New question on the TLGP: We are a mutual bank, therefore not able to issue SUD, and currently hold no CD's for other institutions.

Are mutual's able to participate in this part of the program?? I say yes based on the Alternate Method for Establishing a Debt Cap for Entities with no SUD, and the vaugeness of how it is written, but senior management wishes to see something more concrete in writing saying we are, or are not eligible to participate in the debt guarantee program?

If we are eligible, does it even behoove us to participate if we currently do not issue such debt?

If you are eligible and don't issue any SUD, it won't cost you anything to not opt-out, right? Why not leave your options open in case you find out you can use the DGP to your benefit?

I know this is a very simplified scenario, but am I understanding this correctly? (We are opting in to the TAG).

ABC, Inc. has a DDA with a $500,000 balance and is under a sweep agreement. The sweep has a floor of $100,000, so at the end of business, $400,000 is swept from the DDA to a MMDA, leaving a balance of $100,000 in DDA and $400,000 in the MMDA. If the bank failed that evening, ABC, Inc. would only be eligible for $100,000 of the $250,000 of available insurance for their eligible account (the DDA) and $150,000 of the $400,000 in the MMDA (100,000 + 150,000 = $250,000 –maximum insurance for a corporation). The remaining funds ($250,000) would be uninsured because they are not in an eligible account for unlimited insurance.

Is that right?

And I agree with that, and that is my thinking.

Bigger question here though is, is a mutual savings bank elible to participate or not? I am interpreting that and FDIC insured bank is, but the vaugeness of the def is conerning the powers that be.

I think the $100,000 in the DDA would be fully guaranteed by the FDIC under the TAGP and $250,000 of the MMDA would be insured under the temporary increase of deposit insurance assuming the corporation had no other interest bearing funds on deposit. The guarantee of the TAGP is separate from the deposit insurance coverage.

Yep, you are right, MY BAD. Thanks for correcting me.

On the repo side - is correct to say they are only not insured guaranteed under the TAG if the securities are not in their name or the money (had the sweep not occured) did not originate from a non-interest bearing deposit transaction account?

I thought I would post the notice we will be sending to our clients who have a sweep to a repurchase agreement. I started with the model from Wolters Kluwer and tweaked it a litte. I hope it helps you.
----------------------------------------------------------------
Date


Customer Name
Customer Address
City, State Zip

FDIC insurance and your sweep account.

Dear Valued Customer:

XYZ Bank participates in the Transaction Account Guarantee Program offered by the Federal Deposit Insurance Corporation (FDIC). This means that funds held in your noninterest-bearing checking account are fully guaranteed by the FDIC through December 31, 2009.

You have a sweep arrangement in connection with the noninterest-bearingchecking account you have with us. On a daily basis, when your target balance is exceeded in your checking account, funds are swept from your account to execute a repurchase agreement. Under this sweep arrangement, funds that are transferred to a repurchase agreement do not qualify for insurance coverage. This action voids the FDIC’s guarantee with respect to the swept or transferred funds; these funds, however, are secured by the bonds that support the repurchase agreement. Funds remaining in the noninterest-bearing account continue to be fully guaranteed by the FDIC through December 31, 2009. In addition, funds held in interest-bearing savings accounts will continue to be insured through December 31, 2009 for up to $250,000 under the FDIC’s general deposit insurance rules.

If you have any questions regarding your sweep arrangement, please contact your Commercial Banker.

As always, we value the business you have entrusted to us, and are committed to providing superior banking services.

Do we need to hand out a disclosure with each official check and money order sold or may the Bank post one sign in the location where these items are sold for the disclossure requirement?

I think you may get by with a posting as far as checks you sell over the counter. However, a lot of checks get mailed out. For those, you might consider a slip sheet that provides the information.

Regarding Cashiers checks and money orders we sell, the checks are drawn on our own institution, not another, so do we still need to notify our customers about the guarantee on these items?

No, you do not. The overall notice of your participation/non-participation covers your Cashier's checks and money orders if drawn on you.

I have a question pertaining to repurchase agreements where the funds are swept into government securities. If the bank has a written agreement with the customer which indicates that once the funds are swept into the securities that FDIC insurance does not apply, we don't need to make any new disclosures do we?

I am trying to get a handle on advertising for 2009 if the Bank opted-in to the FDIC programs. Must the Bank now place any wording on future Adsin 2009?

I know the signage requirements but what is now covered in Ads?