In 2008, the Federal Deposit Insurance Corporation (FDIC) established the Transaction Account Guarantee (TAG) program to instill public confidence in the banking system. The program provided unlimited guarantees to non-interest bearing accounts through 2010 and then the program was extended to the end of this year (2012).
And now in plain English (Sorry about that, too much banking jargon), banks pay into a federal program for insurance that guarantees depositors (anyone holding money in a bank) get their money bank if a bank fails and shuts down. Deposits have traditionally only been insured up to a certain dollar amount and anything over the cap is uninsured. In 2008, the TAG program raised the cap from $100,000 to $250,000 for deposit accounts and gave non-interest bearing accounts (like a traditional checking account) an unlimited guarantee. This was supposed to inspire confidence in a banking system that was floundering due to the financial crisis that was really picking up steam in Fall, 2008.
Now, the Senate is supposed to vote today on whether or not to continue the program past December 31, 2012.
The prevailing thinking is that this temporary guarantee helps community banks because they typically have less creative ways to structure accounts and keep dollars insured. The reality may be different. Earlier this summer, the Chairman of the FDIC, Martin Gruenberg, said most of the extra deposits protected by the temporary program were held in the Country’s 10 largest banks. That doesn’t mean community banks–and their customers–haven’t benefitted from the program, but they may not have been the “biggest” beneficiaries. Hopefully, small businesses, wherever they bank, have been able to benefit from the added security and will be able to move forward confidently no matter the outcome of today’s possible Senate vote.
If you’re a small business or have personal deposits at a local bank, visit your banker or go to the FDIC website and find out if your deposits are protected. Chances are, your community banker will be able to make sure you’re covered one way or the other.