The Economy and the FDIC - 1-31-09
As
we end 2008, we have witnessed and hopefully survived the most
traumatic economic event in the last 70 to 80 years in this country
and the world. We’ve observed with shock the fall of corporate
giants, the consolidation of financial kingdoms, the partial
nationalization of the financial services industry and the financial
health of the entire US Economy that was put in “Harms
Way”. As if that
wasn’t enough, we’ve been further damaged by the greed and
dishonesty of those whom we trusted. With the discovery of the
largest PONZI
scheme to hit the United States and the subsequent damage done to
those investors, we have been shaken to our core. All of these
events in the past year have opened our eyes to the cracks in the
regulatory system that was designed to protect us. The US Government
through the US Treasury and Federal Reserve has been scrambling to
re-build the confidence in the system.
As
part of the governments’ efforts to stabilize the economy and
re-build confidence in the financial services, the FDIC made two very
significant changes to the deposit insurance program this past year.
Both of these events have added substantial value to our client base
by increasing the insurance of accounts and extending the Full Faith
and Credit of The US Government.
The
first change was to increase insurance of accounts on all interest
bearing deposits to $250,000.00. This is an increase over the
previous insurance amount of $100,000.00. The second change is even
more significant for our clients as it has increased the insurance of
accounts on all non-interest bearing accounts to an unlimited dollar
amount.
For
example, a client could have two Certificates of Deposit for
$100,000.00 each, a money market account with $50,000.00 and a
non-interest checking account with $1,000,000.00 for a total deposit
with the same institution of $1,250,000.00 and have full FDIC
insurance of accounts.
Remembering
that NOTHING
is free, there are some conditions with these programs.
The
FDIC has stated that there will be a sunset period for these
programs. We will keep our clients advised well before any sunset
period that could eliminate either program. And second is that the
unlimited non-interest bearing program is available to all FDIC
member institutions, however, they may opt out of the program. Some
institutions that do not have high deposit balance clients could opt
out to save the expense as the FDIC will charge participating
institutions 1/10th
of 1% for the additional insurance above the $250,000.00.
United
Labor Bank primarily serves unions and affiliates. Most of our
deposit clients carry balances well above the $250,000.00. We do have
and will continue to have the additional deposit insurance as long as
it is available. It was necessary for us to assess the non-interest
bearing main accounts with a $25.00 monthly fee that helped us offset
the cost. This is actually a small price to pay for peace of mind.
We
send our best to you for a prosperous 2009.
Malcolm
F. Hotchkiss
President
& Chief Executive Officer
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