October e-News

We hope you will enjoy this month's eNews and welcome your comments and suggestions.

How to Protect Yourself from Financial Scams
Con artists prey on distressed homeowners and others

(FDIC Consumer News)

The economy may be slow, but for thieves prowling for victims, business is always brisk. "Crooks are taking advantage of the difficult economy, including tighter credit and higher unemployment, to trick people into accepting fraudulent and deceptive offers that seem beneficial on the surface but actually could cost a lot of money or result in identity theft," said Michael Benardo, manager of the FDIC's Financial Crimes Section. Read full article.

Special Alert

E-mails fraudulently claiming to be from the FDIC are attempting to trick recipients into installing unknown software on personal computers. These e-mails falsely indicate that recipients should download and open a "personal FDIC insurance file" to check their deposit insurance coverage. The "insurance file" may actually be a form of spyware or malicious code and may collect personal or confidential information.

The Federal Deposit Insurance Corporation (FDIC) has become aware of e-mails appearing to be sent from the FDIC that are asking recipients to download and open a "personal FDIC insurance file" to check their deposit insurance coverage. These e-mails are fraudulent and were not sent by the FDIC. The FDIC is attempting to identify the source of the e-mails and disrupt the transmission.

Currently, the subject line of the fraudulent e-mails includes the wording "check your Bank Deposit Insurance Coverage." The e-mails state: "You have received this message because you are a holder of a FDIC-insured bank account. Recently FDIC has officially named the bank you have opened your account with as a failed bank, thus, taking control of its assets."

The e-mails ask recipients to "visit the official FDIC website" by clicking on a hyperlink provided, which appears to be related to the FDIC and directs recipients to a fraudulent Web site. The Web site includes hyperlinks that appear to open forms. However, it is believed that clicking on the hyperlinks will cause an unknown executable file to be downloaded. While the FDIC is working with the United States Computer Emergency Readiness Team (US-CERT) to determine the exact effects of the executable file, recipients should consider the intent of the software as a malicious attempt to collect personal or confidential information, some of which may be used to gain unauthorized access to online banking services or to conduct identity theft. Financial institutions and consumers should NOT access the Web site or download the executable files provided on the Web site.

Information about counterfeit items, cyber-fraud incidents and other fraudulent activity may be forwarded to the FDIC's Cyber-Fraud and Financial Crimes Section, 550 17th Street, N.W., Room F-3054, Washington, D.C. 20429, or transmitted electronically to alert@fdic.gov. Information related to federal deposit insurance or consumer issues should be submitted to the FDIC using an online form that can be accessed at www2.fdic.gov/starsmail/index.asp

For your reference, FDIC Special Alerts may be accessed from the FDIC's website at www.fdic.gov/news/news/SpecialAlert/2009/index.html. To learn how to automatically receive FDIC Special Alerts through e-mail, please visit www.fdic.gov/about/subscriptions/index.html.

New Governor Francis Branch Grand Opening Celebration, November 14th

Pleas join us!

Join us on Saturday, November 14th from 10:00 a.m. to 1:00 p.m. as we celebrate the Grand Opening of our new Governor Francis branch on Warwick Avenue in Warwick, RI. Our Grand Opening “Fall Fest” will feature:

• Free cider and autumn desserts from Gregg's Restaurants
• Free hot dogs and popcorn
• Free pony rides and pumpkin painting for kids
• Free PBruins tickets given out by “Samboni” from 10:00 a.m. to 11:00 a.m. (while supplies last)
• Meet “Paws” of the Pawsox from 11:00 a.m. to noon
• Country line dancing demonstrations at noon by the Kent County YMCA!

A donation of a non-perishable food item for West Bay Community Action would be appreciated Rain Date Saturday, November 21st

Fall 2009 Economic Outlook

By Mary McGoldrick, Senior Vice President and Chief Investment Officer,
1800 Asset Management, Washington Trust Wealth Management

Is the economy on the rebound?
The “green shoots” of economic recovery noted by Fed Chairman Bernanke in March appear to have taken root during the summer months. Many of the widely watched economic indicators have either turned positive or have showed a slowing in the rate of decline during the third quarter. For example, real GDP contracted at less than a 1% annual rate in the second quarter, a significant improvement compared with the 6.4% decline posted in the first quarter. Forecasters polled for the Blue Chip Economic Indicators anticipate that the third quarter data will show a 3.2% rise in output, with consumer spending, residential investment and inventory stabilization contributing to the gain. Read full article.

Introducing "RI Dine"

Washington Trust is proud to partner with RI Hospitality Association to introduce the RIDINE program. The Rhode Island Hospitality Association (RIHA) is proud to announce the launch of its RI Dine program. RI Dine is a new, innovative gift card program that allows purchasers to use the card at any restaurant that is participating in Rhode Island.

