WASHINGTON — A federal program giving unlimited insurance guarantees to some no-interest bank accounts, enacted at the height of the financial meltdown, will die at the end of the year after defeat of a Senate plan to extend it.
Senate Majority Leader Harry Reid, D-Nev., led efforts to add two more years to the life of the Transaction Account Guarantee program, but Republican opponents used a procedural vote to effectively kill it.
Noninterest-bearing transaction accounts are used by businesses, local governments, hospitals and farmers who need a safe place to keep money on a short-term basis for such recurring expenses as payrolls. Critics of openended government backing of the program say the accounts have also become a haven for the wealthy and a deterrent to people investing in more risky job-creating enterprises.
With the measure’s demise, federally backed insurance for so-called TAG accounts will revert back to the $250,000 level that applies to most other bank accounts.
At the end of September, about $1.5 trillion was guaranteed in transaction accounts at U.S. banks and thrifts.
Business, Pages 26 on 12/14/2012