Reid introduces bill extending federal guarantees for bank accounts

Senate Majority Leader Harry Reid (D-Nev.) on Monday introduced legislation that would extend a guarantee program for certain bank accounts, a move major financial institutions say is critical to maintaining the stability of the financial system.

Reid's bill, S. 3637, would extend this guarantee program for two years, until the end of 2014.

The Transaction Account Guarantee Program (TAG) was created during the financial crisis, and provides for government guarantees for non-interest-bearing bank accounts used by small companies and municipalities. The transaction accounts are used by companies and local governments to hold large amounts of money for a brief period of time.

Extending TAG would keep an estimated $1.4 trillion insured by the government. Earlier this year, the Independent Community Bankers of America and the American Bankers Association wrote to Congress to warn that ongoing financial and economic uncertainty means the government guarantee needs to be extended.

"While policymakers had expected the economy to be on solid footing by year-end 2012 when Congress extended the TAG program in 2010, the fact is that the economy is still fragile," they said. "Businesses … are increasingly nervous about the path of the economy. Extending the TAG program for an additional two years will take at least one important piece of uncertainty off the table at year-end."

Reid proposed his bill with no co-sponsors, and with no word on when he hopes to advance it. But presumably, introduction of the bill means he will try to move it before Congress leaves for the Christmas break.

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