A group of farm organizations this week called on the U.S. Senate to pass a two-year extension of a Federal Deposit Insurance Corporation program that insures non-interest bearing transaction accounts, commonly used by farmers and small agribusinesses.
The groups say the Transaction Account Guarantee Program is vital to farms of all sizes and small businesses that make lump sum deposits "inherent in the seasonal nature of their business." TAG, which was enacted during the financial crisis to protect depositors against sudden withdrawals, will expire Dec. 31, 2012 if no action is taken.
However, Senate Majority Leader Harry Reid, D-Nev., introduced a bill Monday, S.3637, to temporarily extend the program for two years. Approximately $1.5 trillion in bank deposits are insured by the FDIC program.
Financial groups such as the Independent Community Bankers of America, like farm groups, support an extension.
"The good news is that Congress holds the power right now to ensure these deposits remain insured," said Camden R. Fine, ICBA president and CEO. "Promptly extending this successful bank-funded insurance temporarily until there is greater stability in the economy and global financial sector makes complete sense and will minimize the risk of widespread disruption in the banking industry and economic damage."
Ag groups noted that without an extension, community banks will suffer.
"If full TAG insurance coverage expires, farmers and rural businesses will be forced to weigh shifting their deposits out of the local banks they partner with in their communities," the ag groups' letter said. " TAG deposits in community banks are a significant source of funding for farm and rural business loans. Premature expiration of TAG could adversely impact the extension of credit. Farmers, small businesses and rural Americans all have a stake in our local communities and the economic recovery."
Those signing the letter include: Agricultural Retailers Association, American Association of Crop Insurers, American Soybean Association, National Association of Wheat Growers, National Cattlemen’s Beef Association, National Corn Growers Association and the USA Rice Federation.