ABA Prez Says FDIC Avoided 'Catastrophic’ Results by Insuring IOLTA Accounts
ABA President H. Thomas Wells Jr. is applauding a decision by the Federal Deposit Insurance Corp. to insure client funds deposited in Interest on Lawyer Trust Accounts.
Interest from the accounts helps fund legal services to the poor, providing the second-largest source of funding for such programs, according to a statement by Wells. The FDIC will fully fund IOLTA deposits, regardless of amount.
The ABA had worked with state and local bar associations and individual lawyers to make the case for full coverage.
“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,” Wells said in the statement. “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 Temporary Liquidity Guarantee Program.
Sens. Benjamin Cardin, D-Md., and Arlen Specter, R-Pa., had written a letter to FDIC Chairwoman Sheila Bair urging full coverage for IOLTA accounts, the National Law Journal reports. It was signed by 17 other senators, including Hillary Clinton.
