Four Ways for Congress to Pass a TAG Extension

WASHINGTON — With a month and a half left in 2012, the window is closing for lawmakers to extend the Federal Deposit Insurance Corp.'s unlimited coverage of noninterest-bearing checking accounts.

Not only is time running out, but between an election and the start of a new congressional term, lawmakers start packing up offices or thinking about the next session. As a result, only a very finite amount of legislative business can get done in this "lame-duck" period.

Yet it remains possible that Congress could extend the FDIC's Transaction Account Guarantee, which is a high priority for the industry's trade lobby.

Under the Dodd-Frank Act, TAG — which originated during the liquidity scares of 2008 - is due to sunset Dec. 31.

While passing narrow legislation just focused on that issue is unlikely, the bill could be attached to broader, higher-profile legislation with bipartisan interest. Congressional staffers reportedly have at least put the program on their list of unfinished business that could get consideration before the end of 2012.

The coming showdown over the federal budget and avoiding the so-called "fiscal cliff" — a series of tax hikes and spending cuts put in motion by last year's debt-ceiling fiasco — is one option, assuming lawmakers can cut a deal. But there are numerous other bills pending on hot-button issues — some not directly related to the financial sector — to which TAG could be added.

Here are some potential routes to getting the program renewed:

1) Agricultural Reform

Farm bills are perennial pieces of legislation considered in every session to deal with subsidies, crop insurance and other programs providing support for the agricultural sector. In July, the Senate passed the Agriculture Reform, Food and Jobs Act of 2012, which would extend federal farm-related programs for another five years. Yet the House has yet to take up the measure. Assuming Congress approves a final bill to preserve certain farm programs, the agriculture legislation offers a chance to add language extending the TAG program as well.

2) Disaster Relief

The aftermath of Hurricane Sandy has not only left the Northeast with a costly cleanup effort but has also renewed attention on the federal bureaucracy's ability to handle big disasters. New York Gov. Andrew Cuomo has requested $30 billion in federal assistance for the Sandy cleanup, and that would likely need congressional approval. The storm has also tested the coffers of the National Flood Insurance Program. Banks along the Eastern seaboard were also hit by the storm, and the industry may have an argument that ending TAG now could remove another layer of security for storm-affected small businesses. While a disaster-relief bill stemming from the storm has yet to be introduced, some observers say it could come up in the closing weeks of the term.

3) Budget Showdown

Of all the issues federal policymakers will focus on in the closing days of 2012, none has garnered as much attention as the "fiscal cliff." As the White House and Congress have repeatedly punted on a comprehensive plan to reduce the deficit, their short-term deal last year called for sharp spending cuts — coupled with an expiration of the Bush tax cuts at the end of this year — to take effect if Democrats and Republicans cannot agree on a long-term budget compromise. As attempts at a deal are likely to be the capital's No. 1 focus heading into 2013, a huge bipartisan budget bill may be the banking industry's best shot at extending TAG. If anything, community bankers can argue that ending TAG will not help in coping with the economic consequences of going over the cliff.

4) All or Some of the Above

The end-of-session horse trading between the two parties could also produce any number of other scenarios for where to attempt to add a TAG extension. Congress has yet to finish other items deemed relatively routine, such as authorization for defense spending. If lawmakers cannot reach a big spending deal, they may attempt to isolate narrower items that could be passed on their own with more support, such as renewing certain tax cuts and credits that are due to expire. Preserving the FDIC program — which has supporters in both parties despite some opposition among bankers - may find room in one of those provisions. Lawmakers have other banking-related items that have been debated in this session but not completed, including a pending bill to increase federal support for mortgage refinancing. (Bankers beware: the list also includes increased lending limits sought by credit unions.) Congressional leaders may focus their efforts on getting just one bill passed — known as an "omnibus" — with a smorgasbord of items.