"I wonder if any of you heard the radio commercial in Hawaii about a local bank that was offering FDIC insurance of $50M per account. I heard it about a week ago as I was driving between appointments. I wasn't particularly focused on it until I heard the FDIC insured amount. I thought I heard wrong but the commercial repeated the amount. I may be wrong on the $50M, but I'm pretty sure it was a huge amount...not just a few million. ..."
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Don't get too excited about this new program. My bank here in Florida ...Bank Atlantic...is part of this program. In talking with my banker at first I thought it was kind of like a sweep account which is used by companies to collect all the money deposited by various stores into a single account...but in reverse. In other words I thought that they had set up a system where I could deposit my money into one account and it would automatically be spread out over 10 to 20 or more accounts in different banks so that I would never have more than $250,000 in any single account. And I had hoped I would be able to set up an account where I could still write all my checks (especially very big checks) and have the money drawn into the clearing account" as needed from the other subsidiary accounts in different banks. I got excited when I saw the sign in front of my bank offering "FDIC insurance--up to $50,000,000." I thought this would solve a problem for me because I carry an average daily balance in my account that exceeds the FDIC $250,000 limit and I would love to be able to distribute the money from my main bank account into enough banks to give me coverage beyond the $250,000 FDIC limit.
Unfortunately how it works is that if you have more deposits than the $250,000 covered by FDIC the bank will buy CDs in your name from a network of other banks (at market rates which my banker said would be slightly lower than the rate offered by my bank--covering their administration fee). It is a pretty interesting concept for someone with a LOT of money. I mean to get full FDIC coverage on $50,000,000 you would have to buy CDs in 200 DIFFERENT banks. So having your bank administer the whole thing for you would be a great thing. But it only works with CDs...not regular bank accounts...so you also need to structure the maturity of the CDs so that some mature every month or every week (in some bank somewhere) if you want to have access to part of your money at any given time without penalties for cashing in CDs before they mature. Again it would be very convenient for you to have one contact to organize and manage this for you.
I have one question though...if you did have $50,000,000 sitting around...why in the world would you be putting THAT much money into CDs in the first place? And why would you want to deal with a banker to do this rather than a REAL investment specialist???
I hope this program will get some banker somewhere thinking that a reverse sweep account like I described here would be a HUGE thing for businesses like mine which regularly carry average balances way above the $250,000 FDIC limit. With the computerized electronic transfer system (Check21 system) it would NOT be terribly difficult to set up. I know I would sleep better at night if I I knew that my business would not collapse the next day if my bank was seized by the feds during the night.
Steve Ervin
President/Owner
24Seven Marketing System, LLC
727-320-5436 Direct
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