Lawmaker Asks FDIC to Weigh in on Potential TAG Extension

West Virginia Rep. Shelley Moore Capito has asked the Federal Deposit Insurance Corp. to provide Congress with a detailed analysis on the performance of the Transaction Account Guarantee program in order help lawmakers decide to whether or not to extend the four-year-old program when it expires Dec. 31.

In a letter to acting FDIC Chairman Martin Gruenberg Thursday, Rep. Capito, a Republican, asked the agency to assess the cost of the program, also known as TAG, and estimate its impact on the Deposit Insurance Fund if it were extended.

She also asked the agency to assess what the impact might be on the banking system's liquidity and the overall economy if the program were to expire as scheduled.

The fee-based TAG program allows banks to offer its customers unlimited deposit insurance and noninterest-bearing transaction accounts. The FDIC created the program in late 2008 at the height of the financial crisis to help restore confidence in the banking system and Congress passed a law in 2010 that extended it through the end of 2012 and made it mandatory for all banks to participate. (Up to that point it had been voluntary.)

Though there has been widespread debate on the fate of the program — in general, small banks support an extension while large banks don't — the FDIC has yet to weigh in.

In her letter, Rep. Capito said that as Congress continues to consider an extension of the program, "it would be helpful to have the FDIC's perspective on [its] performance …as well an assessment of the risks and potential consequences of extending the coverage or letting it expire." She asked the agency to respond to her questions by June 29.

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