Washington, D.C. – December 13, 2012 – On behalf of taxpayers and future generations burdened by the nation's debt, the Competitive Enterprise Institute rejoices at today's Senate defeat of the Transaction Account Guarantee on a procedural budget rule.
"Though TAG went down due to legitimate concerns about the shutting down of constructive amendments and violations of budget rules, this subsidy providing an unlimited safety net to millionaires and billionaires deserved to be defeated because of its own fiscal recklessness," said John Berlau, CEI's Senior Fellow for Finance and Access to Capital.
Berlau was among 14 leaders and scholars of conservative and free-market groups who signed a letter late last week stating strong opposition to theTransaction Account Guarantee (TAG) .
Enacted at the height of the financial crisis in 2008 and extended by the Dodd-Frank financial overhaul of 2010, TAG provides unlimited government-guaranteed deposit insurance for non-interest bank and credit union accounts, over and above the $250,000 limit for all accounts. Yet the bank lobby had pushed furiously to extend this "temporary program," which benefits only the wealthiest depositors, for another two years.
"We are outraged on many levels that the Senate would even consider extending TAG," states the letter, whose signatories includes leaders from the Competitive Enterprise Institute, National Taxpayers Union, the 60 Plus Association, National Center for Public Policy Research, American Commitment, Less Government, R Street, and in his own capacity, prominent banking scholar Peter Wallison of the American Enterprise Institute. "TAG both places unlimited liability on taxpayers for bank and credit union deposits and subsidizes the ability of the wealthy to 'park their money' in ways that are unproductive for the economy."
As Berlau wrote in National Review , "A TAG extension, coupled with the tax rate hikes that may go into effect next year, would pour fuel on the proverbial fire by telling investors the government will take more from them if their investment in a job-generating startup business is successful but will provide an additional margin of safety if the money just sits in a bank vault!"
Berlau adds that massively extending deposit insurance, as TAG did, encourages reckless banks to take unnecessary risks with taxpayers' money, while punishing prudent financial institutions. He argues instead that Congress should pursue bipartisan regulatory relief measures that benefit all banks, credit unions and the economy as whole.
"There is no reason that Congress can't take up separately the measure from Sen. Mark Udall (D-Colo.), which was rejected as an amendment to this bill, to lift the archaic 'cap' that severely constricts credit unions from making more business loans to their small business members. Or to relieve banks and credit unions from onerous Dodd-Frank provisions adding costs to and limiting choices of mortgages and debit cards. Congress should work on stopping the regulatory cliff rather than massively adding to the fiscal cliff with huge boondoggles like TAG."
Berlau is available for comment on the vote on TAG that took place today around noon. The bill is S. 3637.