The card is completely flexible allowing consumers to purchase any monetary denomination they choose and it is rechargeable. Cards can be purchased on the website www.RIDINE.com or directly from RIHA by calling 401-223-1120.

“The RI Dine program is a great way for us to spotlight our fabulous restaurants here in the Ocean State,” noted John C. Warren, Washington Trust's Chairman and CEO. “As Rhode Island's largest independent bank, we are committed to supporting local businesses and the economy and believe this is a win-win program.”

Bank Green with Less Paper!

Consider these options for your bank statements.
Are you looking for ways to “go green” at home or in your business? If so, Washington Trust is ready to help. You'll save paper and enjoy easier, more streamlined record keeping.

Receive Online Statements
Access your accounts and account statements through Personal Online Banking. You can sign up for Personal Online Banking at www.washtrust.com. To view your statements, just select the “Online Statements” tab.

Turn off paper Statements
If you no longer wish to receive paper statements, click on the “User Options” tab, select “Online Statements Options”, and choose “Waive the mailing of your monthly paper statement.”

Receive Email Statements
Access your account statements electronically through your email. Simply call our Account Information Center at 800-475-2265 to sign up. Once you've signed up, you'll receive a monthly email when your statement is ready. For your protection all statements are sent as encrypted PDF files. Simply click on the attachment link in your email message, then enter the user name and password you chose when you signed up.

If you have questions about our online statements, please call our Account Information Center at 800-475-2265 or contact us.

How to Protect Yourself from Financial Scams
Con artists prey on distressed homeowners and others

(FDIC Consumer News)

The economy may be slow, but for thieves prowling for victims, business is always brisk. "Crooks are taking advantage of the difficult economy, including tighter credit and higher unemployment, to trick people into accepting fraudulent and deceptive offers that seem beneficial on the surface but actually could cost a lot of money or result in identity theft," said Michael Benardo, manager of the FDIC's Financial Crimes Section.

Here are some common schemes being reported, followed by tips for protecting yourself.

• Mortgage rescue schemes
• Credit-related scams involving upfront fees
• Work-at-home scams
• “Mystery shopper” scams
• Fraudulent e-mails related to current events
• False or misleading sales of CDs

Mortgage rescue schemes: Con artists are preying on hard-pressed homeowners in the current depressed housing market. David M. Nelson, a fraud examiner in the Financial Crimes Section, said that companies posing as foreclosure specialists "promise miracles," such as falsely claiming they can save a home from foreclosure by lowering the loan balance, interest rate and monthly payments, and "all for a large upfront fee."

Instead, distressed homeowners should contact their mortgage loan servicer to request a modification of their loan at no cost (see When Payments Are a Problem). "It's very important for qualified borrowers to understand that the industry best practice is loan modifications free-of-charge," said FDIC Chairman Sheila C. Bair. "They do not need to spend thousand of dollars to get help."

Before contacting your lender or loan servicer, though, think about getting help from a trained, reputable housing counselor who can help you for no charge or a small fee. Find one through groups such as Neighbor Works America (www.nw.org) or by calling 1-888-995-HOPE (4673). Or, for a referral to a counseling agency certified by the U.S. Department of Housing and Urban Development (HUD), visit www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call 1-800-569-4287.

Other credit-related scams involving upfront fees: Several of these have been circulating since problems emerged in mortgage and other credit markets. In some cases, con artists claim they can "guarantee" loan approvals to people with credit problems - in exchange for a big upfront fee. Of course, after collecting the nonrefundable fee, the loan falls through.

"No legitimate lender can promise a loan without looking at a borrower's financial condition," explained Michael L. Jackson, an Associate Director of the FDIC's Division of Supervision and Consumer Protection. "And in most cases, loan fees are typically collected at the end of the lending process, not at the beginning." For guidance about avoiding scams involving credit counseling for people behind on their bills, see When a Debt Collector Calls.

Work-at-home scams: Thieves prey on people who have lost their jobs or need extra cash by sending unsolicited e-mails and running advertisements on the Internet and in newspapers. The ads offer flexible, easy part-time jobs working at home and involve a lot of pay for doing very little, such as processing payments or shipping items. These offers may seem especially attractive if you've just lost your job. What can go wrong? Here are two common scenarios.

Your "employer" may steal your identity and commit fraud by obtaining your bank account and Social Security numbers, perhaps as part of a fake job application. Or, you could face major losses if your new boss requests that you deposit a check or electronic transfer into your bank account and wire funds out of your account (after deducting your "commission"), and later your bank tells you that the original deposit was bogus and you're responsible for the money.

According to Nelson, "If the check or electronic deposit is fraudulent, you will likely lose the money wired out of your account, plus you may have difficulty opening a new bank account until your name is cleared from any suspicion that you were a willing partner in any fraud."

