Without quick resolution of the impasse over budget issues, farm country is well aware of the imminent threats to federal farm programs.

Less well known is the impending demise of the Transaction Account Guarantee (TAG) program, which provides coverage for non-interest bearing transaction accounts in community banks.

Unless Congress extends the Federal Deposit Insurance Corporation (FDIC) program, it will expire on Dec. 31.

Knowing the uncertainty farmers and their bankers already face going into 2013, worries over the expiration of TAG have recently been addressed by a wide range of agricultural and financial groups.

In a joint letter to Senate leaders sent Dec. 5, the groups stated that, “TAG deposits in community banks are a significant source of funding for farm and rural business loans. Premature expiration of TAG could adversely impact the extension of credit. Farmers, small businesses and rural Americans all have a stake in our local communities and the economic recovery.”

A second joint letterto Congress, sent on Monday (Dec. 10), warned that, “When combined with the looming uncertainty with respect to the nation’s economy, spending and tax policies, the expiration (of TAG) would act to force depositors to shift significant funds out of current deposits into various accounts to try and guarantee adequate safety. This can only foster a destabilizing effect on businesses, credit, and markets.”

Mark Scanlan, vice president of agriculture and rural policy for Independent Community Bankers of America(ICBA), spoke to Farm Press about the situation on Monday (Dec. 10). Having served at USDA’s Office of Congressional Relations under former Agriculture Secretaries Yeutter and Madigan, Scanlan is well versed in farm legislation.

Among his comments:

On the ICBA…

“ICBA represents only community banks — about 5,000 of them across the United States. Because of that we’re geared towards a philosophy where we support community banks working with local businesses, farmers, non-profits and local entities.”

On community bankers and the unknowns of going into 2013 without a farm bill in place…

“The bankers we represent deal with nearly all the commodities addressed in the farm bill and a number that aren’t. So, a number of them are nervous about getting a new farm bill passed.

“Our association has been supportive of passing a new five-year farm bill. We’ve signed onto some (joint) letters urging Congress to come to agreement on new legislation.

“Our view is that much of the work has already been done and they’re pretty close. They’re in the ‘red zone’, so to speak, and are pretty close to putting the ball across the goal line.  

“Some of the (farm bill programs are set to) expire and go back to permanent law. That is unsustainable. So, by hook or by crook, we think there will be an extension (of 2008 law) or a new farm bill. Our strong preference is to get a new farm bill done and take away some of the uncertainties farmers are now facing.”

On the TAG program and what it means to farmers…

“There’s about $1.5 trillion of deposits in the Transaction Account Guarantee (TAG) program. Initially the program was started by the FDIC in 2008 during the financial crisis. It helped to ensure there weren’t runs on banks.

“TAG was extended as part of Dodd-Frankto 2012. However, it expires December 31.

“What it allows is for, say, farmers who are selling livestock or harvest and sell a crop to bring those proceeds to the community bank and have those deposits above $250,000 guaranteed.

“Given all the financial turmoil we’ve gone through, a lot of the people with large deposits want to first ensure the safety of their deposit amounts. This program does that. The banks pay assessments to the FDIC for these guarantees so there isn’t any taxpayer funds involved.

“It’s great for the borrower, great for small businesses. It is also helpful for local hospitals, non-profits, or municipalities. They can put their deposits with the community bank, support their community. The bank re-lends these funds for small business loans, farm loans or other loan demands in the community. It’s a good program for the rural economy.”