In Citigroup, Chase, Bank of America CD Ripoff I talked about guaranteed to blow up Borrow-Short Lend-Long strategies that banks are using.

I also talked about absurdly low CD rates offered by Bank of America, Northern Trust, JPMorgan Chase, and Citigroup.

Here is the pertinent snip regarding CDs with a couple additions in brackets.

According to Bankrate, national average for 5 year CDs is 1.61% and the rock bottom low is .95%. The site average is 1.98% and the top yielding 5-year CD yields 2.75%. Thus Citigroup’s claim of competitive rates is absurd.

[Citigroup 5 year CDs yield 1.5%]

Although Bank of America makes no such claims, its CD rate is priced so preposterously low, that Bank of America must not even want to deal with them.

Alternatively, B of A has an incredibly large pool of moronic depositors begging to be ripped off.

[Bank of America 5 year CDs yield 0.95% (annualized monthly not daily to extract every possible cent from its clients it is blatantly ripping off]

In response to the possibility that “Bank of America has an incredibly large pool of moronic depositors begging to be ripped off“, I received this email from a reader.

Hi Mish

I’ll tell you what fools buy Bank of America CDs at less than treasury rates. Little old ladies do. B of A has found that little old ladies will do just about whatever a good looking middle aged “financial advisor” tells them to do.

My mother-in-law complained about the value of her investments falling, and I found that they had split her $125,000 investment into three parts. $50k was in an account that paid 0.05% interest. Yes, the decimal point is in the right spot. 50K was in 20 year Freddy Mac bonds and 25k was in 30 year Fanny Mae bonds.

I hit the roof! I told her that all three investments were a bad idea, and that she ought to move her money to 3, 5 and 7 year treasuries. Fortunately she is taking my advice.

She called the bank, and the nice man explained to her that the up and down in valuation didn’t matter since she’d get all her money back at maturity.

The bonds will mature around her 110th and 120th birthdays.

I believe that B of A’s “financial advisors” serve only the interest of the bank. They seem to me to be more than willing to complete the screw job to those on fixed income that Bernanke has started by pushing interest rates so low.

Best Regards,


Culture of Greed, Arrogance, Incompetence

Telling someone not to worry about losses on assets held to maturity, when maturity would put an investor at age 110 or 120 is either gross incompetence or gross greed.

I am quite sure that Bank of America will offer some nonsense that this is an isolated case not reflective of their desire to blatantly rip off its client base. Yeah right. Offering CDs at .95% annualized monthly instead of daily (to extract every possible last cent) is proof enough of what they are doing.

By the way, this is exactly why banks do not want tighter regulation regarding fiduciary responsibility.

If you have an elderly parent or grandparent with money tied up in CDs or in investments at Citigroup, Bank of America, JPMorgan Chase or for that matter any place, please do what you can to make sure they are not being ripped off and their investments are suited to their age and risk tolerance.

Mike “Mish” Shedlock
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