I am the lucky holder of IndyMac Brokered CD's in my brokerage account. I wanted to point out some of the nuances of brokered CD's in the event that your bank fails.

-Neither broker "announced" there was a failed bank CD in my account or provided any information about the CD's for about a week, and even then, it was only when customer service was contacted directly and repeatedly that I received any information.

-While bank customers have the option of holding the CD to maturity or being cashed out, brokered CD's are cashed out, period.

-Brokered CD's stop accruing interest immediately upon bank failure.

-Brokers are required to file special paperwork for FDIC pass-thru insurance. You can't really contact the FDIC to find out if you are insured. I'm below the limits, so it isn't really an issue with me, but you can't use the "Am I insured" web page set up for IndyMac account holders.

-This weekend, the position value was changed to zero. I was told it is because they no longer trade, but it is quite a wake-up call to see your balance evaporate. I've been told by the broker not to worry.

-The FDIC does not have the same sense of urgency with brokered deposits. They will pay your broker, who will pay you, after they review the pass-thru insurance paperwork, usually in less than 60 days.

-Be sure to compare rates between the bank and broker. They often have very different rates for the same term.

-Some brokers (FirsTrade) are actually charging commissions on primary market CD's.

There is a convenience factor with brokered CDs, but folks should understand the difference between the two.

Thank you for the information.

So, does this mean that if the bank of a brokered CD fails, while your P&I up to the failure is safe, it may sit in no interest limbo for as much as 60 days?

I may have to be a little choosier and do more (some) research when investing in brokered CDs going forward.

edit: typo

crap I just posted this. sorry for double post.

Here is another angle to consider... if you have a brokered CD with interest paid "at maturity", but the bank borrowing the CD money fails before CD maturity, it may positively affect the CD's APY as a result of the shorter compounding period.

IE: Let's say you have a 1 year CD with a 3.4% annual interest rate and interest usually compounded/paid at maturity. The APY on this CD would therefore also be 3.4% APY.

Let's say after six months, the bank failed and you received a penalty-free early interest payment, calculated using the CD's 3.4% rate. Notwithstanding the loss of "float" from the day(s) you don't have access to the funds, your APY would get bumped a bit as a result of the shorter compounding cycle, from 3.4% APY to 3.429% APY.

This extra .029% APY would then pay for about 3 days of not having access to the funds (assuming they are earning no interest during that period.)

To the contrary.

However, the brokered CD's I am referring to a LONG TERM CD's (15-20 yrs).

Current offering, for example: 15 yrs. @ 6.125%

Most B&M banks don't offer long term CD's and I'm not familiar with ANY that pay over 6%

Firstrade credited the account last night as well.