Bank Ratings Are Secondary to Insured Deposits

Dear Dr. Don, You have CIT bank listed as an all-star bank. I am not sure after reading all the negative things about this institution that it is safe, insured, etc. Please let me know if this is a place you would put your bank deposits. -- Pat Particulars

Dear Pat, I'd handicap the news on the bank and its holding company as being mostly good since CIT Group Inc., the bank holding company, filed for bankruptcy protection Nov. 1, 2009, and came out of bankruptcy Dec. 10, 2009. Its operating subsidiaries, including CIT Bank, were not included in the bankruptcy filing.

In April 2011, the Federal Deposit Insurance Corp. lifted a cease-and-desist order first instituted in July 2009 that had stopped the bank from accepting new bank deposits. That was good news. The holding company did post a loss in the third quarter of 2011, but the loss was less than predicted by Wall Street analysts. Beating the Street is considered good news.

CIT Bank has a four-star rating out of five in Bankrate's Safe & Sound Star Ratings, which is a "Sound" rating. I don't know if four stars make it an all-star bank, but it's a good rating.

While bank ratings are important, I put my faith in FDIC-insured bank deposits. Those deposit accounts carry the full faith and credit support of the U.S. government up to $250,000 per depositor. Investors who want to chase yield by depositing money in lower-rated banks should feel comfortable taking that action as long as the deposit is FDIC-insured.

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