WASHINGTON — Bankers' banks have joined the list of supporters for an extension of the transaction account guarantee program, which provides unlimited deposit insurance for noninterest bearing checking accounts.
In letters to Senate leaders released Tuesday, the chief executives of 15 bankers' banks said an extension was vital to prevent deposits from leaving community banks.
"Bankers' banks help community banks manage their liquidity on a daily basis. This gives us an exceptional perspective on the role of … TAG insurance in maintaining community bank liquidity, which is necessary for community lending and investment," the CEOs said in the June 25 letters, which were circulated by the Independent Community Bankers of America.
The Federal Deposit Insurance Corp. launched TAG to protect liquidity at the peak of the crisis in 2008. Then, banks could choose whether to participate for an extra fee to the FDIC. When that program ended, the guarantee was continued through a provision in the Dodd-Frank Act, which established the coverage for all banks but removed the extra fee. The coverage is now slated to end at yearend, but community banks have pushed for an extension.
"Extending TAG has no downside in our opinion. A temporary TAG extension is an easy way for Congress to ensure municipalities and small businesses have the deposit protection and access to credit they need in this difficult economic environment," the bankers' banks said.