In May 2019, Georgia became the 50th state (plus the District of Columbia) to allow public entities to protect taxpayer funds by submitting the funds for placement through a deposit placement service for non-time deposits. Pursuant to the new law, the Georgia State Depository Board has approved Promontory Interfinancial Network as a third-party service provider to facilitate deposit placement for public entities using ICS, the Insured Cash Sweep® service.1 All 50 states (and the District of Columbia) also have laws enabling the use of CDARS, also known as the Certificate of Deposit Account Registry Service®, for public funds placed in time deposits. As a result, public funds throughout the country have access to millions of dollars of FDIC insurance coverage through a single financial relationship with one or more banks that are located in, and make loans to, their communities.2
But public depositors (e.g., city, state, and local governments) have not always been able to use ICS and CDARS to keep deposits safe. When Promontory Interfinancial Network launched CDARS in 2002, only a handful of states permitted public funds to utilize the new service.
Before CDARS and ICS, many large-dollar depositors, such as public entities, institutional investors, and nonprofits, were unable or reluctant to deposit their cash at small banks because their deposits could only be insured up to $250,000, and many banks lacked the excess collateral necessary to backstop higher deposit amounts. Often, public deposits went to larger entities that managed large collateral pools, possibly taking the funds well outside of the local market in which they were generated.
But CDARS (and later ICS) offered a way for community banks to accept large public deposits and reinvest the full amount of those funds locally. Using both services, banks are able to replace potentially more expensive funding, along with ongoing collateralization costs, by using reciprocal deposits. Invented by Promontory Network, these are deposits received in exchange for deposits placed by a bank for its local customers at rates that the bank sets. The bank has the ability lend these funds locally.
However, because of outdated laws and regulations, most states initially did not enable banks to use either service to accept public deposits.
That’s where Ed Dunkelberger came in.
Ed Dunkelberger joined Promontory Network in November of 2002 after 45 years at one of the nation’s largest and most respected law firms, Covington & Burling LLP. Ed, a graduate of Yale Law School and a former Marine, started at Covington & Burling in 1957. By 1966, he was a partner and he later became a member of the Management Committee. Ed was a beloved fixture at Covington and sought out by all in the firm for his wisdom, expertise, and sense of humor.
Within months of arriving at the office in Arlington, Virginia, Ed was asked to figure out how to get the use of CDARS enabled by public entities in every state. Working with state banker associations and other Promontory Network employees—Steve Kinner, Phil Battey, Regional Directors, and key folks in the legal department—Ed got the job done. Whether it was a ruling from a state banking regulator, an executive action by the governor, or the passage of legislation, CDARS eventually became the go-to option for public funds wanting to support local banks and invest in their communities.
But Ed wasn’t done yet. In 2010, Promontory Network launched ICS. And, just as he had been with CDARS, Ed was on the job again—working with trade associations and meeting with community bankers from all 50 states. All told, Ed worked on the passage of 78 different bills to enable the use of CDARS and ICS by public funds. As a result, banks can use CDARS and ICS to keep the full amount of public deposits at home.
This fall, Ed celebrates his 18th year at Promontory Network (and his 90th on this terrestrial ball). But should anyone think Ed is done, think again. Right after Georgia became the 50th state to enable ICS, Ed asked our CEO Mark Jacobsen what his next assignment was. In a few years, that will be the subject of yet another writing.
Join us for a free webinar detailing the ICS and CDARS services that offer large-dollar FDIC insurance eligibility for CDs, money market deposit accounts, and demand deposit accounts – services that government finance officers in Georgia may use to place deposits. We will review the benefits, how they work, and ways government finance officers can leverage these services and work with their local banks.