Deposit insurance bill dies in Senate
BY JIM ABRAMS Associated Press
Friday, December 14, 2012
12/14/12 at 4:45 AM
WASHINGTON - A federal program giving unlimited insurance guarantees to some no-interest bank accounts, enacted at the height of the financial meltdown, will die out at the end of the year following defeat of a Senate plan to extend it.
Senate Majority Leader Harry Reid, D-Nev., led efforts to add two more years to the life of the Transaction Account Guarantee program, but Republican opponents used a procedural vote on the bill's budgetary impact to effectively kill it.
Non-interest-bearing transaction accounts are used by businesses, local governments, hospitals and farmers who need a safe place to keep money on a short-term basis for such recurring expenses as payrolls. Critics of open-ended government backing of the program say the accounts have also become a haven for the wealthy and a deterrent to people investing in more risky job-creating enterprises.
With the measure's demise, federally backed insurance for so-called TAG accounts will revert back to the $250,000 level that applies to most other bank accounts.
The increased insurance protection was put in place in October 2008 as the financial crisis raised fears of a run on banks. It was revised and renewed in the 2010 Dodd-Frank financial overhaul act.
At the end of September, about $1.5 trillion was guaranteed in transaction accounts at U.S. banks and thrifts, according to the Federal Deposit Insurance Corp.
Original Print Headline: Fed savings insurance plan dies