WASHINGTON — Sen. Bob Corker, R-Tenn., showed further signs he could be a 'nay' if Congress voted on extending the Transaction Account Guarantee program.
Community banks have pushed for lawmakers to extend the blanket deposit insurance for certain no-interest checking accounts, which under the Dodd-Frank Act is set to expire at yearend.
But in an Aug. 2 letter, Corker, a member of the Senate Banking Committee, reiterated concerns he made at a July 26 hearing about an extension.
"As you likely know, the program was always meant to be temporary," Corker wrote to Martin Gruenberg, acting chairman of the Federal Deposit Insurance Corp.
The FDIC originally launched the program in 2008 at the height of the crisis as a way for banks to protect deposits belonging to business customers. At that time, banks could choose whether to receive the extra coverage, and participating institutions paid a fee. Dodd-Frank, which was enacted two years later, made the program mandatory and removed the fee.
Corker asked Gruenberg to weigh in about potential moral hazard from extending the TAG and whether an extension would affect the payment of deposit insurance premiums, among other questions.
"During the financial crisis in 2008, the FDIC created TAG to strengthen confidence, encourage liquidity, and prevent any sudden withdrawal of deposits that could be potentially destabilizing," Corker wrote. "After multiple extensions, we are still operating under this structure, and, in my view, we need to start thinking about what comes next."
