The number of institutions finding ways around the FDIC's now $250K limit to provide higher levels of insurance coverage has jumped in the past year as ultra-low interest rates fuel growth in the "bankerage" brokerage sweep marketplace. The latest entrant is USA Mutuals with its new Insured Cash Shelter Account, which "provides access up to $10 million of Federal Deposit Insurance Corporation ('FDIC') coverage through one convenient account." Evolve Bank & Trust's Insured Deposit Program has also recently revamped its product and website.
Eric Lansky, president of USA Mutuals Partners, tells us, "The Insured Cash Shelter Account, which provides up to $10mm in FDIC insurance, next day liquidity and a current yield of 40 bps, was initially rolled out for the family office and advisor marketplace. However there has been an increasing interest among municipal and corporate clients. To help meet such demand, USA Mutuals has signed distribution agreements with Vanderbilt Avenue Asset Management and Cash Investment Advisor and former Moody's Money Fund Analyst Doug Rivkin."
USA Mutuals uses IDC Deposits as its provider. The website says, "USA Mutuals Partners Insured Cash Shelter Account (ICSA) seeks to provide a competitive level of interest in a federally insured account with liquidity and safety. ICSA is able to provide FDIC insurance protection on deposits beyond the current $250,000 limit for each category of legal ownership by electronically linking to multiple 'well-capitalized' FDIC insured banks and savings institutions. By spreading assets among multiple institutions, ICSA is able to offer a higher level of FDIC insurance coverage compared to a deposit in a single banking institution."
Evolve Bank & Trust, which uses Deutsche Bank's program underneath, says on its InsuredDepositsOnline.com site says, "Protect Your Cash Portfolio! In today's tremendously turbulent economy, many investors continue managing portfolios defensively, emphasizing liquidity and capital preservation rather than seeking returns that present any degree of downside risk. With cash awaiting reinvestment, investors with larger cash balances need a different approach. Evolve Bank & Trust offers these investors a unique cash strategy investment option to protect their entire multi-million dollar deposits through the Insured Deposit Program."
It adds, "The Insured Deposit Program ('IDP') is one of the most prudent cash management programs for high net worth individuals, financial institutions, corporations, trusts, and municipalities, to benefit from leveraging Federal Deposit Insurance Corporation ('FDIC') pass-through insurance coverage. As of June 30, 2009, the IDP maintained approximately $6.9 Billion of assets under management."
Two of the largest players in the "FDIC insurance amalgamation" business are Promontory InterFinancial Network, with its Insured Network Deposits (IND) product (as well as its CDARS CD product), and Double Rock, formerly Reserve Management Corp., with its Liquid Insured Deposits. Crane Data estimates that almost $600 billion is currently held in FDIC-insured "sweep" programs offered through brokerages. For more info on rates, ask to see our weekly Brokerage Sweep Intelligence.
