Q: In a nutshell, what is Public Sector Insured Deposit Portal (PSIDP)?
A: PSIDP was originally created under the umbrella of a Florida inter-local cooperative called the Florida Fixed Income Trust (Florida FIT) in 2010. Managed by Wertz York Capital Management Group, an SEC registered advisor, the program was added as part of a collection of fixed income investments, especially for deposits that needed to be available on a next day basis.
Q: What does PSIDP have in its portfolio that allows for such liquidity?
A: PSIDP is a collection of FDIC insured bank deposit programs. Each program has its own underlying portfolio of high quality community banks so that collectively, PSIDP has access to hundreds of banks. When a cash manager invests in PSIDP, the money is dispersed to each of the programs and distributed among these FDIC insured banks in amounts not greater than $250K. This means the entire deposit is insured and backed by the full faith of the US government.
Q: Why is PSIDP exclusively for Public Sector investors?
A: Public Sector deposits are far more stable and conservative than those coming from institutional corporate clients. Banks are able to make better investment decisions in their communities due to the predictability and stability of Public Sector deposits. This increases the overall integrity and safety of the program.
Q: How does PSIDP differ from other FDIC registry programs?
A: Aside from being the only registry program specifically for Public Sector, PSIDP has next day liquidity and no penalties for withdrawals. In addition, we review each portfolio on a daily basis to monitor for any bank overlap.
Q: How does PSIDP compare to our local government investment pools (LGIPs)?
A: Pools are often used to cover frequent needs of accounts payable and have money market security portfolios that are designed to cover that level of transaction frequency. PSIDP is a supplemental liquidity vehicle without the credit market or $1 Net Asset Value (NAV) risks of pools and money funds.
Q: What are the risks of a bank deposit program?
A: There are basically two risks to any bank deposit program. One is that the bank will fail. As an FDIC insured bank, generally another bank will take over and that typically occurs within days. The banks that are within PSIDP are only those with the highest level of financial strength, called “well capitalized”. Banks which fall below well capitalized are removed from our program. It would be rare to have a bank fall from the level of well capitalized to default within any quarterly review period. The other risk is overlap of banks exceeding the $250K FDIC insurance. We make every effort to avoid such risk by requesting a bank exclusion list from our clients and then carefully monitoring the banks in their account on a daily basis.
Q: What if we already have an FDIC insured bank deposit or Certificate of Deposit (CD) program in our portfolio?
A: No problem. You’ve already determined the value of PSIDPs. Now you can add capacity to your portfolio and we will monitor for overlaps.
Q: How does this program help our communities?
A: PSIDP is made up of a collection of community bank deposits. These banks often want public sector deposits but the issue of collateral for large deposits can be a problem. Cash managers might want to keep some money local but it isn’t practical to make deposits in such small increments. PSIDP makes it easy to provide funds to community banks so they can then reinvest in their community.