Merrill Blasts Broker Deposit Insurance Plan
McCormick, Linda W., American Banker
WASHINGTON -- Merrill Lynch & Co. rolled its big guns into Washington on Friday to advance its war on proposed insurance limits on brokered deposits.
In a press conference called to release copies of comment letters filed with the Federal Deposit Insurance Corp. and the Federal Home Loan Bank Board, Roger M. Vasey, chairman of Merrill Lynch Money Markets Inc., charged that the proposed limit on insurance for brokered deposits is "an ill-advised overreaction to imperfections in the marketplace."
He called the agency proposals the result of faulty economic analysis and said they are "far too sweeping and should not be adopted."
FDIC officials present at the meeting would not comment on the Marrill Lynch charges. A meeting has been scheduled Tuesday between FDIC attorneys and Merrill Lynch officials.
Both the Bank Board and the FDIC have proposed to limit the amount of insurance on brokered deposits to $100,000 per broker at any one institution. The agencies argue that the rapid growth of brokered funds poses a threat to federal deposit insurance, and they say brokered funds have played a major role in some bank and thrift failures.
Bank Board Chairman Edwin J. Gray, in fact, characterized brokered deposits as "a spreading cancer" during a recent speech to thrift industry officials.
But Merrill Lynch officials said Friday that the economic analysis behind those arguments is ill founded. Instead of blaming all brokered funds, the FDIC and Bank Board should be focusing on the small number of unregistered brokers who are placing insured deposits on behalf of institutional investors, Mr. Vasey and other Merrill Lynch officials said. Second Assault by Merrill
The Friday press conference marked the second time that Merrill Lynch has attacked the proposed limits on brokered deposits. In January, the Securities Industry Association held a press briefing in New York during which Merill argued against the FDIC and Bank Board proposals.
Mr. Vasey said only 7% of all brokered deposits are insured institutional investments, yet all the cases of abuse of brokered funds have occurred within that segment of the industry. …