The Senate on Thursday voted down a two-year extension of the Transaction Account Guarantee program, which insures non-interest bearing accounts with more than $250,000, and the program will expire at the end of the year.
In a 50-42 procedural vote, the legislation failed to garner the 60 votes needed to waive a requirement that the bill not add to the federal deficit.
Community banks supported the extension, saying that the financial recovery remains fragile and that failure to pass the extension could lead depositors to move their money to large banks that are less susceptible to economic distress.
Frank Keating, the president and CEO of the American Bankers Association, said that the ABA was “disappointed.”
“The TAG program has been fully funded by the banking industry at no taxpayer expense and millions of small businesses and municipal depositors would have valued its continuation during this period of economic recovery,” Keating said.
Opponents of the two-year extension maintained that the crisis-inspired legislation was no longer necessary. Credit unions opposed the measure, saying that allowing the program to expire would create a more level playing field.
Because the measure failed, federal insure for so-called TAG accounts will revert back to the $250,000 mark that applies to many other bank accounts. The increased insurance measure was put into place in 2008 in order to restore confidence in the U.S. banking system. The program was extended again in 2010.