Shortly after the economic collapse, the Federal Deposit Insurance Corporation implemented complete coverage for non-interest bearing transaction accounts, meaning that bank deposits held by small businesses and municipal governments are insured beyond the $250,000 legally required amount.
The bad news is the plan, designed to reassure depositors and stabilize the banking system, will expire Dec. 31. By preventing sudden withdrawals of deposits, the program minimized disruption in our banking system. If allowed to expire, coverage for transaction accounts will revert to the $250,000 limit, creating negative consequences for small businesses, with $1.3 trillion in transaction-account deposits becoming uninsured overnight.
Congress can easily extend this program, promoting continued economic recovery by keeping small-business and municipal deposits fully insured and secure. Small businesses use transaction accounts for payroll expenses, and municipalities use them to deposit local tax revenues and pay operating expenses. Banks — not taxpayers — pay the cost of deposit insurance coverage to the FDIC.
Abruptly ending full FDIC transaction account coverage will provide damaging economic consequences. Extending this important deposit-insurance program will certainly keep us on the road to full economic recovery.
Scott E. Latham
President and CEO
The Community Bankers Association of Alabama