[At-Large] ICANN Keeps it Money in a Non-Interest Bearing Account!

[Karl Auerbach]

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--