Under the FDIC's temporary liquidity program, all non-interest bearing deposit transaction accounts in banks and thrifts are fully insured by FDIC, regardless of the amount, for a 30 day period beginning October 14, 2008. That unlimited coverage will continue until December 31, 2009 unless the institution opts out within the first thirty days.

Failure to opt out comes with a price, however -- 10 basis points per annum calculated on the basis of the deposits in excess of the "normal" (i.e., $250,000) level.

SOOOOOOOOO, what is YOUR institution going to do? It's clearly a business decision and I'm sure there's a lot of number crunching going on out there to figure out you own institution's actual cost and to look at which customers have amounts over the $250,000 in that type of account, etc.

On Good Morning America this morning, they did a piece on "safe banks." In it, news reporter Claire Shipman made the statement "And, for the next year, commercial deposits will be fully covered."

Argh. So many misstatements in one little sentence.

Anyway, I would really like to hear what you are going to do, and hear about what all is going into your thought process on it.

From what we've looked at so far, the cost seems minimal, so, depending on what we'll have to disclose (the scarlet "U"?), I'd say we're leaning towards not opting out.

Our first look - Majority of acounts are public funds and already backed by pledging. So our first thought is we will opt out.

But, since you only have authority to pledge assets to secure the uninsured portion of public deposits, if you stayed in the program, you wouldn't have to pledge.

So, I would think you would look at freeing up those assets that you had formerly pledged to be able to use them in other ways. Thoughts?

Surprised that large public unit accounts aren't asking for interest. MB - you're right that there is liquidity pick-up in that situation.

Yes they do want high int, these are just some of the Public Funds that are in non-int bearing accounts.
Yes, Mary Beth we would gain some liquidity and possibly gain some on investments if we could free up some pledged and sell and replce some of those. But our first look is that we would not gain enough to offset the higher FDIC Premium.

Do we really have a choice? From the ABA FAQ "While nothing is set and may change, the FDIC may consider, for example, whether to have an online resource that would help customers to know which institutions have agreed to pay for the additional coverage and which have opted out of it."

Can you image when the press sees this and publishes the banks in the community that opted out?

Also, from the ABA FAQ " If the costs are greater than the fees collected, the FDIC will conduct a special assessment of the entire industry (including any institution that opts out of either guarantee program).

That was my thought re banks "opting out"...the public may be biased towards those that have taken the additional coverage.

If I were a banker and stayed in the program and paid the extra assessment, you'd better believe I'd milk it in the press for all it was worth if our competitors opted out.

Exactly. I think there will be negative connotations to not participating!

The scarlet "U". (Uninsured)

So after kicking this around some more it sounds like we are being made an offer we can't refuse.
1. Stay in the new unlimited - Our best first guess is with this and the increased premiums for 2009 the extra cost for our FDIC Insur in 09 will be about 15-18% of our 2008 Profit !!!!
2. Opt out and save some expense - But be branded with the Scarlet "U", as Jokerman said !!!!

Which is the lesser of two evils ?? (no I am not turning this into a Presidential / Political Thread)

Does anyone what the exact mechanism for opting-out of this program? My CFO has asked, but I can't find any information anywhere as to who/where you contact.

Thanks in advance.

What they said in yesterday's call, if I understood correctly, is that a form will be posted next week for the banks to use to state what the bank's intentions are in terms of opting-out or not. What I also understood is that once you are in, you are in for good - you cannot later get out. I am not sure if the reverse is also true for opting-out. They also said in yesterday's call that they will have something like a mailbox on the site to post questions to.

This FAQ should shed some light on the subject:

http://www.fdic.gov/regulations/resources/TLGP/faq.html

I think you're right, J. We're in.