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Statement of H. Thomas Wells Jr., President, American Bar Association
Re: FDIC Inclusion of IOLTA in Unlimited Deposit Insurance Under Temporary Liquidity Guarantee Program
CHICAGO, Nov. 21, 2008 – We applaud the Federal Deposit Insurance Corporation for clarifying the Temporary Liquidity Guarantee Program to include Interest on Lawyer Trust Accounts. Consistent with its mission to ensure stability in the banking community, the FDIC has acted to protect client funds and assure continued funding for programs that provide legal aid to poor people when economic uncertainties make the need for legal guidance most critical.
As a result of today’s FDIC action, an individual client’s funds deposited in IOLTA are fully insured regardless of the amount.
The ABA, working with state and local bar associations and individual lawyers nationwide, made a persuasive case to the FDIC why IOLTA funds must be included in the expanded insurance program. Had the FDIC failed to expand full coverage for IOLTA, lawyers would have had to consider abandoning IOLTA for fully insured non interest bearing accounts or moving IOLTA funds from community banks to the larger “too big to fail” banks. Abandoning IOLTA would have been catastrophic for IOLTA programs in all 50 states, which provide funding for legal aid for the poor. Moving the accounts to larger banks would have defeated the FDIC’s purpose in creating the TLGP.
The leaders of the House Financial Services Committee and the Senate Banking Committee, more than 20 U.S. senators, members of the House Judiciary Committee and many individual representatives urged the FDIC to include IOLTA in the TLGP. This bipartisan effort by members of Congress, plus the efforts of state government officials, community banks, consumer groups, bar associations and foundations, law firms and individual lawyers nationwide, all emphasized to the FDIC the importance of IOLTA programs as the second largest source of funding for legal services to the poor. With today’s action by the FDIC, IOLTA programs can continue make a real difference in the lives of low-income Americans.
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Media Contact: Nancy Cowger Slonim, 312-988-6132, or slonimn@staff.abanet.org
