# USD deposit with CDIC insurance



## james4beach (Nov 15, 2012)

The CDIC made various changes recently. One major change is that they now insure foreign currency deposits.









FAQs - cdic.ca


Here are some frequently asked questions about CDIC's deposit protection and our member institutions that may help you.




www.cdic.ca





I'm trying to understand if this applies to TDB8152, since previously it was not covered by deposit insurance. This ISA looks like a fund but it's actually a deposit account, under the main TD issuer name.

Does anyone know if USD stored in TDB8152 are covered by CDIC?


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## Money172375 (Jun 29, 2018)

I would think it is. This fact sheet was revised April 2020. Although it does only reference ” Canadian currencies”.



https://www.tdassetmanagement.com/document/PDF/TD%20ISA%20Product%20Features.pdf



hmmmmmm.


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## Money172375 (Jun 29, 2018)

Last paragraph in clause 1 and clause 10 also lend credence that the $US is covered.



https://www.tdassetmanagement.com/document/PDF/TD%20ISA%20Terms%20and%20Conditions%20E.pdf


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## AltaRed (Jun 8, 2009)

USD deposits like the in-house ISAs are now covered by CDIC. Example: Scotia's ADS Bank shows CDIC coverage https://ads.scotiabank.com/ADS/Download/943/en


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## james4beach (Nov 15, 2012)

Money172375 said:


> Last paragraph in clause 1 and clause 10 also lend credence that the $US is covered.
> 
> 
> 
> https://www.tdassetmanagement.com/document/PDF/TD%20ISA%20Terms%20and%20Conditions%20E.pdf


Ah great



AltaRed said:


> USD deposits like the in-house ISAs are now covered by CDIC. Example: Scotia's ADS Bank shows CDIC coverage https://ads.scotiabank.com/ADS/Download/943/en


Thanks, I see. This is pretty nice.

I'll keep holding cash in TDB8152 then. It only pays 0.25% but that's still higher than my US$ chequing account and also higher than US t-bills.


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## Retired Peasant (Apr 22, 2013)

Don't forget that the coverage is for US$ and CDN$ combined at one institution. The US$ isn't considered a separate account.


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## james4beach (Nov 15, 2012)

Retired Peasant said:


> Don't forget that the coverage is for US$ and CDN$ combined at one institution. The US$ isn't considered a separate account.


Good point. Let's say it's the TD issuer. You would add up all CAD and USD deposits under TD, and that amount is insured up to 100K CAD.


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## Money172375 (Jun 29, 2018)

There are a handful of issuers at TD to spread out The risk. On the Cdn side, you have 8150, 55, 57, 59 under TD Bank, TD Mortgage Corp, td pacific, canada trust. You could insure $400k in cdn dollars at TD. The US ISA is issued by TD Bank. Just move the Cdn dollars to 8155, 8157, 8159 if you’re worried.


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## calm (May 26, 2020)

Does anybody know how much has been set aside to redeem insured accounts in case of an economic collapse?

As an example .....

"As of June 30, 2011, the FDIC deposit insurance fund had a balance of only $3.9 billion to provide loss protection on $6.54 trillion of insured deposits. That means every $10,000 in deposits was protected by only $6 in reserves." 
"The FDIC fund could borrow from the Treasury, but the Dodd-Frank Act (Section 716) now bans taxpayer bailouts of most speculative derivatives activities; and these would be the likely trigger of a 2008-style collapse."
"Derivatives claims have “super-priority” in bankruptcy, meaning they take before all other claims. In the event of a major derivatives bust at JPMorgan Chase or Bank of America, both of which hold derivatives with notional values exceeding $70 trillion, the collateral is liable to be gone before either the FDIC or the other “secured” depositors (including state and local governments) get to the front of the line."
--Ellen Brown, Think Your Money is Safe in an Insured Bank Account? Think Again, July 05, 2013--








Think Your Money is Safe in an Insured Bank Account? Think Again.


A trend to shift responsibility for bank losses onto blameless depositors lets banks gamble away your money. When Dutch Finance Minister Jeroen Dijsselbloem told reporters on March 13, 2013, that t…




webofdebt.wordpress.com


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## AltaRed (Jun 8, 2009)

The Canadian gov't would ball out CDIC. We are just too socialist not to do that for the hard working middle class.


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## calm (May 26, 2020)

AltaRed said:


> The Canadian gov't would ball out CDIC. We are just too socialist not to do that for the hard working middle class.


And how long does the Canadian government have to redeem insurance claims or to make the depositor whole again?
In America it is 20 years I think.


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## AltaRed (Jun 8, 2009)

I don't know what the legislation, or backstop, says should CDIC run out of money. CDIC has handled a lot of failures though History of failures - cdic.ca

I recognize those were not 'black swan' events, but I'd suggest anything other than big 6 failures should be well within CDIC's ability. They target 1% of insured deposits for fund size https://www.cdic.ca/wp-content/uploads/cdic-2019-annual-report.pdf If we have big 6 failures, we have economic collapse anyway and need to head for the hills with our survival rations and ammo.


