Aug 29 Bank groups on Wednesday renewed a push
to convince the U.S. Congress to extend a financial crisis-era
deposit insurance program, arguing that businesses will withdraw
funds if the program expires at the end of the year.
A group of 80 state banking associations sent letters to
leaders in the House of Representatives and the Senate urging
them to approve a two-year extension of the Transaction Account
Guarantee (TAG) program.
The program insures bank deposits of more than $250,000, the
amount the Federal Deposit Insurance Corp normally covers, in
checking accounts that do not pay interest. Regulators created
the program during the 2008 financial crisis to reassure
depositors that their money was safe and to ensure that
businesses and local governments had access to cash.
It was then extended for two years as part of the 2010
Dodd-Frank financial oversight law.
Bank groups argue that if the insurance expires at the end
of 2012, as it is currently set to do, businesses will move
their money to money-market accounts and other options.
"Failure to continue FDIC coverage of these accounts would
create disruption and uncertainty in the banking system and for
small businesses, municipalities, hospitals, and other entities
that use these accounts to meet payroll and operational
expenses," the bank groups wrote.
Bank lobbyists say Congress should give the program another
two years to lessen the impact on the U.S. economy of the
year-end "fiscal cliff," when tax increases and automatic
government spending cuts are due to kick in.
They say that when interest rates eventually rise,
depositors will seek interest-paying accounts and the program
will expire naturally.
Acting FDIC Chairman Martin Gruenberg has said Congress
should determine whether an extension is needed to maintain
"We've said all along that it was the financial stability
considerations that brought the program into being in 2008,"
Gruenberg told reporters on Tuesday.
Lawmakers will return from a month-long recess in September
and face a long list of tasks, including heading off the fiscal
cliff, without much time this year to get through them. Some
groups have said Congress could attach a TAG extension to
another must-pass bill to ensure its passage.