Extend FDIC insurance past first $100,000

OK, more likely than not, you don't need easy access to $50 million in FDIC insurance. But some banks are promoting a one-stop banking solution for small-business owners, nonprofit organizations, retirees and others who demand FDIC insurance when they invest huge sums in certificates of deposits.

Michigan-based Flagstar Bank is running ads that proclaim, "Have it all. One bank. One rate. One statement. And access to $50 million in FDIC insurance for your CDs."

After federal regulators seized California-based IndyMac Bank in July, retirees and other savers with serious money are increasingly concerned about the safety of their savings above $100,000.

"We're not really seeing customers concerned about Flagstar Bank, but they are concerned about other relationships," said Trenton Hancock, Flagstar assistant vice president and product manager for retail banking.

Flagstar and other companies are taking part in what's called the CDARS network — the Certificate of Deposit Account Registry Service — which creates a way for the banks to share coverage through the Federal Deposit Insurance Corp.

Huge deposits are split into CDs of less than $100,000 that are spread across the network and thus insured through several banks. CD terms range from four weeks to five years, depending on the customer's needs.

Flagstar launched a pilot program at its Indiana branches in 2007, offered the service in Georgia earlier this year and began offering the service in Michigan in May.

The CDARS network was launched in 2003 by three big names in the financial services arena, including Alan Blinder, a vice chairman of the board of governors of the Federal Reserve in the 1990s.

The Web site is www.cdars.com. More than 2,200 banks nationwide participate.

Larger depositors that use CDARS can include municipal governments in about 40 states.

A CD issued through any bank in the network is never for more than $100,000, so every penny is eligible for full FDIC insurance. If one of the banks fails, the FDIC pays out the bank's depositors.

The FDIC would handle CDARS certificates of deposits in the same way as other fully insured CDs at the bank, said Phil Battey, a spokesman for Promontory Interfinancial Network in Arlington, Va., which runs the network.

Reach Susan Tompor at stompor@freepress.com.