United States: Transaction Account Guarantee Program

The collapse of Lehman Brothers in September 2008 led many uninsured depositors to withdraw their funds from US banks that they perceived as troubled. To reassure depositors, the Federal Deposit Insurance Corporation (FDIC), on October 14, 2008, guaranteed certain debt and deposits through its Temporary Liquidity Guarantee Program (TLGP). The Temporary Account Guarantee Program (TAGP) was one component of the TLGP. Through the TAGP, the FDIC provided unlimited insurance to noninterest-bearing transaction accounts (NIBTAs) and other low-interest-bearing accounts. On October 3, 2008, the US Congress had increased the limit on insured deposits to $250,000. By guaranteeing these accounts in full, the FDIC hoped to calm depositors and forestall potential bank runs. All FDIC-insured institutions were automatically enrolled in the TAGP, free of charge, with the option to opt out after 30 days. After 30 days, banks were charged a flat-rate fee to stay in the program. Eighty-six percent of banks remained in the TAGP after 30 days. The FDIC extended the TAGP twice through December 31, 2010. The Dodd-Frank Act replaced the TAGP with a similar program that expired on December 31, 2012, which the FDIC administered. Through 2010, the TAGP collected $1.2 billion in fees. The FDIC absorbed $1.5 billion in losses from the failure of banks covered by the TAGP.