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## james4beach (Nov 15, 2012)

AltaRed said:


> The Canadian gov't would ball out CDIC. We are just too socialist not to do that for the hard working middle class.


Absolutely. The Bank of Canada can ultimately print money to achieve this.

There is virtually no risk of an insured amount under CDIC not being repaid. Even in the US, during their last banking crisis, there was never a moment of doubt about the FDIC making good on its promises. In fact they actually increased the FDIC limits to alleviate concern.


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## james4beach (Nov 15, 2012)

AltaRed said:


> I recognize those were not 'black swan' events, but I'd suggest anything other than big 6 failures should be well within CDIC's ability. They target 1% of insured deposits for fund size https://www.cdic.ca/wp-content/uploads/cdic-2019-annual-report.pdf If we have big 6 failures, we have economic collapse anyway and need to head for the hills with our survival rations and ammo.


I can't imagine one of the big 6 failing. There are regulations and bail-in measures to protect against them. First, the moment the capital level becomes too low, equity is issued. If the bank continues to have problems and needs tons of new capital, then tons of equity is issued, which wipes out shareholders (or heavily dilutes them down to nothing) but boosts the bank capital with the new cash.

This means there is a virtually unlimited source of cash available by equity issuance, and that's the first measure to recapitalize the banks. And the regulator forces it to happen.

Next, preferred shares are converted to equity. If that's not enough, then many bonds can also be converted to equity. This wipes out the bond holders, but dramatically improves the balance sheet. Finally, uninsured deposits can be bailed in and wiped out. The bank doesn't have to repay those (in the worst case scenario).

There's so much that can be done, that I really don't see how the big 6 would default on *insured* deposits.

So no, you don't need survival rations or guns & ammo. I don't know why everyone goes to such extremes. I think it's very possible that banks may, at some point, need heavy recapitalization and use the above means to achieve it. Life would go on and the bank would still exist, and still carry on business. It would just wipe out equity holders and maybe some bond holders, but those are the risks that they happily assume.


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## AltaRed (Jun 8, 2009)

Bottom line is there is no risk a Canadian government wouldn't supplement CDIC resources in the event of massive numbers of fintech bank/trust failures. With CDIC having assets of $5-8B (2019 annual report) on an insured deposit base of $800B, the vast majority of which is with the big 6, there is little risk of inadequate coverage. It is also important to recognize a bank failure does not mean complete loss of assets either, simply insolvency, or perceptions of issues, like the run on the bank in the recent Home Capital case.


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## calm (May 26, 2020)

I was thinking of a black swan event and that is why I used the term Economic Collapse and not Bank Failure.
I have no doubt that CDIC is able to handle a bank failure.
--------
If things continue the way they presently are with deficit spending because of this virus, how long do you think that this could continue before resulting in an economic collapse? How large a deficit do you think Canada could create before being mocked on the world stage?

Is it the Bank of Canada which "Creates" the money or does Trudeau need to borrow from Wall Street and then the Bank of Canada can "Print" the money?


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## AltaRed (Jun 8, 2009)

Economic collapse would be a black swan event, with much bigger issues at hand, including a peso loonie with minimal purchasing power. You cannot look at CDIC in isolation. If there is an economic collapse that prevents the federal gov't from supporting CDIC, then that $100k you have in loonies is pretty worthless anyway. Having greenbacks is all that will save you, but recognize CDIC may not be able to cover insured USD either. I'd bundle several thousand US 20 dollar bills in some rubber bands in that case and bury them in a water proof container in the back yard.

The Bank of Canada can buy assets and put them on its balance sheet by printing money at will, but it is still sovereign debt. BTW, I think a central bank buying assets on to its balance sheet is a better option than just increasing money supply that would be inflationary (loss of purchasing power) but eventually those assets need to be re-sold back into the monetary system...or written off and be a true debt.

How far can Canada go with deficit spending? We won't know until the credit rating agencies downgrade our rating sufficiently that no ex-Canada entity will want to buy our debt and may actually start to moneitize their investments in Canada before the loonie becomes a peso. Of course, increasing net losses in foreign capital investment in this country starts to exacerbate the problem. Self-perpetuating. In the early 90s, rating agencies kept harping at Canada about pending downgrades and that caused our loonie to slide. It was only when the loonie got to about 65 cents that Paul Martin took charge and stopped the hemorrhage. The same thing will happen again and whether the current administration in Ottawa has any grey matter between the ears or not to do something remains unknown. Clearly the current trust fund baby we have as a PM has no concept of what a bottomless cash drawer looks like.

