An End to TAG

The community banking effort to extend the Transaction Account Guaranty (TAG) program appears to have fallen prey to a U.S. Senate procedural process. As you may recall, in the fall of 2008 — shortly following the creation of the misnamed Troubled Asset Relief Program (TARP) — the Federal Deposit Insurance Corp. unilaterally announced the creation of the TAG program. This program provided, temporarily, 100 percent insurance to depositors’ money held in transaction (checking) accounts that did not earn interest. The purpose of TAG was to assure government and business depositors, who regularly exceed the $250,000 FDIC insurance level per depositor, that their funds were safe. Thus the program provided comfort to corporations with large payrolls.

When the Dodd-Frank Act passed in 2010, Congress took it upon itself to extend the TAG program through Dec. 31, 2012. One result of this Congressional extension is that FDIC no longer perceives that it has the singular power to extend TAG. Consequently community bankers find themselves at the mercy of Congress to pass language to extend TAG, and that extension must take place prior to Dec. 31, 2012.

Last week the U.S. Senate passed, by a 76-20 vote, language that allowed the TAG extension bill to come before the body for a vote. However, prior to that vote, the Senate had to vote to waive consideration of a Congressional Budget Office (CBO) report, concluding that TAG extension would cost taxpayers $110 million during the next 10 years. In order to waive consideration of the CBO report, 60 votes were required; instead the measure was defeated 50-42, and the stand-alone bill died. Only two Republicans voted to ignore the report.

The CBO report needed to be ignored, because its results are highly questionable. How did CBO calculate the alleged cost to taxpayers? After all, not a single penny of taxpayer support for FDIC has ever been requested. The banks and thrifts that benefit from FDIC coverage have always underwritten all FDIC expenses, including the cost of failed institutions. It is baffling how CBO arrived at its conclusion.

Regardless, most Republican senators routinely request, as a matter of principle, that CBO reports be considered. I tend to agree with this position. But there should also be some means to verify the accuracy of CBO actions. Apparently there are none.

As for the extension of TAG, its only remaining option is to be attached as an amendment to a bill which then passes. Frankly, this last resort is unlikely to happen. In the end, TAG is set to expire Dec. 31 — victimized, to some extent, by senseless procedure.

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