Last year, the state of Maryland had more than $200 million on deposit in a Citigroup account that was fully insured by the Federal Deposit Insurance Corp. and that paid 50 basis points. "It was an extremely wise investment," says Mary Christine Jackman, the state's director of investments. Then Citi, like most big banks, opted out of the unlimited FDIC coverage. Jackman immediately pulled the money and invested it in things like Treasuries, agencies and repos.
"Without the insurance, it was no longer attractive," she says. "The whole point was getting the insurance." Making sure investments are insured or guaranteed is one reason Maryland has a triple-A rating, she points out.