I Asked my Wells Fargo Branch about CDs with Higher Interest Rates. This is What Happened Next

Competition for cash is returning for the first time in 9 years, and banks hate it.

Wells Fargo is one of several banks I do business with. OK, I know. It handles my corporate stuff, including payroll and quarterly filings. It has never tried to cross me, and its employees are nice, though they did try to sell me all kinds of crap, but that stopped after the fake-account scandal. But this is about how badly Wells Fargo needs the cash from new deposits, why it is willing to pay more for it than other banks, how stingy it is with its own clients, and how competition is returning to cash for the first time in nine years.

There is a newly competitive slugfest going on at brokers where banks, even the biggest banks, are competing with each other, to sell FDIC-insured CDs to the broker’s customers, and thus attract new deposits. They do so in a competitive market place where the broker sorts each offer by duration and by interest rate, with the best deals on top.

And Wells Fargo’s CDs are now consistently at the top at my broker, including today, in all four duration categories I checked:

  • 13 months CD: Wells Fargo offers 2.25% (same as equivalent US Treasury yield); next in line Bank of China with 2.15%.
  • 25 months CD: Wells Fargo offers 2.75% and monthly interest payments; next in line Morgan Stanley with 2.75% but semiannual interest payments; next is Ally with 2.70%.
  • 36 month CD: Wells Fargo offers 2.90% and monthly interest payments; next is Citi with 2.90% and semiannual interest payments. Next offer is 2.80%
  • 60 month CD: Wells Fargo offers 3.15% and monthly interest payments; followed by Citi offering 3.10%.

Clearly, Wells Fargo is trying hard to attract new cash, and it’s willing to pay top dollars to get it. This is competition.

But not on the Wells Fargo website – where it’s nearly impossible to find CD offers. I ended up having to use the search function. And this is what it showed:

  • 9-month CD “Special Offer” at “Bonus Interest Rate” of 0.35%
  • 19-month CD “Special Offer” at “Bonus Interest Rate” of 0.75%
  • To get over 1%, you have to go to a 58-month CD, a “Special Offer” at a “Bonus Interest Rate” of 1.05%.

These are the “special offers” where Wells Fargo is like trying really hard. Further down are the regular offers, for example, a one-year CD with non-special “Bonus Interest Rate” of 0.15%. In other words, Well Fargo isn’t going to pay its own clients for their money.

This made me even more curious.

I moseyed over to my branch and ask a banker about their CD offers. He came up with the same kind of no-nothing rates. I told him about the 2.25% 13-month CD Wells Fargo offers at my broker. Why not offer it to me right here if I agree to transfer money into my account to buy it?

His eyes lit up. I should open a Wells Fargo brokerage account, he said, transfer some money into it, and buy a Wells Fargo CD there. And the rates he came up with were better than those on the bank’s website, but still shitty and much lower than what Wells Fargo was offering me through my broker.

What’s amazing is how Wells Fargo shafts its own customers on interest rates, and at the same time, how it is highly motivated – even desperate – to attract cash in via CDs offered at other brokers.

This shows that there is something else going on: Competition for new cash – for the first time since 2009, when banks, under the tutelage of the Fed, banded together and agreed among each other to stop paying any measurable interest on deposits. Price fixing? Sure. But it was part of the official bailout. So no problem. The Fed promised the banks free money to increase their profits and use those profits to rebuild their capital. That was the official policy. Depositors were shanghaied into providing that free money to bail out the failing banking industry.

It moved the needle. In 2009, there were $7.5 trillion in deposits at these banks. Half of it was savings products. Over the  years, deposits have ballooned. The banks got to use those deposits essentially for free. And they lent out the cash at rates that could be over 20% for credit card loans.

But that period is over. Now that banks’ capital cushions have been rebuilt on the backs of savers, the Fed has stepped back as the chief organizer of this scheme and is allowing competition for cash once again. That’s what we’re seeing here.

And the Fed is raising rates, and banks have to scramble if they want to attract more cash. It’s painful for them. Free money was so nice and so easy. And Wells Fargo, given the public flogging it has been subject to, may have to try extra hard to compete for new cash. And that’s a great thing to see – that some modicum of competition, however much banks may hate it, is returning to cash, after nine years of centrally organized schemes to stifle it.

The surging costs of salaries, wages, and benefits make a combustible fuel for the Fed’s tightening machine. Read… Employment Costs Surge Most since 2008, Fed Raises Eyebrow 
 

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  96 comments for “I Asked my Wells Fargo Branch about CDs with Higher Interest Rates. This is What Happened Next

  1. Wisil
    Apr 28, 2018 at 12:36 am

    Wells Fargo has proven to be so corrupt that I suspect even if you buy one of their “new higher rate CD’s”, they will still find a way to take advantage of you somehow going forward. Their business model has been built on servicing their customers the way Babyface Nelson used to service banks.

    • Apr 28, 2018 at 1:16 am

      Seattle has severed ties with Wells Fargo for being so corrupt.. It always amazes when these banks avoid a RICO charge but they pay better bribes than the Mafia..

      • Wisil
        Apr 28, 2018 at 6:56 am

        I think the high rates are not so much to attract more deposits, than to attract more customers. No need to offer high rates to existing customers.

        This is similar to the drug dealer that offers free samples to new customers, but not existing ones that are already hooked.

        Wells needs to increase their customer numbers, and the profits will follow. If they have to lure in new ones with attractive CD rates, then they will do this. What amazes me is how few customers have left Wells despite all the bad press they have been getting. It would not suprise me if their current rates are not enough, they will increase them even further to hook more suckers (ahem, customers)

        • Apr 28, 2018 at 9:52 am

          Wisil,

          These “brokered CDs” are different.

          If you buy a Wells Fargo CD at your broker, you don’t become a WF customer and you don’t have any contact with WF. You’re just engaging in a transaction with your broker (same as you would if you bought stocks or bonds). It doesn’t matter which bank the CD is from. You’re the customer of your broker, not the issuer of the CD.