That all said, it is a little different this time in that most, if not all, OECD countries are hemorrhaging in fiscal deficits. Which Nazi German U-boat do you want to sail on as a submariner? One might get their pants wet no matter which boat one picks.


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## calm (May 26, 2020)

If the rating agencies climb on board and downgrade Canada's debt, what harm does that do? Anybody anywhere can borrow money at 0% interest. (Sometimes less.)

Is Canada able to roll over the debt so that there are no interest payments from years long past borrowings? Perhaps curtail impounding interest?


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## AltaRed (Jun 8, 2009)

calm said:


> If the rating agencies climb on board and downgrade Canada's debt, what harm does that do? Anybody anywhere can borrow money at 0% interest. (Sometimes less.)


It depresses the currency substantially causing a flee of foreign investment capital AND the loss of purchasing power (higher import inflation). Our economy simply stalls and GDP growth maybe goes to zero or negative. We are 'nipples up' if the loonie crashes through the 65 cent threshold.


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## calm (May 26, 2020)

Isn't it inflation that the government uses to pay back debt with inflated dollars?
They borrow 100 bucks value but pay it back with inflated dollars?


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## AltaRed (Jun 8, 2009)

Yes but it doesn't work if the rate of debt accumulation exceeds that of the rate of inflation increase PLUS if inflation takes off, so does the bond yield curve. That 0.5% yield for 5 year bonds can quickly turn to 5%. Remember that the central bank cannot control anything other than the overnight bank rate, which then does have an impact on longer durations (flattening the yield curve) but it does not control longer durations. The market does.

Example: If the overnight rate is 0.25% and inflation start to take off, then the yield curve steepens. 5 year bonds may go to 3% and 10 year bonds to 7% because traders assume the government doesn't care about inflation and it means higher longer term inflation. To the extent Canada has issued a lot of its debt in 5 and 10 year bonds, they have to pay a lot more.

The point being..... the central bank cannot afford to let inflation get too far out of whack....because if they do, the bond yield curve takes off and cost of servicing the debt skyrockets. Behind paywall but Is Canada about to repeat fiscal history debt crisis

Added: One also needs to separate government deficit financing and borrowing to fund it versus the Bank of Canada buying assets to keep the markets, bond and equity, from freezing up. The BoC had to buy bonds in the March crisis because the bond market froze up.


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## calm (May 26, 2020)

Your terminology is using the term "Central Bank".
The Federal Reserve is a Central Bank, are you saying that the Bank of Canada has the exactly the same BIS relationship that the Federal Reserve has?


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## AltaRed (Jun 8, 2009)

Bank of Canada has essentially the same Central Bank mandate as the US Federal Reserve. Did you not respond to the recent BoC questionnaire regarding whether they should change their mandate from a focus on 1-2% inflation control to something more elastic such as employment and GDP growth?


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## calm (May 26, 2020)

I appreciate your answers .... Very kind of you.
You said : Bank of Canada has essentially the same Central Bank mandate as the US Federal Reserve.
However; in the strictest sense, it is not really a central bank?


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## AltaRed (Jun 8, 2009)

Bank of Canada


> _Banque du Canada_) is a Crown corporation and Canada's central bank.[4] Chartered in 1934 under the _Bank of Canada Act_, it is responsible for formulating Canada's monetary policy,[5] and for the promotion of a safe and sound financial system within Canada.[6] The Bank of Canada is the sole issuing authority of Canadian banknotes,[7][8] provides banking services and money management for the government, and loans money to Canadian financial institutions.[9][10] The contract to produce the banknotes has been held by the Canadian Bank Note Company since 1935.


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## calm (May 26, 2020)

I apologize, but can you give me a more simple answer?

It seems to me that Bank of Canada is "central" only to Canada.

It is not the same/identical position as the Federal Reserve?

I am thinking that every country has a central bank.
What I am trying to understand is when Canada borrows, who does it borrow from?

When we borrow, we just owe it to ourselves because BOC just prints money? And if interest rates rise, we pay the extra borrowing costs to ourselves?

Or do we need to go to the Federal Reserve or Wall street and borrow from there?

Why do we see ridicule of China because it owns the it's banks but here in Canada it seems the same thing is true here with our government owning BOC, and yet we call China communist?


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## AltaRed (Jun 8, 2009)

The Federal Reserve is responsible only to the USA. Congress sets its mandate, etc. Both BoC and the Fed print money. Mandates are essentially the same.

The answers you seek are not simple. There is a lot of interplay in a country's monetary system. Suggest you google for more detailed explanations of both....


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## james4beach (Nov 15, 2012)

AltaRed said:


> If there is an economic collapse that prevents the federal gov't from supporting CDIC, then that $100k you have in loonies is pretty worthless anyway. Having greenbacks is all that will save you, but recognize CDIC may not be able to cover insured USD either. I'd bundle several thousand US 20 dollar bills in some rubber bands in that case and bury them in a water proof container in the back yard.


