The Senate on Thursday failed to clear a bill that would have extended for two more years a program that provided federal insurance for deposits kept in no-interest accounts at federally insured banks.
The arrangement, known as the Transaction Account Guarantee program, was created during the financial crisis to help shore up banks by increasing their deposit base. In the months after the program began in 2008, some $500 billion flowed into the accounts, which now total about $1.5 trillion, analysts say.
On Thursday, however, a bill that would have extended the policy through the end of 2014 failed to garner the 60 votes necessary to end debate and bring the measure to a vote.
Small to midsize banks supported the extension, as did the Obama administration, but larger banks and credit unions opposed the bill. Analysts said they expected $200 million to $300 million in cash to move from the accounts into money markets and other interest-bearing instruments in the weeks ahead.
A similar procedural hurdle was easily cleared on Tuesday by a vote of 76 to 20. This time, however, only 50 senators supported bringing the proposal to the floor.
The drop in support largely came from Republicans who had voted affirmatively on Tuesday. On Thursday, however, Republicans raised a budget point of order, saying that the bill violated the Budget Control Act because it authorized additional government financing.
The cost of the program is not borne by the government but by fees paid by banks participating in the program. Nevertheless, if a bank failed with those types of deposits, taxpayers would be responsible for paying.
Senate aides said the defeat also had less to do with the substance of the bill than with a continuing fight between the two parties over Senate rules. After the Tuesday vote, Senate Majority Leader Harry Reid, Democrat of Nevada, proposed placeholder amendments that shut out any chance for Republicans to offer amendments.
That tactic led Republicans to invoke the point of order, which required 60 votes to override.
Frank Keating, the president of the American Bankers Association, said that while his members were disappointed, they were prepared for the setback.
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