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Posted by Gil Faver on October 13, 2008, 5:51 pm
I just read that republicans are proposing "Extending government deposit
insurance to business transaction accounts."
does this mean a business entity has no FDIC protection currently?
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Posted by Douglas Johnson on October 13, 2008, 9:59 pm
>I just read that republicans are proposing "Extending government deposit
>insurance to business transaction accounts."
>
>does this mean a business entity has no FDIC protection currently?
According to www.fdic.gov corporations, partnerships, and unincorporated
businesses are covered up to $250K per entity. But you don't have to be a very
big company for that to be this week's payroll. -- Doug
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Posted by Gil Faver on October 13, 2008, 10:36 pm
>
>>I just read that republicans are proposing "Extending government deposit
>>insurance to business transaction accounts."
>>
>>does this mean a business entity has no FDIC protection currently?
>
> According to www.fdic.gov corporations, partnerships, and unincorporated
> businesses are covered up to $250K per entity. But you don't have to be a
> very
> big company for that to be this week's payroll. -- Doug
thanks. I guess that was just sloppy reporting, the way it was worded. I
guess they mean to increase it beyond $250k. I guess.
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Posted by Jean Keener on October 14, 2008, 5:05 am
>I just read that republicans are proposing "Extending government deposit
>insurance to business transaction accounts."
>
> does this mean a business entity has no FDIC protection currently?
Business entities are currently insured ... directed from the FDIC Website:
"Deposits owned by a corporation, partnership, or unincorporated association
are insured up to $250,000 at a single bank, but are insured separately from
the personal accounts of the entity's stockholders, partners, or members."
Jean Keener
Keller, TX
www.keenerfinancial.com
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Posted by Mark Freeland on October 15, 2008, 9:50 am
>I just read that republicans are proposing "Extending government deposit
>insurance to business transaction accounts."
>
> does this mean a business entity has no FDIC protection currently?
There may be both more and less to this than meets the eye.
First of all, the extension of insurance is to participating institutions,
which I suppose means that banks aren't required to participate and pay the
10 basis points for the excess insurance. Second, it applies to all
non-interest bearing transaction deposit accounts (aka DDA or non-interest
checking accounts), not just to commercial accounts.
http://www.fdic.gov/news/news/press/2008/pr08100b.html
Third, I've seen nothing describing the interplay between this insurance and
the $250K per depositor limit (e.g. if you have $200K in savings, and $300K
in checking, are you fully insured, or are you first insured for the $300K
in checking, and now having exceeded $250K insurance, uninsured in savings?)
Perhaps most disturbing is that this may all be smoke and mirrors. Banks
typically sweep transaction account funds into "savings" accounts, to avoid
reserve requirements. (See
http://www.newsletterlink.info/nx.asp?x=82-879-553-2562-6008-0 or
http://www.stls.frb.org/publications/cb/2003/d/pages/deposit_program.html
- banks are required to hold reserves against transaction accounts but not
against savings accounts.)
Since much of the money that you think is in a transaction account really
isn't, it would appear that the money isn't getting this extra insurance.
Smoke and mirrors. I could be wrong - this is from a quick read, and I
haven't really researched sweep accounts. But it is enough to make me
suspicious and ask if others have a better understanding.
Mark Freeland
nNeEwTs@nyc.rr.com
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