WESTERVILLE, OHIO - One of the storylines emerging from the failure of IndyMac Bancorp is the fact many large depositors stand to lose some or all of their balances above the FDIC-insured maximum of $100,000–but don’t put credit unions on that list.
At least, that is, CUs that invested in IndyMac certificates of deposit through Primary Financial’s SimpliCD program. Primary Financial is a CUSO that was founded by Corporate One and currently is owned by all the corporates. SimpliCD is a brokered certificate of deposit, explained Paul Hixon, AVP, marketing for Corporate One.
“Each CD is insured by the government up to $100,000, which typically is the amount a credit union will invest,” Hixon said. “If a credit union has $1 million to invest, the SimpliCD program places it in 10 financial institutions, and helps it manage the accounts.”
Because the interest is paid monthly, and the last interest payment was made in June, even CUs that invested the full $100,000 (rather than stopping short at $99,000 in order to ensure both principal and interest would be covered) have already recouped their interest, according to Primary Financial CEO Mark Solomon. Additionally, the majority of these CDs were set to mature in the next few weeks. Moreover, FDIC has said it will pay up to 50% of the uninsured funds, as well, “though they could still change their mind,” he added.
There are about 3,800 CUs that have agreements with Primary Financial to place certificates in their names, Hixon continued. He said each corporate credit union sells to its own natural person CU members. And although some of these CDs are at IndyMac, all are covered because the program is designed to place no more than $100,000 at any one financial institution.
“We deal with close to 800 financial institutions, and IndyMac was one of them,” he said. “We will only place up to $100,000 in any one financial institution for a customer. We work with banks on the issuing side, but 99.9% of our customers are credit unions. Within our program, we have only placed $100,000 on behalf of any credit union at IndyMac,” he continued. (c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com http://www.sourcemedia.com
