O.T. I appreciate your post. As I said, fixed income is not at all my area of expertise, so a little schooling is not entirely unwelcome on my end. I should mention that at the time I opened my Citi acct, WaMu (among others) was offering a ridiculous 6%, which I promptly passed on for precisely the reasons you outlined above. Not that at WaMu the funds wouldn't have been FDIC insured, but I had to go with my gut and choose the larger 'name brand', which may or may not prove to have been the best move. Time will tell of course. sprstpd's story is somewhat comforting. You are right, we don't put our money with IB solely for the interest rate. My only point here was, and maybe it's just me, but it seemed there was a time when IB had rates that compared very favorably to MM's at many of the major banks (at least the ones I usually deal with). It was a nice little bonus to having the IB account, which in my own experience I have found no longer to be the case.
If IB is really serious about allowing vanguard mutual funds then there is the option of VMMXX with a 3.5% yield. But I already noticed IB doesnt list that as an option on the avaliable mutual funds page(http://individuals.interactivebrokers.com/en/trading/mf.php), what a joke, they listed EVERY vanguard fund except the money market ones. Guess they like the revenue of no interest on first 10K too much to act on their clients interest