Borner, Tom Sent: Tuesday, November 04, 2008 10:25 AM To: Comments Subject: IOLTA Accounts
In addition to
serving in my capacity at Putnam Bank, I am of counsel to a law firm. I have
serious concerns about the IOLTA accounts and whether they are included in
the Temporary Liquidity Program. Attorneys in Connecticut are required to
maintain these accounts with institutions agreeing to credit interest and
pay directly to the Bar Foundation for its legal service fund. The attorney
does not make money from these accounts nor can they be placed in
non-interest bearing accounts. This is similar to real estate brokers
accounts where the interest is paid to a housing fund.
As an attorney I
recently received a letter from the Bar Foundation explaining that should
the bank in which these accounts are held fail, the attorney may be liable
if the amount for any one client exceeds the FDIC insurance limit for that
customer. Since these accounts are held for real estate closings there are
frequently times when the balance per client exceeds the insured limit.
Since the duty to complete due diligence on the bank is on the attorney
many attorney have seen this as a sign to only deal with the banks, such as
Bank of America, who come under the to big to fail doctrine.
Please consider creating an exception for these accounts since they do not
really pay interest and will serve to put community bank at an extreme