Magazine article American Banker

Seidman Takes a Conciliatory Stance on Brokered Deposits, but Plans Curbs

Magazine article American Banker

Seidman Takes a Conciliatory Stance on Brokered Deposits, but Plans Curbs

Article excerpt

DALLAS -- Brokered deposits aren't all bad, According to L. William Seidman, the new chairman of the Federal Deposit Insurance Corp.

"I'm not against brokered deposits perse," Mr. Seidman told reporters after a speech here Tuesday at the U.S. League of Savings Institutions' annual convention.

When asked if the FDIC was softening its position on brokered deposits, Mr. Seidman said only that the agency would be looking at new methods of curbing abuses of brokered funds. "I don't have any detailed approach at this time," he said.

But another possible indication of a change in the FDIC's attitude is that the agency has stopped mentioning brokered deposits in failed banks in its press releases, an FDIC source noted.

Mr. Seidman doesn't expect Congress to address the issue. "I don't find great support on [Capitol] Hill for eliminating brokered deposits," he said.

In his address to the convention, Mr. Seidman noted that "financial institutions have found that using brokers or listing services is an exceptionally efficient way to transfer or obtain funds.

"Some managers have demonstrated they are unable to responsibly use the service, but others are benefiting. They have a nationwide teller network which generates deposits to their specifications."

The FDIC's plan to limit insurance on brokered deposits to $100,000 per broker per institution, which was recently struck down by an appellate court, was "too effective," Mr. Seidman said. "It eliminated the benefits of the evolution of the financial marketplace.

"We shall be exploring other ways of preventing abuse while retaining the benefits of the larger marketplace. …

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