LastNightinVegas took the photo, and titled the post “This is the end, my only friend the end.”
WaMu is paying 5% on CDs at a time the Fed Funds Rate is 2.0% and the discount rate is 2.25%. Where can WaMu invest money safely and return 5%? The answer is nowhere.
It is a moral hazard that WaMu can even offer CDs at 5% with FDIC guarantees. Money is increasingly flowing to such endeavors, at taxpayer risk.
Losing money on CD deposits when your bank is imploding and advertising it with hand-lettered signs is the sign of an institution in desperation and near-collapse. That the Fed allows this is near-criminal.
A 30-year fixed-rate mortgage currently runs 6.29%. A 10/1 ARM or an FHA 30-year fixed runs 6.5%. Jumbos (i.e. any mortgage in SoCal) will be higher. They’ve got to HAVE money to LOAN money, and despite the Fed’s disconnect from reality that’s what loaned money costs.
I say this despite the fact that I own Puts on Wamu.