Senate debates extending Transaction Account Guarantee program
The U.S. Senate has taken up legislation regarding the Transaction Account Guarantee program, a federal initiative designed to protect certain non-interest bank accounts with insurance coverage. The program was developed in the height of the economic recession as a way to protect small banks while larger institutes either failed or were bailed out by the federal government. The program has been considered a boon for small, community-based banks that would have collapsed without adequate insurance protection.
Program could continue to protect small banks
The Senate is currently considering extending the Transaction Account Guarantee program for another two years. Federal lawmakers are apparently taking heed of the outcry from small banks and consumer advocacy groups that suggest that the insurance program is one of the few things that stands between the federal government and another financial disaster. Without the insurance coverage that the program offers, many small banks are likely to experience an exodus of business.
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Program boost deposit insurance limits
Typically, banks throughout the country have their deposits insured by the federal government. This insurance protects deposits of up to $250,000. The Transaction Account Guarantee program provides non-interest-bearing bank accounts to be insured for an unlimited amount, which has gone a long way in keeping business local for many community-based banks. If the program is allowed to expire at the end of this year, the deposit insurance limit will revert back to $250,000.
Alternative solution may be necessary for the future
The federal government notes that the Transaction Account Guarantee program has been a boon for small banks, and the program itself has won short-term support from the Obama administration. Government officials are keen on looking for an alternative to the program in the future, however. Lawmakers note that the program was created to mitigate the impact of a disastrous situation. As such, it may no longer be needed if the economy continues to show signs of strong recovery.