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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 

CDARS allows banks to exchange customer deposits with one another so that 
their customers can obtain FDIC protection while the banks can retain the 

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 

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 

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.



Last Updated 11/05/2008

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