Bye-Bye, Unlimited FDIC Coverage

Congress isn't likely to extend the FDIC’s Transaction Account Guarantee program, which is scheduled to end Dec. 31.

James Ballentine of the American Bankers AssociationCorporate treasurers may need to find new places to park their money come Jan. 1, since it seems less and less likely that Congress will extend the life of unlimited Federal Deposit Insurance Corp. insurance on interest-free checking accounts.

In 2008, in the depths of the financial crisis, the FDIC created the Transaction Account Guarantee (TAG) program to provide such unlimited deposit insurance, largely to protect against bank runs. In 2010, Congress extended the program through the end of this year. Without congressional action, FDIC insurance on these accounts will revert back to the original cap of $250,000 per account as of Jan. 1.

But Paul Merski, ICBA’s chief economist, sees “a good likelihood” that an extension will pass.

“We’ve gotten a very positive response to a temporary [two-year] extension,” Merski says. “With all of our advocacy on Capitol Hill in the House and Senate, there’s no concern it doesn’t have support.” He adds that the measure is also supported by the White House, which included an extension in its continuing budget resolution proposal.

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