TAG! Team Obama’s Flip-Flop
Yesterday, while the posturing over the fiscal cliff continued, the Obama administration released a statement of administration policy (SAP) expressing support for the passage of S. 3637. The bill would extend the Transaction Account Guarantee (TAG) program, which the administration says “played an important role in maintaining financial stability and banking system liquidity for consumers and businesses during the financial crisis.”
Is it the administration’s contention that the program, which is scheduled to sunset on December 31, is still necessary? The SAP doesn’t really answer that question. Never fear though, Treasury Secretary Timothy Geithner appeared to answer the question for the Senate Banking Committee earlier this year:
Our judgment so far has been it’s not necessary to extend it … That’s been the judgment of the relevant authorities so far. But I know this is an issue and a concern to many people, and we’re going to have to look at those concerns carefully.
I suppose a lot could have changed between July 26 and now, but certainly the Obama administration isn’t arguing the economy is WEAKER now or that we are on the verge of a financial crisis, are they? Senators should demand answers from this administration, which once against appears to be hiding the ball.
Heritage’s David C. John has explained the inherent dangers of the TAG program to the banking system. The program distorts the market, and if money is moved from noninterest-bearing to interest-bearing accounts quickly, banks depending on these accounts will be in serious trouble.
Proponents of TAG posit “stability” as a reason for the program’s extension, but stability for small banks and large banks doesn’t really come from government programs. Despite the financial sector “reforms” included in Dodd-Frank, we are still talking about the problem of too-big-to-fail.
Big banks have an unfair competitive advantage, but the solution is not to double down on government intervention; rather, implement real reforms and end the practice of using taxpayers as a financial backstop.
As we have stated previously, we oppose S. 3637 and will key vote against this bill.