–Still Takes No Position on TAG Extension Beyond 2012

By Yali N’Diaye

ARLINGTON, Va. (MNI) – U.S. regulators are working toward
finalizing the Volcker rule and it remains to be seen whether they will
do so by the end of the year, Federal Deposit Insurance Corporation
Acting Chairman Martin Gruenberg indicated Friday.

Asked whether he was confident the Volcker rule — which among
other rules prohibits proprietary trading — would be finalized by the
end of this year, Gruenberg said, “I think the agencies are working on

“I think that’s the intention to try to get it done,” he told
reporters following a speech at the American Banker Regulatory
Symposium. “We will see.”

Gruenberg declined to comment on the money market fund industry
regulation in the context of the Financial Stability Oversight Council
following the Securities and Exchange Commission’s failure to even
submit proposals to introduce structural changes to the industry.

Earlier, Gruenberg again refused to take a position on whether to
extend the TAG program set to expire at the end of this year.

The Temporary Liquidity Guarantee Program — providing full deposit
insurance coverage for non-interest bearing transaction accounts and
lawyer trust accounts — was established in 2008 for a two-year period
to help stabilize the banking system. To that effect, the program has
proved “quite effective,” Gruenberg commented during a question and
answer session following his remarks.

In 2012, Congress extended the program by statute for an additional
two years. As a result, the guarantee will expire at the end of December
2012 in the absence of action from Congress.

“Congress will have to make a judgment,” as to whether to extend
the program, Gruenberg answered when asked whether he believed the
program should be extended.

However, he reiterated that the criteria to make the decision
should remain the same: financial stability in the system.

Earlier during his remarks, Gruenberg reiterated his assessment of
the banking industry, which “continues to make gradual but steady

While the rebound in loan growth in the second quarter is
“encouraging,” he repeated, “We will see if the trend in loan growth
gains can be sustained.”

He added, “We are particularly focused on a return to prudent loan

A key reason is that “we know that a return to greater lending is a
necessary condition for a growing economy.”

** MNI **

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