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To date, the public dialogue about the Transaction Account Guarantee program has been divided between the political and reputational risks of continuing this extraordinary federal insurance and the potential liquidity crisis that could ensue if the program ends prematurely and abruptly.
March 19 -
A bailout-era program that offers unlimited deposit insurance on business transaction accounts is set to expire at the end of this year. Some argue that the Transaction Account Guarantee Program has run its course, but many community bankers fear that if it is eliminated large depositors will move their money to megabanks seen as too big to fail.
February 17 -
Bankers shouldn't complain about intrusive government regulation while begging Congress to extend unlimited deposit insurance on large transaction accounts. It's disingenuous, and perhaps worse, it's dangerous politics.
February 22 -
As the potential end of unlimited deposit insurance for noninterest bearing accounts nears, industry observer weigh in on what could to happen to those deposits. Some see the Dec. 31 end of the program as a 'litmus test' for Too Big To Fail and an opportunity for smaller banks.
May 24
More than 30 state trade associations have joined the Independent Community Bankers of America in urging Congress to extend a program that offers banks unlimited deposit insurance on transaction accounts before it expires on Dec. 31.
In a
"Because the global banking system and the economic recovery remain fragile, expiration of full insurance coverage for transaction accounts carries the risk of abrupt dislocation of funds and other unintended consequences for the financial sector, particularly community banks," the associations wrote.
The Transaction Account Guarantee, or TAG, program offers consumers and businesses unlimited deposit insurance coverage on non-interest-bearing deposits. The Federal Deposit Insurance Corp. created the temporary program in October 2008 to help restore confidence in the banking system and in 2010 Congress passed a law that extended the program through the end of 2012. The program is supported not by tax dollars but by fees assessed to banks.
Support for extending the program is hardly universal, however. Some have argued that TAG has benefited large banks most and that
Notably, the American Bankers Association has not taken a position on whether or not to extend the program. In a
But others, like Florida Bankers Association President and Chief Executive Alex Sanchez, believe extending the program is a "no-brainer."
"The program keeps deposits secure and in the local economy, allowing small businesses to grow and the economy to recover," Sanchez said in a news release the ICBA put out Tuesday. "So it's a win-win for community-based borrowers and lenders. That's why Congress needs to act now to keep our economic recovery on track."