For more information about work-at-home scams and a complaint form, go to www.IC3.gov, a Web site established by the U.S. Department of Justice and the National White Collar Crime Center.

"Mystery shopper" scams: It's common for businesses and consulting firms to pay consumers to visit and shop at their retail locations or dine at their restaurant and then submit confidential reports about the experience. These part-time workers are known as "mystery shoppers" and "secret shoppers." But fraud artists are cashing in by setting up fake mystery-shopping programs that look very real, including job applications (requesting Social Security numbers) and professional-looking Web sites, and then convincing new recruits to wire money using funds from their own checking account.

Here's a typical scenario. Your first assignment as mystery shopper is to deposit a $2,000 cashier's check into your bank account - supposedly to cover a $1,900 purchase you're about to make for your new part-time "job," plus a $100 advance payment for your services. You're then instructed to withdraw $1,900 in cash from your bank account, take it to a particular store to have the funds wired to a person (a "colleague" of your new employer) in Canada. Later, you'll go home and fill out an evaluation of the store's money-transfer service. But eventually, perhaps a couple of weeks later, the cashier's check you deposited will be returned as counterfeit, and you will be responsible for the money you withdrew from your account.

"Part of what makes this swindle successful is that the criminals stress that the entire assignment must be 'confidential,' from ordering the money transfer at the store to filling out the evaluation form," explained Millie Spencer, a financial crime specialist with the FDIC.

Fraudulent e-mails, calls and faxes related to bank failures, mergers or other current events: Crooks are pretending to be from a financial institution in the news (perhaps one that has acquired a failed institution) or a government agency (such as the FDIC) asking for consumers to supply personal information, such as account and Social Security numbers or passwords.

Lately, emails have been circulating from “military personnel” saying that they have cash to send back to the states and need the email recipient to receive it on their behalf. Don't fall for this trick.

Remember, your bank, credit card issuer and any other reputable business you deal with will not call or e-mail you to confirm account numbers or passwords because it will already have that information.

False or misleading sales of certificates of deposit (CDs): Bank CDs issued by FDIC-insured institutions have long been considered to be among the safest financial investments available because of the deposit insurance protection. However, with the slow economy resulting in relatively low interest rates on insured CDs, savers looking for high yields may be tempted by Internet or newspaper advertisements offering unusually high returns. While most advertising for CDs is accurate and legitimate, beware that some may be misleading or even untrue.

"Look very closely at the fine print in those eye-catching ads," said Richard M. Schwartz, an FDIC attorney who specializes in consumer issues. "Some high-yielding accounts have strings attached, like a requirement that you buy insurance or annuities you may not want. Other accounts may be deceptively advertised as FDIC-insured accounts but they're not, and that's a violation of federal law."

In general, how can you protect yourself from financial scams and rip-offs?

• Be wary of requests to "update" or "confirm" personal information - such as your Social Security numbers and bank account and credit card numbers (including security codes) - in response to an advertisement or an unsolicited call, text message or e-mail. Be extremely skeptical of any unsolicited offer that requires you to send a payment or provide bank account or other personal information before receiving anything in return.
• Take the time to thoroughly research the people or organizations offering a job, loan, deposit, investment or other "opportunity" involving your money or personal information.
• Walk away from any offer from a stranger that would involve a large deposit into your account and instructions to wire any of that money back, perhaps to someone in another country.
• In general, assume that any offer that sounds unrealistic or otherwise "too good to be true" - especially one from a stranger or an unfamiliar company - is probably a fraud.

To learn more about common financial frauds and how to protect yourself, visit www.fdic.gov/consumernews. If you have additional questions, contact Washington Trust, your Trusted Advisor Since 1800. We will be happy to help.

Fall 2009 Economic Outlook

By Mary McGoldrick, Senior Vice President and Chief Investment Officer,
1800 Asset Management, Washington Trust Wealth Management

Is the economy on the rebound?
The “green shoots” of economic recovery noted by Fed Chairman Bernanke in March appear to have taken root during the summer months. Many of the widely watched economic indicators have either turned positive or have showed a slowing in the rate of decline during the third quarter. For example, real GDP contracted at less than a 1% annual rate in the second quarter, a significant improvement compared with the 6.4% decline posted in the first quarter. Forecasters polled for the Blue Chip Economic Indicators anticipate that the third quarter data will show a 3.2% rise in output, with consumer spending, residential investment and inventory stabilization contributing to the gain.

Recent reports support the belief that the consumer has begun to rebound. Retail sales in August rose 2.7% from the prior month and an early reading on same store sales for major chains showed a 1.1% rise in September, the first increase in 14 months. However, surveys of consumer confidence suggest that consumers remain cautious, particularly given the continued rise in unemployment. In September, the survey data showed job losses continued to rise and the unemployment rate stood at 9.8%. Since the recession began in December, 2007, the U.S. economy has lost 7.2 million jobs. Given the magnitude of these job losses, consumers remain focused on rebuilding their savings and reducing their debt burden as protection against the proverbial “rainy day.”

