Reviewing the log from those office hours, it appears Garfield did not "accept and speak highly of the suggestion", he merely said he would look into the possibility.
Well I'm glad someone is sanity-checking me, but the statement "We get some of best ideas from the community" occurred after the question about certificates of deposit from credit unions and before the response to the next question.
I'm also rather skeptical of the underlying claim about the superiority of credit union CDs in this context
So I googled "credit union 6 month certificates of deposit best rate" and found http://www.gobankingrates.com/cd-rates/6-month-cd/ which shows offers of 1.47% for six month and 1.86% for 12 month CDs from Metropolitan Service Credit Union, all of which are federally guaranteed for up to $250,000, the same amount the government guarantees all Citibank deposits per depositor for any total. Their next four top rates, all over 1.0%, are also from federally guaranteed credit unions.
Citibank's website says they offer 0.15% for six month and 0.2% for twelve month CDs over $100,000. So it looks like the actual ratio is that credit unions are offering up to about nine times as much interest instead of the four times as much as it was in April. For a $20 million reserve fund, the difference is about $300,000 per year.
On 12/27/2012 1:46 PM, James Salsman wrote:
I'm also rather skeptical of the underlying claim about the superiority of credit union CDs in this context
So I googled "credit union 6 month certificates of deposit best rate" and found http://www.gobankingrates.com/cd-rates/6-month-cd/ which shows offers of 1.47% for six month and 1.86% for 12 month CDs from Metropolitan Service Credit Union, all of which are federally guaranteed for up to $250,000, the same amount the government guarantees all Citibank deposits per depositor for any total. Their next four top rates, all over 1.0%, are also from federally guaranteed credit unions.
None of those rates are current, from quick investigation they appear to be anywhere from two weeks to two months old. As any published rate sheet will tell you, rates are subject to change without notice. Where the actual websites, as opposed to this aggregator, are more up-to-date, it looks like the rates are often significantly lower. Furthermore, even the outdated published rates have significant limitations that may render them unworkable. For example, while deposits may be guaranteed up to $250,000, the institution may not actually offer certificates up to that amount. In at least one of the examples I found with that link, the credit union is publishing rates for CDs that are not actually available, and it appears the only products actually available are for 17- and 23-month terms.
Credit unions also have membership requirements, and while the limitations around those have loosened significantly in recent years, it's not as simple as finding the highest rate and opening an account. Even a consumer would need to figure out which ones they can join first before shopping based on rates. The membership question alone would probably rule out any of the examples found, and for an organization like Wikimedia you'd have the additional issues of whether they support business accounts and what services they offer in that capacity.
As Garfield also mentioned in the IRC office hours, part of his mandate is low risk. In finance, that tends to be reflected in wariness of institutions as small as these. They're less accessible, less equipped to provide the level of services needed, and more vulnerable to change (which can mean either failure or acquisition). While consolidation is a bigger factor in the volatile small banking industry, small credit unions are hardly immune themselves. And while it's easy to talk about federal insurance as a backstop in case of outright failure, as a practical matter there may be a lot of time and hoops involved to recover your deposits in such situations, which runs counter to the focus on liquidity for cash reserves.
Donor funds need to be managed wisely, but simply performing a Google search for the best interest rates is not all that useful a tool here. If somebody wants to come to Garfield and tell him, "I've had some of my own money in a CD with Bank or Credit Union X for the last 6 months, I've been getting X% and I'm about to renew at a similar rate, and I know they can handle business accounts like yours", I think information like that might have more practical value. In the meantime, I won't try to micromanage the work of our financial professionals without having clear options for improvement ready to suggest.
--Michael Snow
Michael Snow, 28/12/2012 00:12:
Donor funds need to be managed wisely, but simply performing a Google search for the best interest rates is not all that useful a tool here. If somebody wants to come to Garfield and tell him, "I've had some of my own money in a CD with Bank or Credit Union X for the last 6 months, I've been getting X% and I'm about to renew at a similar rate, and I know they can handle business accounts like yours", I think information like that might have more practical value. In the meantime, I won't try to micromanage the work of our financial professionals without having clear options for improvement ready to suggest.
All very true, but even specific suggestions wouldn't be that useful. The WMF bank account is still rather small, but now big enough to be possibly worth a call for bids (or whatever the name in the USA); perhaps one was already done, and that should be enough to eliminate any doubt. The best offer doesn't always come from where one would expect. Usual random example, my university did a very exacting one a few years ago and the best offer was significantly better than the average, but certainly not spectacular: little more than 700 k€/y for cash varying typically in the 70-90 M€ range, 150 at best and 30 at worst. Services/fees are probably more important even though the WMF's needs are rather simple; for instance, requiring scholarships recipients to have PayPal is/was quite dismal.
Nemo
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