Bank lobbying groups have been pushing for an extension of the Transaction Account Guarantee program that would continue to make FDIC coverage for all transaction accounts mandatory. "But prior to Dodd-Frank, the original TAG — which regulators created in 2008 to strengthen liquidity — was voluntary and charged participants extra fees to opt in,” writes American Banker’s Joe Adler.
If TAG is extended at the end of this year, should it be voluntary or required for all banks?
"The marketplace would normally say: If you want excess insurance, fine, but you have to pay for that," says James Rockett, partner at Bingham McCutchen LLP. He says he has heard both sides of the debate from bankers, but believes with a voluntary program all banks "would be in the position to make their own decision as to whether or not that will make a difference to their customers."
One of the major arguments for a mandatory program is that it eliminates any negative perception of opting in (think TARP). "Banks that were being conservative and opted to stay in the program would be viewed as weaker in the eyes of depositors because they needed the insurance." says Paul Merski, the Independent Community Bankers of America 's chief economist.
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