FDIC Federal Register Citations

November 2008

Sheila Bair

FDIC Chairman

Federal Deposit Insurance Corporation

550 17th Street, N.W.

Washington, DC 20429-9990

As a Florida Banker, I appreciate the opportunity to comment on the

proposed FDIC Surcharge on Brokered Deposits. We understand that the FDIC

has proposed a new rule that will impose an insurance premium surcharge on

brokered deposits of certain banks, and that surcharge, as now

constructed, will also apply to CDARS Reciprocal deposits. CDARS is a

deposit swapping service that enables banks to provide their customers

with access to millions of dollars of FDIC-insured certificates of

deposits.

CDARS allows banks to exchange customer deposits with one another so that

their customers can obtain FDIC protection while the banks can retain the

funding.

If the FDIC policy penalizes the use of brokered funding by certain

institutions, it will also penalize the use of CDARS- impairing a stable

funding source at precisely the time when is most needed. Moreover,

including CDARS in a category of deposits that is being subject to a

special risk assessment, will stigmatize what everyone agrees is a good

product.

CDARS Reciprocal behaves like stable core deposits. They have a high

reinvestment rate - 83% in 2008. They are overwhelmingly gathered within

the relationship bank's geographic footprint - 80% of CDARS placements are

made within 5 miles of the bank's branch location. The rates for these

deposits are set by local competitive markets, not a national market.

Since CDARS deposits are built on established customer relationships,

demonstrate a high degree of "stickiness" and are insulated from any rate

volatility in the national CD market, they should be treated like core

deposits.

Therefore, we believe CDARS should not be subject to any new premium

surcharge or tax, which the FDIC may be considering for brokered deposits.

In closing, CDARS deposits should be excluded from the Notice's definition

of brokered deposit. Moreover, we see no reason why CDARS deposits should

be considered as brokered in the first place.

This institution respectfully asks the FDIC to support legislation to

exclude CDARS Reciprocal deposits from the definition of "brokered

deposits" in the next Congress. We believe doing so would clarify any

uncertainty that would remain in the wake of an FDIC exemption in the

risk-based assessment rule.

Thank you for the opportunity to comment.

Sincerely,