3% instead of the 2.5%. Missed it by 1 day ...
I just received a secure email from Ally. It appears that they are going to give me the 2.5% APY for the no-penalty CD. I funded using ACH.

By the way, the CD funding schedule using ACH pull is typical of the former GMAC's money transfer timeline : if you submit a pull on Thursday, the CD gets funded on Friday but money only leaves the external bank the following Monday.

I had a No Penalty cd that I started a couple of days before which gave me an error message during the creation process. They sent it to a review department and I got a call back this morning stating that they would honor the previous cd rate. I'm impressed that they are trying to do the right thing when changing rates. The FDIC arm twisting is BS.

If you had an in process CD request that was held up for an exceptional reason, it might pay to give them a call and ask, they will probably try to do the reasonable thing.