Senate fails to advance bill extending banks' transaction account guarantee

TAG was created during the financial crisis, and provides for government guarantees for non-interest-bearing bank accounts used by small companies and municipalities. Companies and local governments holding large amounts of money for a brief period of time use the transaction accounts.

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“We’re not in a financial crisis anymore,” Toomey said before the vote. “There’s no question our economy is lousy, but it’s not a financial crisis.”

Extending TAG would keep an estimated $1.4 trillion insured by the government — something banks believe is needed given the continuing economic uncertainty. If the measure expires at the end of the year, the insurance cap will revert to $250,000 for these types of accounts.

“This program provides certainty to businesses at uncertain times,” Sen. Tim Johnson (D-S.D.) said Tuesday. “With concerns about the fiscal cliff and the continuing instability in European markets, I believe this is still needed.”

Johnson said that the bill has a cost-recovery provision, meaning taxpayers wouldn’t be on the hook. He said the bill “is not and never will be a bailout.”

Toomey disagreed with Johnson, and said the bill does put taxpayers on the hook in a time when the protections are no longer needed.

“There is no doubt about it that the taxpayer is on the hook,” Toomey said.

Toomey and other Republicans called for reforms in the Dodd-Frank financial law as a better way to help small banks.

“The only reason that we’re voting on this measure is that the members on the other side know that Dodd-Frank has hurt community banks,” Sen. Bob Corker (R-Tenn.) said before the vote.

Republicans said they had amendments that would have made the bill better, but complained Reid filled the amendment tree, blocking their ability to amend the bill.