DOCU’s Buying Pressure Exceeds its Selling Pressure
by Chuck Hughes
On Jun 16, 2020
Ever since the 2008 meltdown, taxpayers have stood behind the transaction accounts of the largest depositors in the country by way of a program called Transaction Account Guarantee (TAG). This program is a continuing part of the government’s bail out of the Too-Big-To-Fail banks, as I wrote about a couple months ago.
TAG was supposed to be a temporary increase in deposit insurance for transaction accounts to maintain liquidity in the banking system, or, more clearly, stop large depositors from running with their cash, putting banks out of business, as in the case of IndyMac, WaMu, and Wachovia.
TAG was to expire when the balls drops in Times Square in a few weeks but bankers like having taxpayers fade their action. Eighty years ago, deposit insurance covered an inflation-adjusted $41,000, TAG makes the coverage unlimited. Now bankers are just wild about Harry: Senate Majority Leader Harry Reid that is. The Nevada Senator has unveiled a bill to keep TAG alive for a couple more years.
The American Banker reports that Reid’s support doesn’t guarantee passage, but
that Reid’s support makes it more conceivable TAG will be added to a higher-profile vehicle. One candidate, [Jaret Seiberg] said, is a package of relatively uncontroversial measures to keep certain temporary tax policies — such as a lower alternative minimum tax — from expiring. (A bill addressing such tax-related issues would be separate from talks on how to avoid the so-called fiscal cliff.)
Community bankers are said to be the ones pushing for the extension, complaining that if TAG goes away, their big depositors will more their money to big banks that are implicitly guaranteed by the government. But the numbers indicate that it is the big banks that are already sopping up the vast majority of TAG deposits.
I think we know how this will turn out. Hide your your eyes if you don’t like seeing sausage made.
Written By