    • Frederick
      Apr 29, 2018 at 2:51 am

      The question one has to ask is “ Why would anyone continue to do business with this bank “ or any of the “ Too big to fail” banks for that matter?

    • Mike G
      May 4, 2018 at 6:52 pm

      I wouldn’t touch Wells Fargo with a 10-foot pole.
      Giving them your personal information to open an account would be like bathing in a sewer.

    • Charley
      May 5, 2018 at 5:04 pm

      Higher rates can also bring higher risk. Both have to be considered.

  2. Gershon
    Apr 28, 2018 at 1:11 am

    Sorry, but the banks are going to have to compete a lot harder for my cash, given that that even this touted 2.25% rate is well below the rate of real inflation, and the pathetic interest I do earn will be taxed by Uncle Sam. As long as the Fed’s War on Savers rages unabated, I’ll put my money elsewhere than in our TBTF banks.

    • Anon1970
      Apr 28, 2018 at 9:58 am

      As a former bank employee, I once attended a training class in which the presenters were members of the bank’s retail arm. Most CD buyers were older depositors who were not very rate sensitive and were a lot wealthier than the bank’s average retail customer.

      At the end of 2010 and early 2011, one could have locked income tax free yields of 6% or even 7% on investment grade bonds from a variety of California local government and agency issuers. Of course, most residents of the state either a) had no excess money or b) were too frightened to make such investments.

      • Apr 28, 2018 at 10:07 am

        If a muni pays a yield of 7%, you better check what’s going on so you understand the risks before you buy it. They can be good deals, if you understand the risks.

  3. alex in san jose AKA digital Detroit
    Apr 28, 2018 at 1:12 am

    Hmmm Treasury bonds or a ceedee from SmellsAFartBlow as a friend of mine used to call them… decisions … decisions…

    BTW I understand filing quarterlies but payroll? Is running a blog so labor intense that you actually have employees?

    • Apr 28, 2018 at 9:41 am

      Wolf Street Corp, my vast media mogul empire, is a California C-corp. It owns this website, as you can see at the bottom of each page.

  4. backwardsevolution
    Apr 28, 2018 at 1:48 am

    Worldwide collusion between central banks (U.S., U.K., E.U., Japan, China, Canada, Australia) to keep interest rates down.

    Collusion between the Federal Reserve and the big banks to keep interest rates down.

    All to bail out the banks.

    Wolf Richter, thank you for all that you do.

  5. raxadian
    Apr 28, 2018 at 2:00 am

    So, screw over your clients will you?

    Yeah that will totally work out!

    • Frederick
      Apr 29, 2018 at 2:53 am

      Seems to have worked out OK for Goldman Sachs They even bragged about it Some people are gluttons for punishment evidently

    • LessonIsNeverTry
      Apr 29, 2018 at 10:50 am

      They already have and it worked. Wolf didn’t even bring up the delayed foreclosures until the market was pumped back up or the removal of mark to market in this article. Vast wealth transfer from the public and other nations saved the banks.

  6. Steve clayton
    Apr 28, 2018 at 3:24 am

    Great article Wolf. Good news the banks are going to have to raise their game with their customers. Wells Fargo have 1.3 trillion in deposits, if they lost 5% of that deposit it’s a fair amount of money. The weaker banks it could be a perfect storm for them. Two things for certain the net interest margin figure going forward is going to be challenged and the banks are going to have to cut more cost out of their business.

  7. Jas
    Apr 28, 2018 at 4:21 am

    My personal favorite and most recent “scheme” was a little $10/month fee wells fargo started charging me a few months ago. I didn’t notice it at first and when I recently called them to complain and ask about the new service fee, I was told that it was a “mistake” and it was only supposed to affect customers that didn’t meet certain monthly deposit requirements. I clearly didn’t fall in that criteria and was refunded the “error”. Then, Just yesterday I was talking to a coworker about wells fargo and she started complaining that she was being charged a $10/month service fee and was thinking about switching banks. I told her my story and she said she’s going to call wells and get to the bottom of it. I have to wonder if this was just 2 curious coincidences or if it is something more sinister. Some companies never learn..

    • raxadian
      Apr 28, 2018 at 9:23 am

      Well, looks like thry really want to suicide themselves.

    • IdahoPotato
      Apr 28, 2018 at 10:13 am

      Ditto here. I changed my PMA account to a regular checking simply because I have Bill Pay set up. One more 10$ charge and I will shut that down too. I also moved my mid five-figure taxable brokerage account to another place. WF is shamless and remorseless.

      • IdahoPotato
        Apr 28, 2018 at 10:16 am

        BTW, I asked them to give me some incentive to move a mid six-figure account from Fidelity over. They emitted some b.s. about giving me free checks. I’m not sure they are interested in keeping customers.

    • chris Hauser
      May 1, 2018 at 8:29 pm

      i sold my wells stock because “i’ll just let warren deal with it.”

      when i go to various big banks, they ask me why i don’t have an account with them, my answer always is ……because.

    • Mike G
      May 4, 2018 at 6:55 pm

      Right, a “mistake”. Funny how their mistakes always put money in their pocket, not the customer’s.

  8. Realist
    Apr 28, 2018 at 5:14 am

    Where I live, one of the largest banks in that part of the world did ( are still ? ) systematically cheat oldsters luring them to switch their savings into paper issued by the bank in question, thus the oldster loosing sometimes significant amounts while the bank did rake in nice earnings on the shenanigan.

    I did run into this personally when I did accompany an old relative to a branch of that bank. My relative is still knifesharp in the head, but weak in the legs, has difficulties to move around. ( Btw strange that usually oldsters’ minds are stil sharp, but their legs soft or the other way around, soft in the head but legs in working condition )

    When my relative was about to complete the affairs for the day, the banker stated that there was reason to overhaul the investments of my relative, because they didn’t look all that great. Well, I was still loafing in the waiting area, waiting to bring my relative back home, so my relative did call for me to come up and give a hand. It was interesting how the tune did change at once the banker noticed that the banker wasn’t dealing with an oldster being alone, instead stated that things were looking good and that all were well handled ….