Keeping some USD cash bills in a safe is not a bad idea. You could also be a nut like me and hold some gold bars and coins.

I view my USD & gold holdings as "foreign currency" in the unlikely, but non-zero chance, that the Canadian dollar gets wiped out. If a person really hates the idea of gold, they could also do something like holding a mix of USD, GBP, CHF cash.

It can be helpful to study examples such as Iceland and Argentina to see what happens when a currency and economy are wiped out. The people who came out unscathed were those who held foreign investments such as global stocks, or cash in foreign currencies like USD, EUR, or gold.


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## twa2w (Mar 5, 2016)

To at least somewhat answer Calms question
So it is the Federal Reserve System in the US. It is actually made up of 11(I think) Federal Reserve Banks. Commercial banks (and in some cases individuals) own shares in them. - no you do not have enough money. The Chairman is selected from the board of governors by the president - he can't just pick anyone.

In Canada the Bank of Canada is a crown corporation with special powers and limitations.

Most countries have some type of 'central' bank and they all operate a little differently.

When Canada 'borrows' they normally issue bonds or T-bills or similar instruments - these are bought by institutions, individuals or sometimes other countries.


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## calm (May 26, 2020)

I am thinking that it must of been during the Paul Martin era that I was listening to a radio program and where I understood the participants saying that when Canada needed to borrow, they went to Wall Street and that is why Canada trips down to Wall Street just prior any budget in the spring. After securing the financing from Wall Street and International lenders, the Federal government prints Canadian Dollars.

Also; the Federal Reserve is privately owned

Thus; I have lived a lifetime with this understanding and why I keep asking for confirmation or a better understanding.

It is kind of unfair for me to do it here because the answer would require a zillion taps on keyboards. And I would like to say "Merci Buckets" for the attempts you made to clarify the facts.


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## AltaRed (Jun 8, 2009)

calm said:


> I am thinking that it must of been during the Paul Martin era that I was listening to a radio program and where I understood the participants saying that when Canada needed to borrow, they went to Wall Street and that is why Canada trips down to Wall Street just prior any budget in the spring. After securing the financing from Wall Street and International lenders, the Federal government prints Canadian Dollars.


That was simply because much of the debt Canada was trying to sell (bonds, T bills, etc) didn't have enough market in Canada, e.g. pension funds, institutional funds, retail investors like you and I at attractive enough yields. Canada was counting on foreign investors to buy a good portion of the bond issues and they would obviously have even less trust in the Canadian peso and need even more return. Foreign investors started to balk at buying more and more of Canada's debt until and unless Canada improved its credit rating and/or yields high enough to make it worthwhile. Canada had to up its game to continue to issue bonds at reasonable rates.

Example: Would you buy Argentina gov't bonds now when they are defaulting and/or have IMF demanding austerity?
Example: China has bought much of the USD federal bond debt and may be the Washington's biggest creditor. The difference is the US dollar is considered the world's reserve currency. As long as it remains so, the US greenback is almost infallible. If it ever loses that status, the US is in trouble. Trouble is... there is no other world currency that has a legitimate basis to be the world's reserve currency.


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## calm (May 26, 2020)

Are the Canadian government bonds sold before or after the money is printed?. Maybe there is a filing cabinet somewhere and is full of bonds waiting to be sold or distributed.
Maybe a backlog of transactions?

In the U.S. there are three "Privately Owned" Commercial Rating Corporations which are licenced to "rate" and/or to distribute the Trillions and Trillions of government bonds?
No competition is allowed in this type of work. Hundreds of other companies have asked the SEC to be licenced and the SEC refused.
A monopoly at the very heart of the U.S. Capitalist System.
Check-Out who owns these three rating agencies








Credit rating agency - Wikipedia







en.wikipedia.org





I think that Trudeau needs to visit Wall Street prior to any budget in order to know how much he has to spend or how much he can borrow without a fuss from the rating agencies.

The same institutions which told the world that Bear Sterns was Okay is still playing the same game and is going to rate Canada's debt? The same firms that said that collateralized Mortgages were Triple-A?

Do you know who is licenced to distribute the Billions and Billions of the Trudeau government bonds?


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## AltaRed (Jun 8, 2009)

One of several Articles for you to read regarding the Canadian system. The key point is bonds and Tbills are 'created' to be distributed for sale. Someone has to buy them in order for the gov't to finance its operations in a deficit situation, just as you would have to borrow from someone to finance cash flow deficiencies.

Credit rating agencies are not infallible and they clearly showed their vast shortcomings in the 2008 crisis, i.e. they rated things without really understanding the macro picture. They tend to be comparative more than absolute in that regard simply because there are so many moving parts especially with sovereign nations, and to some extent financially engineered products like CDOs, etc. Use their ratings as a guide.


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