ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, October 13, 1996 TAG: 9610110012
SECTION: BUSINESS PAGE: 5 EDITION: METRO
DATELINE: NEW YORK
SOURCE: JOHN CUNNIFF ASSOCIATED PRESS
It would seem to be among the simplest of questions you could ask your bank, since banks, it is said, are experts on matters of dollars and cents:
How much will you pay me in five years on your $50,000, five-year certificate of deposit?
The service provider at the first bank erred by more than $2,000, advising Joe Mintz that the bank would pay him $65,411 at maturity. The correct figure was $67,704.
Joe drove down the street to the next bank and asked the same question. The officer gave him the correct figure - $67,481 at 6.18 percent interest - but couldn't explain how the bank arrived at its calculation.
The next bank also got it right. At a yield of 5.24 percent, they would return $65,348. They knew their stuff, calculating the numbers immediately.
Joe was stunned at the next bank. At a yield of 5.25 percent, they would return $63,121. How could this be, he mused, when the annual yield was higher than at the previous bank. ``No compounding,'' he was told.
All four banks were on the same Dallas street, separated by just three traffic lights. In 40 minutes of inquiries, Joe received answers that differed by $4,583, proving his point that it is almost impossible to shop for CDs.
``With such confusion and imprecision, how do you know if your IRA is leaking?'' he asks, suggesting that many savers may be getting a dollar return substantially different from what they figure.
How can you shop for the best deals for an Individual Retirement Account or 401(k) or other long-term savings, insurance or investment plans offered by institutions?
And yet the solution is simple - incredibly so.
Or is it? While banks are required to specify the interest rate and the yield (the latter differs mainly because of the frequency of compounding), they are not required to state what these percentages mean in dollars.
Too much trouble, too much paperwork, they say. They have fought hard to have it that way. And the Federal Reserve, the bank regulator, has offered little support to efforts that would compel them to do so.
Strange, you might think, when the Fed has just approved new rules to put car leases in plain English. One of the rules: The leasing company must disclose the car's price, monthly payments and how payments are calculated.
What's specified on car leases, it seems, isn't considered vital enough by Congress and the Fed to be applied to the life savings of individuals, couples and families. The banks have that data; they just don't want to share it.
The solution, already in bank computers but often not available even to their own customer representatives, could be answered as simply as filling in the blanks in this statement:
``If I deposit $on this date and I do not withdraw funds, you will pay me $on ``It's shocking,'' Joe says. ``The Fed doesn't require of banks, which it oversees, what it demands of car leasing companies.''
There's no way he'll be stopped; he has often walked the aisles of Capitol Hill in pursuit of his goals. An authority on insurance, he has been responsible for regulations regarding life insurance costs and IRAs.
Meanwhile, he has the answer to that dollar question, his ``Instant Yield Calculator,'' which lists 600 yields from 4 percent to 9.99 percent, and for time periods from one through 50 years. It reveals what the banks don't.
For $9.75 to Retirement Income Disclosure Service, P.O. Box 12066, Dallas, Texas 75225, he'll send you a copy postpaid, along with a form for your banker to fill out regarding the future of your deposits.
With it comes a government booklet, ``Buying Treasury Securities,'' which tells you how to buy directly from the government the very safest securities obtainable, U.S. Treasury bills, notes and bonds. And does so clearly.
LENGTH: Medium: 70 linesby CNB