  9. mark
    Apr 28, 2018 at 6:01 am

    I think anybody doing businerss with Wells Fargo is nuts. If nobody makes an example of banksters screwing people, they’ll just keep screwing people. Duh

    P.S. Fat Warren has it coming

    • polecat
      Apr 28, 2018 at 8:40 pm

      Wells Fargo can go pound fools gold, for all I care ! They continue to shower ever greater amounts of gall onto their customers .. why hasn’t their charter been revoked ??

      • Frederick
        Apr 29, 2018 at 2:55 am

        Take a look at George Carlin’s “ Big club” video for your answer

    • chris Hauser
      May 1, 2018 at 8:31 pm

      brk owns the stock because it is a proxy for a margin above treasuries.

      warren ain’t fat, but he is flawed, like, well, just about everybody..

  10. Setarcos
    Apr 28, 2018 at 6:24 am

    How much have savers “paid” by not receiving any measurable interest on deposits for a decade. It could easily approach/exceed $1 trillion and that assumes a rate well below inflation. A FED-imposed tax. Meanwhile, the govt was busy creating even more moral hazard, which may ultimately carry a much higher price.

    As I read things that were written by the founders, it is apparent that a few of them were omniscient. Despite their efforts to build a fortress of a system to protect us (mainly from ourselves), we are like children making mud pies.

    • Anon1970
      Apr 28, 2018 at 10:05 am

      Would you have preferred that the major banks be allowed to go under? The FDIC insurance fund was never large enough to pay off all of the depositors of a major bank in full. Even limiting insurance payments to the maximum amount covered would have been very disruptive to the financial system.

      • Setarcos
        Apr 28, 2018 at 3:21 pm

        If I was in a position required to make that call at the time, it would have been very difficult – doubtful that I would have had the courage to make the right decision. The right decision would have been political suicide, perhaps simply suicide. But, while brutal in the short run, assets would have found a clearing price and the best of the best would have plotted the path forward. Instead, we rewarded many who put the system at risk to begin with. There will be a price to be paid for that, a bigger price, albeit later – I hope I am wrong.

        Plato and others have recognized that those who want power are rarely worthy to actually wield it. Serving the common good is doing what is actually needed, not what is convenient. When leaders say they are “humbled” by their offices, it should be more than tongue wagging.

        As far as the FDIC goes, it has been creating moral hazard from it’s genesis. Consumers keep deposits with banks that don’t deserve to be in business. Raise capital requirements, reduce leverage and stop providing razor blades and guns to small children.

      • van_down_by_river
        Apr 28, 2018 at 4:09 pm

        Yes, the banks should have been liquidated, share holders should have taken the hit and bank CEO’s and others, who committed bold fraud on a massive scale should have been sent to prison.

        Somehow we have decided it’s ok to commit fraud and steal money from working people and that’s just the price we must pay to keep the system running. I call B.S. on that! Wake up! The guys in power are making rent slaves out of a large swath of the population (including almost an entire generation). If the courts and regulators can’t or won’t administer justice then regular people must take action.

        Stop doing business with Wells Fargo and other big banks and stop buying crap from Amazon. Stop feeding the monsters – even if they don’t die they will at least be weakened.

        • Kraig
          May 2, 2018 at 8:16 am

          Note that this happened in a previous UK crash and led to Nationwide and other building societies (which were originally like local banks) getting big and well nation wide because they had not been dealing with the toxic assets.

      • sierra7
        Apr 30, 2018 at 9:58 am

        Anon:
        Oh my! I can’t believe you just posted that response……on this website!!!!
        Particularly when considering the results of the massive bailouts and the soft tone taken by the government when they bailed out the criminals. Most NOBODY was indicted for fraud…….recall the Savings and Loan mess where almost 1,000 officials were indicted and many went to jail and 5 senator careers were in jeopardy.
        And, when then Pres. Obama called for a meeting at the WH with the heads of the major banks….WF, BofA and others he had the opportunity to demand their immediate resignations but threw then a marshmallow instead.
        I would gently suggest a good read (out of the hundreds of books that have been since published on the crash of 08):
        “Wall Street and the Financial Crisis” (“anatomy of a financial collapse”). “US Senate Permanent Subcommittee on Investigations.”
        If there was enough money to bail out the criminals then there certainly would have been enough to make the victims whole.

    • Hirsute
      Apr 29, 2018 at 9:51 am

      Setarcos – only Kanye West is omniscient (/sarc) and you have an issues with the founders? Thank again. It was Alexander Hamilton (yes, that guy on Broadway) that wanted a central bank from the start. Thankfully Jefferson and Adams shut him down. Jefferson is not en vogue with the coastal elites because of Sally Hennings and I’m not here to get into any factual or moral arguments about that, but he opined greatly on the evils of bankers:

      “If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

      “I believe that banking institutions are more dangerous to our liberties than standing armies.” –Thomas Jefferson

      “… The modern theory of the perpetuation of debt has drenched the earth with blood, and crushed its inhabitants under burdens ever accumulating.” -Thomas Jefferson

      “History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.” -James Madison

      “If congress has the right under the Constitution to issue paper money, it was given them to use themselves, not to be delegated to individuals or corporations.” -Andrew Jackson

      • Setarcos
        Apr 29, 2018 at 3:38 pm

        Hirsute, i think you misread what I wrote. I said a few of the founders were omniscient. I would not put Hamilton in that category either.

        The most important things have never changed, so much of what they wrote about then is still very applicable today. Your quotes from Jefferson are a good example.

        It is in vogue to select a few things out of context and use those to discredit many of them. Some never understand what they have til it’s gone.

  11. Setarcos
    Apr 28, 2018 at 6:40 am

    Anyone here with insight into why Wachovia (now a large part of Wells) was not rescued like so many other banks were? Other than them buying Golden West with their pick a payment mortgage portfolio, Wachovia had been a fairly well respected bank.

    • Suzie Alcatrez
      Apr 28, 2018 at 9:38 am

      There was a depositor run on Wachovia.

      I think Washington Mutual was failing at the exact same time.

