Small banks are pushing Congress to extend unlimited Federal Deposit Insurance Corp. coverage on non-interest-bearing bank accounts, but House Republicans are opposed to the measure, which makes any extension unlikely, the Wall Street Journal says.
If the Transaction Account Guarantee (TAG) coverage expires as scheduled at year-end, FBR Capital Markets estimates that up to $250 billion in deposits could move out of small banks to bigger banks, which are seen as less risky, or into money funds. Big banks took a stand against extending TAG in a Financial Services Roundtable letter to lawmakers last month.
The Journal notes that state treasurers also back a renewal of TAG.
Senate Majority Leader Harry Reid has introduced legislation to extend TAG and has scheduled a vote on the measure this week.
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