Posted on 02/21/2010 10:08:30 AM PST by blam
Citibank: No More DDA Accounts
Karl Denninger
The Market Ticker
Feburary 20,2010
I'm going to delve a bit into the Ticker from yesterday in which I advised people to get the hell away from Citibank (NYSE: C) based on a report that an "accidental" mailing of terms changes to all 50 states allegedly only applied in Texas.
Some rooting around on The Internet (along with a little help) disclosed this little gem:
Texas-only my ass.
Note that the date on that file is 12/28/2009 (by the name) with an effective date of January 1st, 2010, and there is nothing that indicates it is not the case everywhere.
Here's the issue.
Most checking accounts - that is, non-interest-bearing accounts against which one can write checks - are better known as "DDA" accounts in banking parlance. If you look back through your counter receipts for deposits into one (assuming you keep them) you will probably see the letters "DDA" on the detail line.
What is "DDA"? It stands for DEMAND DEPOSIT ACCOUNT.
What is a "Demand" account?
It is an account which the holder reserves the right to, and the bank agrees to comply with, demand any and all good collected funds in the account at any time up to the entire balance.
Now most banks will not allow you to walk in and demand $50,000 in cash at any instant, mostly because they don't have it, or if they do have it allowing that would severely deplete their cash amount on hand and they would not be able to transact routine amounts for other people. After all, it takes time (even if only a few hours) to order up an armored truck full of $100s and $20s.
But "withdraw" is not limited to cash.
You can get a counter (bank) check for the entire balance, you can write a check on your account (and give it to someone or deposit it somewhere else) and you can wire or ACH money in or out of the account. All are "withdrawals."
"NOW" (negotiable order of withdrawal) accounts are a different sort of animal. Those pay interest, and on those accounts the bank reserves the right (and always has) to require notice. Same with saving-linked sweeps (which, by the way, is what Alan Greenspan wildly expanded the authorization for early in his tenure as Fed Chairman, essentially destroying bank reserve requirements as this was instantaneously gamed to reduce actual held reserves almost to zero.)
What this "quiet" little change means is that Citibank has changed the character of all of its checking accounts. They no longer offer a "DDA" account, whether they did before or not.
[snip]
GET YOUR MONEY OUT OF CITIBANK AND INTO AN INSTITUTION SUCH A CREDIT UNION NOW. THERE IS NO EXCUSE FOR THIS SORT OF ABUSIVE CHANGE IN TERMS THAT COULD EASILY EXPOSE YOU TO FINANCIAL OR EVEN CRIMINAL LIABILITY.
Cancelled my Citi Friday
The top 4 banks are toast: BofA, Citi, Wells and JPMChase. I would get out of ALL of them ASAP!
In addition to Obama’s $1.5 billion mortgage restructuring fund is Obama’s consideration of a national moratorium on foreclosures and putting ALL delinquent loans into HAMP so the Obama thugs can pressure the banks into insane and unjustified loan modifications. Its getting THAT bad.
Look at this guy’s presentation of the housing and mortgage markets.
http://mason.gmu.edu/~asander7/
Its under “Update on Housing and Commercial Real Estate and Mortgage Markets”
Eeks! It makes it clear that this $1.5 billion and the foreclosure freeze will accomplish nothing but delaying the pain and adding a huge price to it! The banks are getting crushed and there is no easy way out.
getting out sounds good... but where do you put the cash?
It could be read as a sign of liquidity problems. By turning checking accounts into non-DDAs, they can reduce the amount of reserves that they are legally required to keep.
Some googling has revealed that Citi is not the only bank that has done this, though.
getting out sounds good... but where do you put the cash?In our "putting the cash" means lending some entity the money. You need to lend it to an entity that can pay it back, or buy something with it. Short term Treasuries look a lot better than a Citi account right now.
Great post. Bookmarking the thread.
Who were the other ones do you have links? If so I would appreciate your posting it.
"Effective April 1st., 2010, we reserve the right to require seven (7) day advance notice before permitting you to with drawl from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required buy law to notify you of this change"
I'll be closing my accounts on Monday.
I cancelled my card Thursday when they said I must charge a minimum of $2,400.00 annually or pay $60.00. I said bye, bye.
New Credit Card Rules Start Monday, But You Can Still Get Screwed
I tried to cash a vacation pay roll check at my bank, back in the 70s. If memory serves me it was for about $3,000 and they told me I’d have to come back the next day as they didn’t have that much cash on hand. I was shocked that a bank wouldn’t have that piddling amount on hand at any given time. I’m not sure to this day whether they were telling me the truth or for whatever reason they just didn’t want to let go of that much cash that day.
I went back the next day and sure enough, they cashed it.
I might just have to leave that one there for now, I keep most of my money in my merchant account anyway, though I don't like doing that either.
We got that $60.00 fee notice too lol that is what made me look into all of it and close it all.
They tried to talk me out of it and I told them Discover and Chase aren’t doing that and they pay cash back which is the only reason I use cards anyway the convenience and to get the cash back.
Young people beware though if you can’t pay the bills in full you would be better off foregoing that big screen tv or other unnecessary expenditures!
CREDIT UNIONS
Well it’s the policy at a lot of places now. Wells Fargo branches in Safeway grocery stores in California have a limit of $2000 for cashing a check, for example.
If you send this information to people you know who have Citibank accounts, don’t be surprised if they don’t believe you or the Market Ticker guy. At all.
Under the mattress? You earn about the same amount of interest!
BTW, I called yesterday, and it is NOT limited to Texas. At least according to Islam. (I kid you not, that was the guy’s name that I spoke to.)
that’d make for one lumpy mattress ... and not very secure (potential home invasion worry)
Maybe not a mattress, but with a little creativity, I think a large sum of money could be safely hidden. As long as there’s no fire.
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