On 11/03/2012 12:14 PM, Bret Fausett wrote:
One of the things that the United States federal government did in the wake of the "great recession" to shore up confidence in the banking system was to remove the cap on FDIC insurance for certain non-interest bearing bank accounts. (See, http://www.fdic.gov/deposit/deposits/changes.html). So ICANN apparently made a decision (the right one, in my view) that this extraordinary sum of money was better off in a fully insured non-interest bearing account than in any other place.
I've been thinking about this since the initial note was posted yesterday. I began my thought with this: ICANN's fee for the new TLD program is based on an estimate of anticipated costs to process applications. In other words it is a cost recovery system, not intended to make a profit. But it is also not a slush fund to be wasted. OK. First I thought of AVC's comment that given that it appears that perhaps many applications share similar content that the cost of evaluation would be rather less than anticipated because, simply, one evaluation would cover the the main part of several applications. AVC estimated that the savings could run as high as 92%. If cost recovery is really the underlying theme then one might expect some, potentially significant, adjustments - refunds? - based on actual expenses. But that does not reach the question of where to hold the application money in the meantime. Assuring against downside risk is hard. The FDIC rule essentially puts the "full faith and credit" of the United States behind the zero-interest holding account, at least for another 8 weeks. But then again, that same "full faith and credit" stands behind US Treasury notes. But at least those Treasuries pay interest, perhaps a small amount, but when measured on a base of $350,000,000 it is nothing to sneeze at - even at the low rates mentioned by John L., one could buy several houses in many parts of the US on the yearly return. The catch is that such notes have specific maturity dates and can be less flexible than an on-demand account. Personally when I need a low-risk investment vehicle I also buy a hedge - i.e. put options or that now evil-sounding thing called a credit default swap. Of course, as we have well learned, even hedges can fail. And those things don't come for free, not even close. All of this suggested to me that perhaps ICANN could have followed a different course - which would have been to allow those submitting applications to submit letters of credit against which ICANN could draw as actual, real, concrete evaluation expenses arose. The applicant could then pick-and-chose to fund that letter of credit with whatever it took to get someone to issue a LoC meeting whatever standard of quality that ICANN required. I wonder, at the end of this process will ICANN perhaps be performing and publishing an audit of program costs? --karl--