CEO of Association Management Group Carolinas Challenges Assertion on Fed Will Cover All Deposits
/CEO of Association Management Group Carolinas Challenges Assertion on Fed Will Cover All Deposits
Greensboro, NC — In response to an economist making statements at a recent NC-CAI conference that the Federal Reserve has now effectively agreed to cover all deposits, Paul Mengert, the CEO of Association Management Group Carolinas, disagrees. Mengert states, “Claims that the Federal Reserve would be required to cover all deposits are possible but very questionable.” He reminds everyone of the $250,000 limit that remains in place. Mengert argues that even though the current political climate may support the Fed covering all deposits, unwritten policies can change suddenly, and political realities may vary based on different situations.
Market trends seem to support Mengert's opinion. Since the failure of Silicon Valley Bank, the gap between interest rates on bonds issued by money center banks and large regional banks has significantly widened. The gap was only about 15 basis points (bps) before the failure, but it has now increased to approximately 135 bps.
Investors are demanding higher interest rates from smaller banks. Mengert says, “This is due to concerns that the government may allow smaller banks to fail, resulting in a loss of investment.”
Mengert advises those responsible for investments in community associations to follow their governing documents and take all reasonable actions to protect deposits.
It is evident that Mengert's experience and knowledge, including his observations related to the banking industry, is a credible perspective on the matter. While those who assert all deposits will be covered may sound plausible to some, Mengert's skepticism is a reminder that we should be careful about accepting claims that seem too good to be true without doing proper research.
In the end, Mengert's advice to follow community governing documents and protect owner deposits is essential. Community associations should be vigilant in their investments and ensure that they are following best practices to safeguard the interests of their members.
Paul K. Mengert, CEO
Association Management Group, Inc.
