The program was extended once, with little fanfare, in 2010. But community banks, worried that a huge chunk of the $1.4 trillion in the accounts could abruptly be shifted to bigger banks without the lifeline, are putting on a full-court press to get the program for two more years.
The Independent Community Bankers of America (ICBA) has led the charge, and has lined up a slew of industry groups in the effort, including many from outside the financial sector. The National Association of Home Builders, the National Grocers Association and the National League of Cities are among those lending their support to another extension.
“Everybody’s for it except for a handful of Wall Street megabanks, so that should be an easy vote for the senators,” said Paul Merski, ICBA’s executive vice president for congressional relations. “The number of groups out in support of it, I think, is going to push it over the top ... if you want to vote against those groups, you can.”
But the industry is not united behind the measure. The Financial Services Roundtable, which represents the largest players in the financial industry, came out against an extension at the end of November after largely steering clear of the issue.
In a letter sent to Senate leaders, Roundtable CEO Tim Pawlenty argued that extending a bailout lifeline would send the wrong message about the industry.
“Extending the TAG program may create the misperception of instability, at the very time that the financial-services sector has made significant and positive reforms,” he wrote.
The window for clearing the legislation is small, and got smaller Monday — that’s because a procedural vote on the measure slated for Monday evening was postponed at the last minute by Senate Majority Leader Harry Reid (D-Nev.). A wave of fog that passed over Washington during the day made travel difficult for some senators returning to the capital, so Reid pushed the votes back to Tuesday afternoon.
Senate Banking Committee Chairman Tim Johnson (D-S.D.) has thrown his support behind another extension, but Sen. Bob Corker (R-Tenn.) has been a vocal opponent for months. And extension backers are going to be keeping a close eye on what amendments might be included in the measure, as any controversial ones could sink it. If the bill clears the procedural hurdle, it could face a vote on passage later in the week.
But even if the measure can clear the Senate, it appears to have long odds in the House. House Majority Leader Eric Cantor (R-Va.), who sets the floor schedule, is opposed to the extension and has no plans to bring the measure to the floor, according to his spokesman.
But extension backers are hoping a strong vote in the Senate could clear the way for House passage.
“If the vote ends up being rather overwhelming, that may provide a little more daylight for it in the House,” said Ballentine.
Barring that, backers are hoping it can piggyback on one of the larger legislative vehicles left — perhaps a supplemental spending bill to address the impact of Hurricane Sandy or an agreement to avoid the "fiscal cliff" of spending cuts and tax increases set to hit next month.
“The House is not prone to taking up bills just because the Senate has passed them,” added Ballentine. “Certainly this would have to be lined up to be considered as part of another bill.”
Conservative groups are pressuring the Senate to let the program expire. In a letter sent Friday to the Senate, a coalition of right-leaning groups argued that TAG is an economic anchor that allows the wealthy to park their cash in guaranteed accounts when those funds could be put to productive use in the economy.
“It is especially ironic that Congress is contemplating raising tax rates for those making above $250,000, and TAG further encourages the wealthy to sit on their money, rather than invest in job-creating new businesses,” the groups wrote. “Many wealthy people will choose the security of a 100 percent guaranteed bank account rather than taking a risk with an entrepreneur.”
The officials signing on to the letter came from groups including the Competitive Enterprise Institute, the National Taxpayers Union and Human Events.
Similarly, The Wall Street Journal’s editorial board has come out hard against an extension, penning a pair of editorials this year calling for the program to cease.