The following is an excerpt from JOSH BOAK | The Fiscal Times | September 18, 2012 |
When Congress breaks (again) this week so that members can return to campaigning, doubts will likely remain about the fate of an emergency program that has encouraged lending by smaller banks during the depths of the financial crisis and impacts $1.4 trillion in deposits.
“The world is focused on this fiscal cliff,” said Jim Getz, founder, chairman and CEO and Tristate Capital Bank in Pittsburgh, Penn. “Well, this is a cliff for us.”
Set to expire next year, the Transaction Account Guarantee (TAG) program provides insurance for bank accounts in excess of $250,000, the kind used by local governments and companies to meet payroll. The insurance—financed by premiums from banks—keeps enough safe capital on the books so that loans can be offered in a cash-strapped environment.
At Tristate Capital Bank, there are $144 million in TAG-insured deposits from small municipalities in Pennsylvania and Ohio. That sum has fallen by $35 million since the start of the year as the future of the program has become uncertain, Getz said. If TAG stops, he expects that accounts that currently average $1 million in size will fall beneath the $250,000 threshold for standard government insurance.
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