In this environment, consumers have become more value conscious. The strongest retail sales gains have been posted by discount stores and wholesale clubs. The success of the recently concluded Cash for Clunkers program further underscores this fact. When offered rebates of up to $4,500 for the purchase of new, more energy efficient vehicles, consumers responded and new car sales in August surged above 1 million units, the best monthly results thus far in 2009. However, with the expiration of the program, September sales fell 23% to a 9.2 million unit annual rate.

Provisions in the federal stimulus program are also aiding the housing sector, particularly the $8,000 tax credit for first time home buyers currently set to expire on December 1st. For qualified buyers this represents a significant savings and appears to have succeeded in bringing buyers into the market. The index of pending home sales has risen for 7 consecutive months and both new and existing home sales have risen from their mid-winter lows. Fixed rate mortgage rates are near 5%; median home prices remain below their year ago level; and relative to median income, housing affordability is at a 20 year high.

Turning to the business sector, in the second quarter, businesses reduced inventory spending by a record $160 billion. With the Institute of Supply Management data indicating that both the manufacturing and service sectors have begun to expand, businesses will need to rebuild inventories, and that will also contribute to GDP growth. Longer term, corporate America may be a beneficiary of renewed demand from overseas. If demand can be stimulated in the emerging economies, particularly China, India and Latin America, then there are attractive export opportunities for U.S. producers of goods and services.

Fiscal stimulus and accommodative monetary policy have played an important role in stabilizing the economy. The statement released after the latest Open Market Committee meeting stated that the Federal Reserve's target for short term rates remains at 0 - .25% and will remain at this level for an extended period. With short term rates near zero and an improving economic environment, investors have begun to commit cash to the financial markets. Balances in money market funds currently stand at $3.4 trillion, down approximately $500 billion since early 2009. Presumably, a portion of this decline is attributable to renewed investor confidence in the safety and stability of the markets that has resulted in positive cash flows into both the bond and stock markets.

As seen on the chart, the major market indexes are now posting positive year-to-date returns. It is interesting to note that sectors that have historically exhibited greater volatility, high yield bonds and emerging market equities, have been the leaders in the current recovery, with returns of 49% and 64% respectively. This suggests that the “flight to safety” that characterized the fourth quarter of 2008 and the first quarter of 2009 has ended. Further evidence of this renewed investor appetite for risk is provided by the narrowing of agency and investment grade bond yields relative to the yield on comparable maturity Treasury securities. For example, a 6 year, “A” rated corporate bond issued one year ago was priced to yield more than 4% above a Treasury; today the yield on that bond has narrowed to less than 1% above the comparable Treasury.

Accommodative monetary policy has helped to keep interest rates low and thus provide affordable financing for households and businesses. As the economy strengthens, it is anticipated that the Federal Reserve will begin to wind down programs aimed at providing stability to the financial markets. Central bank purchases of government securities should phase out early next year. With an ever increasing need by the Treasury to finance the deficit, there is some concern that this supply may overwhelm the market and cause interest rates to rise sharply in 2010. Based on the current high balances in money market funds and a reduction in corporate borrowing needs, we believe interest rates are likely to remain in the current trading range, with yields on 10 year Treasuries fluctuating between 3 and 4 percent. In this environment, fixed income returns will come primarily from a bond's coupon; price appreciation is not likely to be a factor.

Investors seeking higher returns may be drawn back into the equity markets. Assuming S&P 500 earnings for 2010 of $75, then the broad market is trading at a multiple of less than 15 times next year's earnings. Assuming multiple expansion to a range of 16 to 18 times earnings, we could see another year of double digit returns on equities.

The key to this rather rosy outlook will be corporate profits. Investors will be scrutinizing third quarter earnings releases with particular emphasis placed on evidence of improved revenue growth. More importantly, forecasters will be watching the economic data. The recovery is still fragile. If it begins to falter with the removal of various stimulus programs, a double dip in equity prices could result.

We believe that the policy makers are cognizant of the current risks. Statements by Federal Reserve officials suggest that they will be cautious in removing the quantitative ease. Lawmakers have suggested that another round of fiscal stimulus may be warranted. Thus, it seems unlikely that the green shoots will be allowed to whither on the vine and we maintain a stance of cautious optimism toward the financial markets as we move towards year end.

The opinions expressed in this newsletter are those of the author and may not reflect those of The Washington Trust Company. The information in this report has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions expressed herein are subject to change at any time without notice. Any person relying upon this information shall be solely responsible for the consequences of such reliance. Performance is historical and does not guarantee future results.