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VIDEOFDIC Squeezes Banks for Fees
By
Scott Reeves Mar 04, 2009 10:30 am
Brief scrutiny of today's headlines.
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FDIC Chairman Shelia Bair warns that the deposit insurance fund could run out as more banks fail in the downbeat economy. The FDIC says 25 bank failures last year drained the fund.
The new fees could raise as much as $27 billion this year. The fund dipped to $18.9 billion in the fourth quarter of 2008 from $34.6 billion in the previous quarter.
A banking trade group says community banks plan to protest the new fees.
Camden Fine, president of the Independent Community Bankers of America, told Bloomberg News that the new assessments could eat up 50% to 100% of some bank’s 2009 earnings.
The FDIC can draw on a $30 billion line of credit at the US Treasury Department, but Bair says the banking industry -- not Uncle Sam -- should rebuild the deposit insurance fund.
Congress has temporarily increased FDIC coverage to $250,000 from $100,000 per depositor through December 31, 2009.
The Certificate of Deposit Account Registry Services -- CDARS, or “cedars” like the trees --provides up to $50 million FDIC coverage through multiple CDs split into amounts below the FDIC limit and divided among member banks to ensure full coverage. However, all paperwork is handled at one bank, and this saves running around town and dealing with several banks to keep your CDs below the threshold for FDIC coverage.
CDARS is a deposit-placement service offered through Promontory Interfinancial Network. It’s designed to help community and regional banks attract and retain large deposits. CDARS is available through about 3,000 banks in all 50 states and the District of Columbia - think Apple Bank for Savings in New York, Bank of Houston or Northrim Bank in Anchorage, Alaska.
In general, major banks don’t offer CDARS.
No positions in stocks mentioned.
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