CUNA Announces Opposition to TAG Extension

In a letter sent Monday to Senate leadership, Credit Union National Association (CUNA) President and CEO Bill Cheney said that CUNA opposes legislation that would extend the Transaction Account Guarantee (TAG) program for banks—legislation that had been seen as a possible pairing for S. 2231.

In the letter sent to Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), Cheney said TAG “is no longer necessary, is risky, [and] has not proven to enhance bank business lending.” The letter went on to stress expanding credit unions’ business lending authority as a better option for helping small businesses.
“The TAG program may provide security for very large depositors,” Cheney wrote, “but the banks are not lending the money. Credit unions see demand for small-business lending in their markets, and the most experienced credit unions face a statutory cap on how much they can help. Perhaps if Congress allowed these credit unions to do more business lending, banks would be inspired to lend more as well? They certainly have the liquidity to do so.”

The TAG program gives the institutions that serve community banks unlimited deposit insurance through the Federal Deposit Insurance Corporation (FDIC) for non-interest-bearing transaction accounts. TAG insurance was established in response to the 2008 financial crisis as a way to prevent sudden mass withdrawals, and coverage is set to revert back to $250,000 at year’s end.

Community banks and their lobby groups, which are opposing legislation to raise the cap on credit union member business lending (MBL), have been pushing for an extension of the coverage for more than $1 trillion in small-business deposits.

Credit unions have comparable coverage through the National Credit Union Administration (NCUA), which is set to expire in less than a month along with the banks’.

Credit unions continue to work with members of Congress to pass credit union MBL legislation this year, and advocates representing Northwest credit unions were in Washington, D.C., last week to join CUNA in urging support for S. 2231.

In his letter to Congress, Cheney noted small banks argue incorrectly that TAG provides liquidity to banks so that they, in turn, can make loans that will stimulate the economy.

“The truth,” Cheney wrote, “is that the banking industry’s average loan-to-deposit ratio is much lower than its historic averages. In fact, this loan ratio is nearly 20 percentage points lower than it was in 2002. More than $500 billion in new deposits have entered banks since the 2008 banking crisis, and yet bank small-business lending is down.”


Questions? Contact a member of the Association’s Legislative Affairs team:

Jennifer Wagner, Vice President of Legislative Advocacy
Mark Minickiello, Vice President of Legislative Affairs
Pam Leavitt, Policy Advisor

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