For the last few months, until Congress raised FDIC insurance to $250,000, a lot of people were absolutely freaking out about their banking deposits. The largely symbolic move from $100,000 to $250,000 affected practically no one at that point but it made me wonder how the wealthy protected their liquid assets. I didn’t consult with any professionals on this but there are two very simple ways: CDARS (Certificate of Deposit Account Registry Service) and Treasury notes.
The Certificate of Deposit Account Registry Service is something that your bank may offer and it can protect your deposits for up to $50 million. The program is very simple and essentially handles the paperwork of opening up Certificates of Deposit at multiple banks. There is a “loophole” in the FDIC insurance in that it covers you for $100,000 ($250,000 until December 2009) per person per institution. CDARS offers $50 million in protection because they open up CDs at multiple partner institutions. You could do it yourself, but they are simplifying the process and likely taking a little bit in interest to pay for expenses and make some money (I wonder how those rates compare with the best CD rates I’ve found?).
All Treasury Notes are backed by the full faith and credit of the United States government. Should that level of infinite insurance fail, the dollar would be worthless and your last concern would be over your deposits! We saw many institutions rush to put their money in short term notes when the credit crisis hit its apex a month or so ago and that was because those notes are protected 100%. As a consumer, you can buy Bills, Notes, Bonds, and Treasury Inflation-Protected Securities (TIPS) through Treasury Direct, the Treasury’s online management system.
For people like you or me, opening up a few high yield savings accounts will probably be sufficient to cover our liquid asset protection needs.