Best Interest Rate Banks

This week the Federal Reserve, after their FOMC meeting, announced that they would be raising the federal funds target rate from a 0.00%-0.25% to 0.25%, which essentially raising the federal funds rate. IAt a time when interest rates have been falling very very quickly, with some banks seeing their rates fall several times last month, this cold be a sign that interest rates will slow their fall. While I still reiterate the recommendation that you try to lock in rates with CDs, this is certainly a good sign for savers out there looking to get something for their good behavior.

In other Fed related news, the FOMC also said they’d be buying $750 billion more agency mortgage-backed securities, which would bring the total purchases up to $1.25 trillion. It would also buy up $300 billion in longer-term Treasuries to help credit markets and expand the TALF (Term Asset Backed SEcurities Loan Facility) to include other assets.

On Monday, Citigroup agreed to purchase the banking operations of Wachovia for $2.1 billion. Citigroup will now have more than 4300 US branches and $600 billion in deposits - putting it with the two other large banking giants Bank of America and JPMorgan Chase (who took over Washington Mutual recently). In the deal, Citigroup will be assuming $53 billion worth of debt and absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio with the FDIC covering any remaining losses.

Citigroup to buy Wachovia banking operations [Associated Press]

After the mostly overlooked yet spectacular collapse of Washington Mutual (its shareholders certainly knew she tanked), it appears Wachovia, which was similarly capitalized, is on the trading block with two potential partners. Reportedly Citigroup Inc. and Wells Fargo & Co. are bidding to take over Wachovia with Spain’s Banco Santander SA (according to the Wall Street Journal anyway) as a possible third bidder in the process.

Wachovia’s stock price fell 27% on Friday and then another 15% in after hours trading.

Wachovia’s current problems stem largely from its acquisition of mortgage lender Golden West Financial Corp. in 2006 for roughly $25 billion at the height of the nation’s housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West’s specialty, which let borrowers skip some payments

But like many other banks, Wachovia stands to benefit from the passage of the government’s proposed $700 billion rescue plan — the details of which were emerging from Washington on Sunday.