  12. cdr
    Apr 28, 2018 at 7:11 am

    Once large banks stop earning lot of income from interest on excess reserves from the Fed, they might have incentive to raise funds from the public to earn from the net interest margin, just like banks historically did before the Fed decided to subsidize them with free money without the need for them to lend for business purposes.

    Until then, people will have to hunt for decent interest rates. They’re out there, but not for those who won’t make the effort. My MM fund is making 1.81% 7 day average. Some have check writing privileges. This is a little higher than many, but most are fairly close. Some have massive minimum deposit balances. Many don’t. Mine in nominal for IRAs, the everyday fund with a small minimum balance pays about 0.1% less. Keep looking.

    In a year or so after rates normalize and the resulting market shock has come and gone, I will move to bond funds with higher rates and risk, but still a lot of safety.

    The economy for the 99% will flourish from this cycle of income from earned/saved capital. The old Bernanke plan was to remove income from capital and replace it with the ‘wealth effect’ created by fake capital printed by the Fed and ultimately deposited in volatile asset markets, creating bubbles and the appearance of income from capital. Besides being highly deflationary from ZIRP (thankfully no NIRP here), it only spread the wealth to the upper 1%, ignoring Main Street. According to Bernanke, “the benefits outweighed the costs”.

    After this bad cycle of low rates and interest on excess reserves ends and the US flourishes from the positive feedback loop of interest income -> spending -> business expansion -> better jobs and higher wages -> more savings —> loop, we need to fire all the economists. Or at least publicly ridicule them all more harshly than the media hounds unpopular political figures. So much of their fake profession is only to justify massive fraud upon the public it defies common sense why anyone still listens to them.

    • cdr
      Apr 28, 2018 at 7:27 am

      Perhaps the Fed reducing the balance sheet will reduce the balance of excess reserves earning free income. I’m not smart enough to know this for sure, but it seems possible. Thus, it’s possible consumer deposit rates will rise, slowly, as the Fed sees the balance sheet get smaller and large banks will have to compete for funds with everyone else.

      At the very least, any fear that ‘the money supply will get too small’ by reducing the balance sheet should be calmed if the Fed stops IOER, putting cash once on reserve into the real economy, followed by a rising velocity of money as the economy expands from interest income generated by raising rates.

  13. Xypher2000
    Apr 28, 2018 at 7:16 am

    My friend had Wells Fargo in mid 2000’s, they would hold his credit card payment deposit so they could charge him late fee. He sent one payment in two weeks ahead of time and they still did it. After that, he was fed up and changed banks. They are nothing but corrupt. I use USBank and I have never had any issues.

  14. DK
    Apr 28, 2018 at 7:35 am

    I’ve had a Wells Fargo account for 30 years. I’ve always kept a close eye on it. Back in the late 1990s they tried some tricks on me and I called them on it and said “one more time, and I take all my money away. ” they never did anything again. Nowadays, I’m using credit unions for most of my money. It’s amazing to me what they’ve done and there’s been no criminal repercussions.

    • BradK
      Apr 28, 2018 at 11:33 am

      It’s amazing to me what they’ve done and there’s been no criminal repercussions.

      Well, there is that looming $1B fine on the horizon.

      • JimGraham
        Apr 28, 2018 at 5:55 pm

        Not anywhere near enough.

        X10 is probably not enough.

        No jail time = no real penalty for the management.

        • sierra7
          Apr 30, 2018 at 10:04 am

          No bankers in jail!!
          I’m shocked; SHOCKED!!
          LOL!!

  15. Paulo
    Apr 28, 2018 at 8:03 am

    After a 4 day fight with a large multi-national comm company I have finally come to the conclusion that many of these private institutions operate in a bubble of, ‘This is our job, and too bad we have to actually deal with customers….it’s just so tedius and irritating to provide service.’ There are several catch phrases involved as well: “It is our policy”, “We have to protect”…., (and my personal favourite) “You need to just”. Don’t forget voice mail holds with the accompanying music!!! It was only after I threatened going to a BC television show with my impasse, “Consumer Matters”, that the service gates opened.

    We are now in the resolution phase….I think.

    Nothing said about Wells Fargo sneakiness surprises me. It appears to be their culture and that always radiates from the top down. I am also in the process of switching out all my private insurance contracts to another smaller company that seems to want my business.

    People often complain about Govt. service agencies and yet I always find them to be courteous and helpful; very helpful. Compared to corporate dealings Govt is wonderful.

    • Silly Me
      Apr 28, 2018 at 8:50 am

      As long as you start the conversation with government workers by asking for their names and ID numbers, you are right, except for some tech companies’ custumer services.

      The local ISP is giving me internet and two landlines. Two years ago, they wanted to charge me $120 a month. I called them up, threatened them with switching (ISPs usually have monopolies in any given area, but based on my needs, I did have alternatives). They went down to $90 until two months ago, when they went up to $110. Gave.them another call and they went down to $60 once and for all (not a promotional rate, just slower internet, which is still lightning fast compared with anything ten years ago). This option, however, is not publicized at all. Apparently, they reserve it for customers who are fed up with their prices.

  16. Jon
    Apr 28, 2018 at 8:27 am

    In Canada, the banks usually ARE the brokerages and the same thing happens, lower rates at the branches, not just due to branch and staff overhead costs but also a premium because customers are less informed to shop around within the same bank. Amazingly I once heard about a branch staff recommending opening a brokerage account to get the better rate. This is mazing because the staff is hurting his own bread and butter to benefit the customer. Another interesting thing about CDs is they can also invert like the yield curve, they had in 2009. Sometimes it even occurs when the yield curve looks normal, presumably if there is more pressure for short term cash.

  17. Bruce T.
    Apr 28, 2018 at 8:48 am

    My CD’s from 2009 have worn out. Missing some good music now!!

  18. Silly Me
    Apr 28, 2018 at 9:06 am

    Switching banks costs time and money and banks know that. Big banks do my books at a lower rate (BofA does it for free for one person, at least, last time I looked), and small banks do not charge you for an account.

