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Network offers 1-stop way to protect deposits

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: “Have it all. One bank. One rate. One statement. And access to $50million 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 others are taking part in what's called the CDARS network – the Certificate of Deposit Account Registry Service – which essentially creates a way for the banks to share coverage through the FDIC.

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.

The CDARS network, www.cdars .com, was launched in 2003.

More than 2,200 banks nationwide participate. 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 its depositors. The FDIC would handle CDARS certificates of deposits the same way it would handle other fully insured CDs at the bank, said Phil Battey, a spokesman for the Promontory Interfinancial Network in Arlington, Va.

Battey said two network members were closed by regulators: Douglass National Bank in Kansas City, Mo., in January and 1st National Bank of Nevada in July. The FDIC sold those banks to other institutions, including their CDARS deposits.

The FDIC (www.fdic.gov) guarantees bank deposits, if you follow the limits, in the case of bank failures.

Savings accounts, checking accounts and certificates of deposit are insured by the FDIC up to the legal limit of $100,000 and sometimes more for special kinds of accounts or ownership categories.

Yet consumers who want to deposit more money often have to go through several banks to guarantee adequate coverage.

So the CDARS option could be something some savers will consider. Even so, savers who use a CDARS service must review their own paperwork.

They need to make sure they don't already have other deposits at one or more of the CDARS network banks that would hold their CDs. If they do, they need to strike that bank or banks from the list of institutions where their money might be placed.

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