Tuesday, July 17, 2012

Extend TAG Program for Two Years for All Insured Depository Institutions

The ABA Board of Directors yesterday -- at the recommendation of the ABA Government Relations Council’s Administrative Committee -- voted to support a two-year extension of the Transaction Account Guarantee program that is slated to expire at the end of the year.

The ABA Board believes that the extension should be provided for all depositors in insured depository institutions -- whether they have accounts with banks or credit unions -- and coverage should include noninterest-bearing transaction accounts and Interest on Lawyers Trust Accounts, or IOLTAs.

While banks have unlimited deposit insurance coverage for IOLTAs, the same does not apply for credit unions. By extending unlimited deposit insurance coverage to IOLTAs for credit unions, this would ensure parity with regard to deposit insurance coverage.

The ABA Board emphasized, however, that there will be no “quid pro quo” for extending TAG -- particularly no language raising the credit union member business-lending cap -- and ABA will adamantly oppose any amendment or other additions to the TAG’s enabling legislation that would be detrimental to the business of banking.

In making the decision to support a two-year TAG extension, the ABA Board noted that while the economy has generally improved, that improvement has not been robust, and many areas of the country still suffer from the economic downturn. Recent evidence also suggests that the economy has again slowed considerably and uncertainty about the future pace of the economic growth has risen.

Such uncertainty acts to freeze business decisions, and many bank customers in a position to expand operations and hire new workers remain hesitant to do so. Extending the TAG program for an additional two years would eliminate one element of uncertainty -- particularly for businesses that want assurance that their payroll accounts are safeguarded.

ABA will marshal its resources to obtain the introduction and passage of the TAG extension’s enabling legislation.


  1. Maybe the ABA knows that CUs are not permitted to hold lawyer's (or similar) trust accounts unless ALL clients (or customers) are in the FOM of the credit union.

  2. If you don't like your FOM limitations, there is always the option of a bank charter.



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