DAK, Uh, oh, I think you are misunderstanding part of your brokerage insurance protection. If you loan money to Merrill or any other bank or broker through their commercial paper or with them as a guarantor, you ARE insured against them ripping you off or a fire burning all their records, etc. You ARE NOT insured against Merrill going belly up. And you are not insured if some firm in their money market fund can't make payment.
Now, if you hold Treasuries in Street name with Merrill, you are insured against ripoff and fire, etc., up to the full amounts. Aetna may be a bit suspect, but I'd rather have them than nobody. But, the truth is, if a big broker goes under, the insurance companies simply don't have the capital to make good. It would be like the San Francisco earthquake and subsequent fire. All of the American insurance companies simply walked away from their claim and said "sorry, suckers." Only Lloyds of London paid off claims, and it nearly took them down.
So, I would never hold beyond the Federally insured amount in any one brokerage firm. Remember, you get the maximum from Merrill, then you can get the maximum from Goldman, on down the line. If you have so much money that you run out of brokers, God bless you and do you want to adopt me and make me your heir? <g> But even for the stuff that is insured, you have to look at the ultimate credit's risk of failure.
True, cash held in your Merrill account is insured. But once they start paying interest on it, it is a money fund and uninsured. |