    My impression is that those with money don’t invest in CDs anymore. Who would like to have a bank sit on their US dollars, if they have a better option? There is uncertainty in the air about the hyperinflationary collapse of the dollar. It’s still probably too early to short it, but nobody can prevent the inevitable. China and Russia are now allies, thanks to US foreign policy, and they are too independent (Russia actually became mostly self-reliant, due to the sanctions) to be manipulated financially (well, China is more vulnerable, but so is the US) and too strong to intimidate militarily.

    Once the value of the printed dollars (issued by the Federal Reserve as a loan to the American taxpayer in order to finance domestic and global monetary manipulation and military intervention) stops securing inflation among the upcoming competition, the US, along with the value of the dollar, will be gone.

  19. Tequila
    Apr 28, 2018 at 9:18 am

    Do these high rate Cds by Wells Fargo sell at a premium to the face value, like Treasuries? Most do, in which case the actual rates are lower.

    • Apr 28, 2018 at 9:27 am

      You buy a newly issued CD from the bank at face value, and the bank redeems it at face value at maturity. That’s the characteristic of a CD. It’s predictable, and there is no price negotiation.

      However, if you buy/sell CDs in the secondary market at your broker, like you would buy/sell bonds — so not involving the issuing bank — you would pay/receive a negotiated amount, which could be higher or lower than face value, just like with a bond. In the secondary market, a CD trades like a bond.

      • Apr 28, 2018 at 9:35 am

        In other words, if you buy a newly issued 1-year Wells Fargo CD at your broker, you’re buying from Wells Fargo via your broker. You pay face value. If you hold it to maturity, on the day the CD is redeemed, the amount of the face value plus any interest shows up in your account as cash. It’s automatic and you don’t have to do anything.

        However, if you sell this 1-year CD six month into the term in the secondary market, you will receive a negotiated amount from someone on the other end. Your broker is just doing the brokering. There are fees involved too. Like with bonds, you generally sell at a premium if rates are falling, but you sell at a discount when rates are rising (as is the case now).

        • John M
          Apr 28, 2018 at 7:25 pm

          Wolf

          Everyone in the bond market has seen the 3% marker on the 10 Year treasury. Everyone was short. Two days ago the 10 year yields have started falling (and rising in price)

          Bonds are probably going to go a great deal lower in yield.. Faites vos jeux

          https://twitter.com/BChappatta/status/989955191612039173

          Chart

          http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=XX%3ATNX&insttype=Index&freq=1&show=&time=4

        • Apr 28, 2018 at 10:57 pm

          I wonder how many people on Wall Street have been through the last rate-hike cycle or two. Sure, there will be counter-reactions, and anytime there is a record net short positions on anything, it’s liable to bounce some near term. But “fighting the Fed” is a losing game when the Fed is determined to do something. And this Fed is determined to push up long-term yields and yield spreads. And it’s going to get this done.

  20. Anon1970
    Apr 28, 2018 at 9:47 am

    Stock brokerage commissions were opened up to competition in 1975, with interest rates on retail CDs being deregulated in the early 1980’s. Of course, lots of retail customers are woefully ignorant about personal financial matters. In the late 1970’s, Charles Schwab still had a shabby branch south of San Francisco’s Financial District, where elderly Chinese men would gather during trading hours and watch the ticker tape. Schwab grew rapidly, while most of the old line “full service” firms went out of business. Old line firms such as Bache and EF Hutton, both of which had survived the Great Depression, did not survive an increasingly competitive brokerage business.

    These days, most of the mailers related to financial matters that I get at home come from “financial planners” who sometimes call themselves “wealth managers”. They are usually peddling high commission variable annuities. All of these mailers go into the garbage.

  21. GSH
    Apr 28, 2018 at 10:17 am

    The broker does not usually charge for buying a brokered CD. There must be a kickback from the issuing bank to the broker. So the CD interest rate/expense to the bank is even higher than the quoted rate.

    • Apr 28, 2018 at 10:27 am

      I have two brokers: one of them charges a fee for CDs (maybe because it’s attached to my HSA account, and I’m locked in). The other, my main broker, doesn’t charge fees for CDs. But I agree with you, there is likely some kind of fee arrangement between the issuing bank and the broker.

  22. Apr 28, 2018 at 10:27 am

    There is a different degree of risk between a CD held at a brokerage, and a CD held at a bank, although that is not the case with Treasury bonds which have a cusip number. Does a CD have a cusip number? Well no probably not, and therefore if you buy at the WF Broker if the broker goes bust you stand in the same line with stock holders and while you might get your money, it might take a good bit longer and in a financial event a frozen account makes all the difference in the world.

  23. Apr 28, 2018 at 10:35 am

    Brokered CDs have CUSIP numbers, just like bonds.

  24. Bobber
    Apr 28, 2018 at 10:59 am

    Rates have spiked so much over the past six months, I wonder if it makes sense to withdraw old CDs early and pay the early withdrawal penalty. I did some quick math, and it makes sense to do that for several of my CDs that have a penalty that is less than six months interest.

    I assume the bank will try to make it very difficult for you to do that, administratively.

    The bank might also waive the early withdrawal penalty if you agree to purchase a new CD at that bank. No harm in asking anyway.

    • cdr
      Apr 28, 2018 at 5:28 pm

      “Rates have spiked so much over the past six months”

      Rates will rise before they go down. Your penalty is fixed. I would wait until rates look better and lock in a rate for a term you can live with. Costs vs benefits using the green eye shades. Spend the time exploring different types of assets you can deposit into, such as MM funds, various bond funds, and other CDs. Don’t cash out until you have a plan that is somewhat flexible in case things work out differently.

      At some point sooner than later, investments that relate to market rates will bounce a bit. Plan your plan with that in mind. I don’t know, personally, what’s best. I just have my ideas for me.

  25. SwimJon
    Apr 28, 2018 at 11:05 am

    The fact that the website and branch rates are much lower is due to Wells’ depositor segmentation strategy which is employed similarly by most all banks. A large percentage of CD depositors do not actively manage this investment and let it roll or make a weak attempt to move it into the banks latest special. These are core deposits of the bank that would be very costly to voluntarily reprice into higher rates. Branch managers are trained to grease the squeaky wheel when a depositor threatens to move the investment. They will usually offer a higher rate to retain the deposits. I would suspect managers will be given more leeway in coming months to retain hot money (i.e. active money managers).

