WASHINGTON Dec 11 The U.S. Senate voted on
Tuesday to begin debating a bill that would keep a financial
crisis-era deposit insurance program in place for two more
years, but it will likely face strong opposition from the
Republican-controlled House of Representatives.
The Transaction Account Guarantee (TAG) program insures bank
deposits above $250,000, the amount the Federal Deposit
Insurance Corp normally covers, in checking accounts that do not
collect interest. It is due to expire at the end of the year.
Bank lobbyists have said that letting the program end could
lead U.S. companies to pull funds from bank accounts and invest
elsewhere, adding to economic uncertainty as the United States
grapples with expiring tax cuts and cuts in government spending.
The Senate voted 76-20 to debate the bill, sponsored by
Senate Majority Leader Harry Reid, that would give the program
two more years.
"With concerns about the fiscal cliff in the U.S. and
continued instability in European markets, I believe a temporary
extension is needed," Senate Banking Committee Chairman Tim
Johnson, a South Dakota Democrat, said in a statement.
"It provides the most certainty for businesses and financial
institutions. It also provides time to prepare for the end of
the program in two years," he said.
The Senate is expected to take another vote on Thursday that
would move the bill toward a final vote.
Even if it musters enough support in the Senate, it could
face a tough path through the Republican-controlled House of
Representatives, where some lawmakers have said the program
should be allowed to end.
Regulators created the TAG program in 2008 to reassure
depositors during the financial crisis and to ensure that
businesses and local governments had access to cash. Lawmakers
extended it as part of the 2010 Dodd-Frank Act, which was aimed
at reforming Wall Street and protecting consumers.
Now, about $1.5 trillion sits in large business accounts
insured by TAG, according to recent FDIC data. If the extra
coverage lapses, supporters have said, businesses may view
Treasury bills, money market accounts or other options as safer
places to park cash.
A survey by the Association for Financial Professionals
found that U.S. companies would cut bank account balances by 20
percent, on average, if the program expired.
"The TAG program for banks and credit unions has proven its
value to millions of small business and municipal depositors,"
the American Bankers Association and Independent Community
Bankers of America said last week in a letter to lawmakers.
Big banks have downplayed the need for extra deposit
insurance in the aftermath of the financial crisis.
Some Republicans, including leaders in the House of
Representatives, have said that since the program was meant to
be temporary, it should be allowed to expire.
A spokesman for House Majority Leader Eric Cantor said that
Cantor "believes we should not continue to extend these
The Obama administration said in a statement on Tuesday that
it supports a temporary extension of the program but that it
would wind it down at some point.
FDIC Chairman Martin Gruenberg said last week that banks are
in a strong enough liquidity position to weather the end of the
extra deposit insurance but that the decision is up to Congress.