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For years the standard FDIC (Federal Deposit Insurance Corporation) protection for single accounts had been $100,000. This mostly covered bank accounts such as savings, checking, or CD (Certificate of Deposit) with FDIC member banks. With the recent global financial meltdown, the government sought to stanch the erosion of confidence in the banking system and raised that limit to $250,000 on Oct 2008 to continue through 2009.

The FDIC coverage however does not extend to other types of accounts such as money market or corporate debts. To alleviate the frozen credit market and jumpstart the flow of money in the economy, the government recently introduced the Temporary Liquidity Guarantee Program (TLGP) rule which provides unlimited coverage to certain types of unsecured notes. It possibly guarantees certain types of corporate deposit accounts which act much like savings accounts but have not generally benefited from FDIC coverage.

The problem is that the rules are apparently so complex and so fluid that even seasoned people running these firms aren't sure whether the deposits are covered or not, as evident below. The screen capture was taken today from the GE Interest Plus site which offers interest-bearing accounts to the public. These accounts are really investments in GE Capital notes, and for now the company's position is that the deposits may not be insured by FDIC. So, for the time being, the depositors' only assurance is the top ratings issued by the rating companies, S&P and Moody's and GE's own reputation.

Given the poor track record of the rating companies who were at least tangentially complicit in the recent meltdown, and GE's own financial woes with its stock price hovering near 16-year lows, that's hardly any assurance.

investment in GE Interest Plus Notes

Disclosure: I am a previous GE employee and hold GE shares in my 401(k) account.


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