InvestmentClubbing.com

Little-known feature seen as rival to direct treasury investment by corporate and high-net worth depositors.

A little-known feature of investment clubs formed by the investmentclubbing.com organization provides FDIC pass-through insurance directly to each club member, in amounts up to $50 Million each. 

Because club members may be corporations, trusts, businesses, pensions or other organizations – even governments – this brings about tremendous competetion to investing in US Treasuries.  With the one-year treasury yield well under half of one percent, certificate of deposit yields of around 2% are very attractive.   

FDIC insurance provides the same government guarantee as Treasuries, but has always been limited by the maximum insurance amount for each depositor, presently $250,000. per depositor per bank.  The ability to go to $50 Million per member investor is of course the key.  This incraesed capability is brought about by a combination of an organization called the Certificate of Deposit Registration Service (CDRS) and a cocktail of InvestmentClubbing.com add-ons. 

The result is that an investment club can be formed by a group of companies, individuals and organizations, with one FDIC-insured bank account which sub-divides the deposits to other FDIC-insured bank accounts around the country, never exceeding the $250,000. maximum balance in any one bank.  The club has only one account number and one bank statement to deal with for each $50 million block.  This also gives the club a single point of access to bank credit against the deposits, the underwriting for which is also spread across the multiple institutions.

The system begain to gain popularity as the economy declined and institutions failed:

But perhaps the most powerful attribute of the Super Clubs is that they are each organized to vote and move funds.  In a maximized situation, one club could move up to $5 Billion with a single vote.  That power to move funds speaks very loudly to banks and their holding companies.  As the clubs are not securities, are private and the members each considered customers of the banks, a sort of billionaires credit union emerges as a possibility.

The negotiating power could influence rates paid, terms granted, credit offered, even to special bank favors for club members. 

Governments which place treasury in US banks are beginning to realize the increase in return.  Rather than invest in US Treasuries at a near zero return, they may move more funds to CD’s, getting about 4 times the return.