  26. Karl
    Apr 28, 2018 at 12:28 pm

    Perhaps the banks could simply withdraw some of their excess reserves from the FED. I for one, buy treasures at auction for safe keeping at my broker.

    • Apr 28, 2018 at 1:06 pm

      I have always assumed that was as good as letting them hold the paper, and if bad things do happen and brokerage accounts freeze, will Treasury Direct stay open? I also assume TD will, and that a traditional broker is going to stay open longer than an online broker. If you buy Treasury paper and hold it at a broker you can use those assets in a portfolio line of credit. If your broker stays open and you want to buy stocks or RE at the panic lows you might have that leverage. No one really knows, but the levels of risk (with CDs or anything) is a decision you make, you want a higher yielding MM or a Treasury MM? I could never see chasing a half point when your capital could be lost in one investment, and held safe in another.

  27. Rg
    Apr 28, 2018 at 12:39 pm

    I live in the Charlotte area so what happens to Wells Fargo is always covered well by the local news media. What is amazing to me is that the local news show (WSOC-TV) interviewed several Wells Fargo customers in the parking lot of one of the bank’s local retail branches about a week ago. Both customers remarked something to the effect that Wells Fargo was corrupt/takes advantage of customers, etc. and that they thought the fines would have no impact on the bank’s bad behavior. I was thinking to myself… why would anyone bank with a company like this and how egregious does a bank have to be to make customers like this leave the bank? There would really have to be a significant barrier or incentive to get me to stay with them. Of course I “bank” with two credit unions.

  28. WST
    Apr 28, 2018 at 1:18 pm

    I currently have a Fidelity brokerage account that I self manage and it constantly has new CDs and new treasury offerings also with existing offerings. I am able to buy a new CD from 1 month maturity out to 60 months (no fees). I can also buy new treasuries from 1 month out to 30 years( also GSE’s’ corporate and municipal bonds). I receive an email every time the US Treasury announces a new round of bidding/financing. The new treasuries can be bought on a non competitive bid offering which is very close to the actual accepted bid spread. Right now the treasuries from 1 month through 1 year are yielding about 10 basis points more than the new CD offerings. All of the CD offerings are yielding more than any bank is paying. The account also offers a trading platform called Active Trader Pro with live streaming data at no charge along with another free product called Trade Armor. I also can trade options, which I don’t do.

    Why hasn’t Buffett come forward to address the problems at Wells Fargo? He has to have a few directors on the board. Not to long ago he had to reduce his holdings of Wells Fargo so Berkshire would not have to change it’s Wells Fargo ownership status to a holding company.

    I am really not trying to promote Fidelity but after hearing what your readers are saying I feel pretty fortunate right now. If you want to get the best CD rates, without using a brokerage account, I would try Connexus Credit Union by setting up an online account. They are very competitive and very easy to work with ( I currently have an account with them even though they are in a different state).

    Wolf, if you want to look at and investigate a former big time TARP bailout candidate (approximately $900 million in Fed TARP money) check out Synovus Bank. The share price went down to just a few dollars and the board did a reverse split to gain a controlling majority. The shares are now trading over $50. While you’re at it you may want to check out the CEO, Stellng D. Kessel. You can access the SEC filings online.

    Banksters…. Some will rob you with a six gun while Banksters rob you with a pen. Figures lie and liars figure…

  29. Maximus Minimus
    Apr 28, 2018 at 1:42 pm

    I always had the dangling carrot of putting money in term deposits, but could never make up my mind expecting the inflation to take off in a big way. And it did, only not where I expected it; the centrally planned housing bubble. The situation today is no different. Reason and prudence being banned, this centrally manipulated market can go anywhere. The CD rates might be up, but so is the fantasy inflation, which with tariffs may actually materialize.

  30. Eric Ma
    Apr 28, 2018 at 1:46 pm

    The higher interest rate of the CD could impact the investment housing market. When the CD can pay me 3% on interest. Why I have to buy an apartment building with similar return (Especially in bay area) and deal with all the tenant and maintenance issues?

    • Apr 28, 2018 at 4:46 pm

      Yes, this is a real problem in commercial real estate, where cap rates in many sectors and markets are at record lows. Why accept a 3% or less cap rate, and take all the risks, when you can get a nearly risk-free 3% via a 10-year Treasury? This thinking is starting shuffle the deck.

  31. vap
    Apr 28, 2018 at 3:07 pm

    Cd’s are not recommended by pros as you time up cash and if better rates come along your screwed.Money market funds or overseas bond funds pay over 6%.

    • Apr 28, 2018 at 4:50 pm

      Watch how you’ll get “screwed” buying overseas bonds yielding 6% when the dollar is rising. This is a high-risk maneuver. You’re taking big credit risks AND big currency risks. Which is OK if you want to take big risks. But this cannot be compared to a CD which are considered “risk-free.” IF a “pro” is mixing this up, dump the pro.

      • Vap
        Apr 29, 2018 at 11:44 am

        Many bond funds pay over 6%, that trade in the USA.
        CD’s are locked in so not good either.

        • Apr 29, 2018 at 3:23 pm

          Open-end bond mutual funds — the most common type of bond fund — are among the most treacherous investments because they can collapse. When there is a run on the fund, the fund has to meet redemptions and sells its most liquid bonds first (Treasuries, etc.) only to then have to sell illiquid bonds that they carried at inflated values, and they have to sell these bonds for cents on the dollar to some hedge fund.

          Numerous bond funds collapsed during the Financial Crisis, such as Schwab YieldPlus Select Fund (SWYSX) or SchwabYield Plus Fund (SWYPX), that were marketed as higher yielding, conservative alternatives to money market funds. Schwab settled numerous class-action lawsuits and many thousands of individual lawsuits regarding these funds. A friend of mine who lost most of the $500,000 he had in one of those bond funds sued individually and got a settlement.

