Too good to be true? CD rates

[ilikeaces86_]

Just wondering if anyone has any experience with this? Seems like they offer very good CD rates if you are willing to waive the right to withdraw before the CD has matured.

http://www.mlnbank.com/Services/premCDs.htm

[krishan]

those rates are pretty rediculous.

Krishan

[jively]

Those rates are high. 1) It says those CDs are not redeemable before maturity. Normal CDs are redeemable and you lose x months of interest, where x is dependent on the term. 2) This page does not mention FDIC insurance. If it's a real US bank, I'm pretty sure they would mention that. It looks like this is a subsidiary of a foreign bank. I tried calling to ask them about FDIC ins. but they are closed.

If they are not FDIC insured, you might ask them about their credit quality. If it's low, maybe there is a 5, 10, or 20% chance they default and you get nothing back before maturity...

-Tom

[Cubswin]

Mailing Address:
Millennium Bank
Financial Services Centre
Stoney Ground, Kingstown
St. Vincent and the Grenadines, W.I.

Not FDIC insured = avoid

[jupiterpig]

people have talked about this place b4 and i think that consensus was that unless u didnt care about what happened to your money to just keep it in an FDIC place like emmigrant or ING

[Scorpion Man]

[ QUOTE ]
Just wondering if anyone has any experience with this? Seems like they offer very good CD rates if you are willing to waive the right to withdraw before the CD has matured.

http://www.mlnbank.com/Services/premCDs.htm

[/ QUOTE ]


Deposit Insurance

Our United States investors frequently ask us about Federal Deposit Insurance Corporation (FDIC) insurance. FDIC insurance in the US and Canada, is capped at $100,000.00. This means that each depositor is protected to a maximum of $100,000.00. FDIC is best understood within the context in which it was created.

The FDIC was created in the United States as a result of the banking crisis of the 1930s. It is primarily designed to prevent a collapse of the banking system brought on by depositor panic. FDIC is not intended to reduce the risk of a bank's investment policies, preserve capital, or guarantee interest payments. Many US banks have deposits that are oriented towards the short term and thus benefit from FDIC membership. Under a system like FDIC, banks are required to limit the majority of their assets in stable but low yielding instruments such as government bonds.

Free from the limitations of FDIC, Millennium Bank has more flexibility in its investment choices. Millennium Bank can invest in a wider variety of instruments, such as AAA rated bonds offered through European companies, international real estate and business investments. This results in a portfolio that hedges risk through diversity. Simply put, Millennium invests in similar vehicles as US banks but can offer more attractive returns and better manage risk through global choices.

Millennium and most other banks invest in similar asset classes. For example, many banks offer home mortgages, which are essentially real estate investments. In the United States, banks are primarily limited to mortgages on real estate in the United States. Millennium Bank also invests in real-estate backed mortgages, but Millennium can invest in mortgages in international markets where these mortgages pay higher interest than similar mortgages in the United States. Therefore, with its global network, Millennium invests in similar assets but delivers higher returns to its investors.

As another example, many banks invest in government bonds. Specifically, many banks in the United States invest in bonds issued by the US, State, or Municipal Governments. Most of these bonds are A to AAA rated securities, or equivalent. Millennium also invests in A to AAA rated bonds, but Millennium invests in bonds in international markets where the coupon, or interest rate, are significantly higher than those paid by the governments in the US. Simply stated, with its global network, Millennium invests in similar assets but delivers higher returns to its investors.

Finally, many banks offer commercial loans. A commercial loan is issued to a company and is essentially an investment in the assets of a company. Structured as loans, the investment returns are limited to the interest rate payable on the loans. Millennium also invests in companies. Following a stringent analysis, Millennium structures investments into companies, but the returns are not limited to interest rates payable on loans. Therefore, with its team of experienced business leaders, Millennium passes on these higher returns to its investors while maintaining low risk profiles.

Deposits in Millennium Bank are not protected by FDIC insurance. However, the proven strength and financial viability of Millennium Bank not only acts as a protection blanket for investors, but a spring board for the growth of investor assets

[jively]

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Deposit Insurance

Our United States investors frequently ask us about Federal Deposit Insurance Corporation (FDIC) insurance.

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Good catch.

If it's not FDIC insured, I wouldn't say "avoid" but I think you need to know it is not like a CD, but more like a bond. It is important to see what the credit rating of the company is. Let's say it's rated A, then there's some kind of default rate. I don't know what it is, but let's say 2% of 5-year bonds will default. Then if you buy 100 of these bonds, you'd expect 2 of them to default, so your EV is 98% of the listed yield...

-Tom