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Idle Balances Reap Rewards

The extension of FDIC insurance and other responses to the financial crisis have changed the value proposition for leaving money just sitting in the bank.

By Richard Gamble | Updated on February 01, 2009

For decades, many treasuries’ top priority was to sweep every available dollar out of a no-interest bank account into an interest-bearing investment or apply it to a line-of-credit balance. Now some of the most alert treasuries are reversing that pattern and taking pride in the money they leave in bank accounts. It’s a dramatic change of direction, but recent dramatic events could make so-called “idle balances” actually the most rewarding use of cash.

First, in response to the financial crisis, Congress last October extended FDIC insurance temporarily to cover 100% of the money held in no-interest accounts like corporate demand deposit accounts (DDAs). “Temporary” means until the end of 2009. That coverage significantly reduces the risk of leaving large amounts of cash on deposit.

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