          For more recent bond fund problems, just Google something like > schwab bond fund class action

          Schwab isn’t the only purveyor of collapsed bond mutual funds. Here is a more recent example of an imploded bond mutual fund (Dec 2015) which I covered here:

          https://wolfstreet.com/2015/12/11/junk-bond-fund-implodes-investors-stuck-focused-credit-fund-by-third-avenue/

          Also remember that if a bond fund yields 6% currently, it is stuffed with junk bonds. It also might use leverage, which makes this fund even more treacherous. The average yield of junk bonds rated “B” is 6.5%. “B” is FIVE notches into junk.

          https://fred.stlouisfed.org/series/BAMLH0A2HYBEY

          There is nothing wrong with taking risks to get some extra return — just do not confuse an open-end junk-bond fund that yields 6% with “risk-free” assets, such as FDIC-insured CDs. They’re not in the same ballpark.

          If you’re into bonds, it’s better to buy them outright. When the market sours on you, you can hold them to maturity and get your money back, plus you get all the coupon payments along the way. You’re exposed to credit risk, but you’re not exposed to the risk of a run-on-the-bond-fund. But understand that in a rising interest rate environment, bonds lose value when they’re traded. This is a problem for bond funds as well. And be sure not to treat bonds like liquid assets. They can be hard to sell in a cold market. This is the problem bond funds run into, but they HAVE to sell.

          If you need liquidity and a risk-free place to park it, get a high-yield savings account or short-term Treasury bills.

  32. Bet
    Apr 28, 2018 at 4:07 pm

    My father passed away last sept. I thought I knew where all of his brokerage accounts were. Then my mother received some dividend checks last Jan ??? We hunted it down and Wells Fargo had my fathers brokerage account. Yet we had not received a statement in three years. Plus last feb unbeknownst to us. Wells Fargo sold its brokerage to another company. EQ. Once again no notifications. No statements. It took weeks to finally close the estate and claim the stocks. If not for the dividend checks we would have never known the account existed. What a cluster. I hate Wells Fargo. A govt sponsored criminal enterprise

  33. Cato
    Apr 28, 2018 at 4:30 pm

    My friend who is a WF customer just sent me a notification he received from WF (below) saying non acct owners/designees can’t deposit cash.

    As a side note, I looked at my TDAmeritrade acct, and the CDs Wolf noted (actually, I only looked for the 13 mo 2.25) are listed for purchase at the terms stated above.

    _____________________
    Cash deposits will be limited to account owners or authorized signers
    What is happening To help reduce criminal activity and protect your account, we’ll be making changes to our policy for cash deposits made at Wells Fargo branches.

    Once our policy takes effect in a few weeks, we’ll only accept cash deposits into your Wells Fargo Consumer checking or savings accounts if it is coming from an account owner or authorized signer.

    What you should know
    If a non-account owner needs to deposit money into your account, they can deposit a check, cashier’s check or money order, or use a person-to-person payment service like Zelle®.

    All customers will need to provide identification to make cash deposits.
    Wells Fargo ATM or debit card holders may use their card and their Personal Identification Number (PIN) to confirm their identity when making deposits.
    Customers who do not have a Wells Fargo ATM or debit card may present a valid driver’s license, state or federal government-issued ID card, passport, or other similar picture ID.

    • Apr 28, 2018 at 4:41 pm

      I got this too. It means that some person who is not a signatory on your WF account and who does not have an account at WF cannot put cash-cash into your WF account. I have no idea who this would apply to. I would never allow anyone who is not a signatory on my account to put cash into my account. They can give the cash to me and I deposit it into my account.

      I can see where an elderly person is no longer able to deposit cash-cash into his or her account, and someone else does it for them, but in these situations, it’s better to work something out with the bank.

      • Eric Ma
        Apr 28, 2018 at 6:30 pm

        Cash deposit into someone else account is pretty common for construction workers. Often times, the manager just deposit cash into the worker’s account or worker’s wife account when they completed the work.
        Many construction workers only want Cash.

        • Apr 28, 2018 at 10:52 pm

          OK, I can see some of that. But if they want only cash, why would they put it into a bank account? That would destroy the purpose of cash (not taxed).

        • Jim Graham
          Apr 29, 2018 at 2:51 pm

          I worked for a guy that bounced most of his pay checks.

          Any wonder that we wanted CASH to put into OUR bank accounts so we could pay our bills???

  34. StanFL
    Apr 28, 2018 at 5:30 pm

    2.25% sounds pretty bad for a 13 month CD. I get 1.6% on my checking account and can move my money to any other bank in a minute.

    • Apr 28, 2018 at 6:14 pm

      Yeah, AmEx banks offers 1.55%. There are plenty of accounts like that. But there is a difference between 2.25% and 1.6%, namely $650 a year for each $100,000. In other words, 2.25% earns 40% more than 1.6%.

      And many people don’t need the liquidity. If you need the liquidity, don’t get a CD!

  35. MASTER OF UNIVERSE
    Apr 28, 2018 at 6:16 pm

    All the Central Bankers now realize that they can’t waffle on free money forever, and that we must all see what we can do to ensure a sound money paradigm is restored before the entire fiat regime of Reserve Currency status seeking ends in the obvious Hegelian Death Spiral it has been on ad infinitum since 08. Clearly, the QE regime did not really work out the way it was intended by Bernanke & Paulson. The banks never did lend to anyone except the main crony banks and their stockholders. Main street USA never evidenced one thin dime of that investment, and over the last 9 years main street USA has seen nothing but consolidation, and chapter 11 en masse.

    The banks will chafe at restoring normalized interest rates on savings accounts given that their prime mandate since 09 has been to go retail banking for fees.

    I miss the old days of banking that did not mix proprietary trading accounts with commercial banking accounts. Things were somewhat honest back then by comparison with today.

    I will never reconcile the Mortgage Rate of the 80’s with that of today. The spread between Volcker & Greenspan era is highly volatile.

    I’ll bet dollars-to-donuts that Volcker despises Greenspan secretly.

