Yesterday, the Federal Deposit Insurance Corporation released its latest "FDIC Quarterly, which "is published by the Division of Insurance and Research of the Federal Deposit Insurance Corporation and contains a comprehensive summary of the most current financial results for the banking industry." The latest publication contains a section on the "Temporary Liquidity Guarantee Program," which discusses the extension of the Transaction Account Guarantee program and unlimited FDIC insurance on non-interest bearing transaction accounts. These dramatic temporary expansions in FDIC insurance are of course of interest to money market mutual funds, so we excerpt some of the highlights below.
The Quarterly says under "FDIC Responds to Market Disruptions with TLGP," "The FDIC Board approved the Temporary Liquidity Guarantee Program (TLGP) on October 13, 2008, as major disruptions in credit markets blocked access to liquidity for financial institutions. The TLGP improved access to liquidity through two programs: the Transaction Account Guarantee Program (TAGP), which fully guarantees noninterest-bearing transaction deposit accounts above $250,000, regardless of dollar amount; and the Debt Guarantee Program (DGP), which guarantees eligible senior unsecured debt issued by eligible institutions. All insured depository institutions were eligible to participate in the TAGP. Institutions eligible to participate in the DGP were insured depository institutions, U.S. bank holding companies, certain U.S. savings and loan holding companies, and other affiliates of insured depository institutions that the FDIC designated as eligible entities."
The section "FDIC Extends Guarantee Programs," explains, "Although financial markets improved significantly in the first half of 2009, portions of the industry were still affected by the recent economic turmoil. To facilitate the orderly phase-out of the TLGP, and to continue access to FDIC guarantees where they were needed, the FDIC Board extended both the DGP and TAGP. On March 17, 2009, the Board of Directors of the FDIC voted to extend the deadline for issuance of guaranteed debt from June 30, 2009, to October 31, 2009, and extended the expiration date of the guarantee to the earlier of maturity of the debt or December 31, 2012, from June 30, 2012. The FDIC imposed a surcharge on debt issued with a maturity of one year or more beginning in second quarter 2009. The Board adopted a final rule on October 20, 2009, that allowed the DGP to expire on October 31, 2009."
It continues, "A final rule extending the TAGP six months, to June 30, 2010, was adopted on August 26, 2009. Entities participating in the TAGP had the opportunity to opt out of the extended program. Depository institutions that remained in the extended program were subject to increased fees that were adjusted to reflect the institution's risk. On June 22, 2010, the FDIC adopted a final rule extending the TAGP for another six months, through December 31, 2010. The final rule is almost identical to an interim rule adopted on April 13. Under the rule, the FDIC could extend the program for an additional 12 months without further rulemaking."
Under "Noninterest-Bearing Transaction Accounts Fully Insured under Dodd-Frank Reform Bill," the FDIC writes, "According to an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, noninterest-bearing transaction accounts at all FDIC-insured institutions will be fully insured for two years. This amendment takes effect on December 31, 2010. Coverage of noninterest-bearing transaction accounts is separate from the regular insurance limit of $250,000. Assessments for noninterest-bearing transaction accounts will be included in the regular assessments for insured institutions."
The FDIC Quarterly also says, "A Majority of Eligible Entities Have Chosen to Participate in the TLGP." It explains, "About 74 percent of FDIC-insured institutions opted in to the TAGP extension through December 31, 2010. More than half of all eligible entities elected to opt in to the DGP. Lists of institutions that opted out of the guarantee programs are posted at http://www.fdic.gov/regulations/resources/TLGP/optout.html."
Finally, the report says under, "$107 Billion in Transaction Accounts over $250,000 Guaranteed," "According to third quarter 2010 Call and Thrift Financial Reports, insured institutions reported 190,817 noninterest-bearing transaction accounts over $250,000, fewer than one-third the number of accounts reported at year-end 2009. These deposit accounts totaled $155 billion, of which $107 billion was guaranteed under the TAGP. More than 5,100 FDIC-insured institutions reported noninterest-bearing transaction accounts over $250,000 in value."