    MOU

  36. MCH
    Apr 28, 2018 at 7:44 pm

    Wolf, I think the best point on all of this is that the bank don’t care about their existing customers because of the potential high switching costs involved. Not only in setting up new accounts but the fee involved in closing down older accounts and shifting over the bill pays and such. It’s probably even worse for a business account.

    We recently set up an account at First Republic. We’ll see how that goes, but the information on the CD is damned useful. Thanks for putting that out there.

    • fajensen
      Apr 30, 2018 at 7:03 am

      Wolf, I think the best point on all of this is that the bank don’t care about their existing customers because of the potential high switching costs involved
      I don’t think it is that, it’s more a mentality that existing customers are all just work, toil and trouble whereas all new customers represents Growth & Opportunity. The staff at most businesses are heavily incentivised for attracting new customers (while ignoring the existing clients because keeping them is not incentivised, it is just assumed).

      Mobile companies are all like that. Nice deals for one-two years, then the stealth fees and hidden services begins to show up and it is time to move out again. Most banks are like that too.

      Mobile companies and banks and all of their antics caused regulation; The situation Today is that one goes to the receiving business and they will transfer everything automatically within 10 days. No fees. Except some nominal stuff if one has a brokerage account with them – it’s 50 EUR or so to move that.

      Still, a lot of people just don’t move. They work on the mental model that “everyone are as bad as the other” and continue to be bilked.

      PS:
      Of course if one still owes them lots of money … the other end has to be willing to assume the risk.

  37. Jay
    Apr 28, 2018 at 10:02 pm

    Marcus by Goldman Sachs..

    2.20%, 12 mos, $500 minimum.

    Just sayin’

  38. wkevinw
    Apr 28, 2018 at 10:56 pm

    I was a Wells Fargo customer for about 15 years. I had a bad customer service experience in ~1990 and stopped doing business with them. WF has been a bad actor for a long time to my knowledge.

    Same with United Air Lines. A close relative did a multi-decade career in aviation and his co-workers knew they weren’t the best decades ago.

    Same as it ever was.

  39. Jason
    Apr 28, 2018 at 11:23 pm

    Capital One has a 2.1% CD advertised https://www.capitalone.com/bank/cds/online-cds/

  40. ReacherNotBluffing
    Apr 29, 2018 at 7:36 am

    Fees paid on a brokered CD/market linked CD and most other instruments are largely based on whether you have a brokerage account or an advisory account. Brokered cds should not be sold to anyone with liquidity needs. Should also check on death put in case you fall off a cliff or have a bad relationship with Hillary Clinton.

    As I said before, a normal bank cd’s “penalty” for early withdrawal is just a withholding of interest and maybe a small fee. Usually not an impact to principle. Of course the rate offered is penalty enough.

  41. Simon
    Apr 29, 2018 at 12:35 pm

    Wolf, Thank you to you and your supporters, as a Khalifornia resident, I understand your pain of running a “2011 – 2018 Wolf Street Corp”, and go thru the pain dealing with the California Franchise board…been there done that..NO MORE.

    Going back to CD, I would share my experience with PenFed Credit Union, been their customer for past 15 years and they have never disappointed me, (Let me be clear they do not pay me to endorse them..just doing it as public service).

    My daughter a new graduate and a new Tax Payer ,also opened her account and now she understands “money does not grow in trees…or ATM”, she also got in to the CDs.

  42. John
    Apr 29, 2018 at 1:41 pm

    Mr Richter;

    The hidden savings rates offered by Wells Fargo are on par with savings rates offered by Markus-online banking subsidiary of Goldman Sachs.And you dont have to jump thru the hoops to get them-you only have to visit their website.

    Your deposit will not only be FDIC insured but will be backed by the full Faith and Credit of Goldman Sachs (and,ipso facto,US Government)

    Because what is good for Goldman Sachs is good for the Country and vice versa.

    Nowadays everybody loves to hate Goldman Sachs but,as the saying goes,there are no friends in buisness.And Wells Fargo is not your friend,of that I am 100% sure.

    • Apr 29, 2018 at 3:38 pm

      Yes, I mentioned Marcus in my prior interest-rate article (linked), along with some others. But these are new banks (Marcus is brand new) that are trying to attract new deposits. That’s why they’re so competitive. They’re not big banks like Citi, Wells Fargo, and the like. Where these big banks get competitive is in brokered CDs.

      Also, if you have a broker, you can buy brokered CDs online, just like stocks, with the click of a mouse or the swipe of a finger — no hoop-jumping involved.

  43. John
    Apr 29, 2018 at 5:59 pm

    Those banks may appear new but all of them are affiliated with the big old established financial institutions.

    It is not like a bunch of tech-savvy kids came up with the idea of no-overhead Revolutionary Bank for the PEOPLE.

    Nobody will allow them to do that-to appear out of nowhere and start stealing customers.

    Proper name is a “direct bank” , sometimes called a “branchless bank”, “virtual bank” or an “internet-only bank”.

    There are many articles on the Web exploring this innovation in depth.I am not sure how deep you want to dig.

  44. mean chicken
    May 1, 2018 at 10:02 am

    All these banks essentially operate as off-shore entities. Try not to forget.

  45. Thunderstruck
    May 1, 2018 at 12:37 pm

    OK, let’s see if I can get this right….

    Isn’t a bank offering higher rates on its CD’s is pretty much the same as if they were issuing bonds – the higher interest reflects more risk to the buyer?

    If this metric still rings true, then I can absolutely see why Wells Fargo CDs (as well as any bond issuance) would demand a premium as far interest rates are concerned.

    If I’m not right, then back to school for me….

    • May 1, 2018 at 4:51 pm

      Treasury yields have been rising not because of rising risks but because the asset bubble in bonds is deflating, inflation is rising, and investors are demanding more yield. The Fed encourages this by raising rates. Treasuries and FDIC-insured CDs are in the same risk category (“risk free”) and should move similarly – and they are for now.

      The factor you’re talking about is “credit risk” (will I get my money back when the bond matures?). Credit risk is near zero with Treasuries and FDIC-insured CDs. However, it is a very significant factor with junk bonds (which are at the other end of the spectrum from CDs and Treasuries).

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