The Temporary Liquidity Guarantee Program (TLGP) was a program administered by the
Federal Deposit Insurance Corporation
The Federal Deposit Insurance Corporation (FDIC) is one of two agencies that supply deposit insurance to depositors in American depository institutions, the other being the National Credit Union Administration, which regulates and insures cr ...
(FDIC) from 2008 to 2012 in the aftermath of the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. The program sought to promote confidence in the US banking system by guaranteeing
interbank loans and no-interest transaction accounts, such as
checking account
A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
s. It was announced through an Interim Rule on October 14, 2008.
Components
The Temporary Liquidity Guarantee Program had two primary components: the Debt Guarantee Program, by which the FDIC guaranteed the payment of certain newly issued senior unsecured debt, and the Transaction Account Guarantee Program, by which the FDIC guaranteed certain noninterest-bearing
transaction account
A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account held at a bank or other financial institution. It is available to the ...
s. FDIC insured entities could opt out of either program
Debt Guarantee Program
The Debt Guarantee Program guaranteed all newly issued senior unsecured debt up to prescribed limits issued by participating entities. As a result of this guarantee, the unpaid principal and contract interest of an entity’s newly issued senior unsecured debt were to be paid by the FDIC if the issuing insured depository institution failed or if a bankruptcy petition were filed by the respective issuing holding company. More than 6000 banks opted out of the progra
DGP Opt-out list (.xls)
The Debt Guarantee Program passed out debt guarantees in excess of $600 billion. Yet, unlike the other major agencies bailing out the financial sector during the
global financial crisis of 2008—the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
and the
U.S. Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
—the FDIC has never disclosed the identity of all the banks taking advantage of the bailout guarantees. Wilson and Wu (2011) find that the recipients of the FDIC debt guarantees paid their CEOs significantly more than their peers. Thus, bailed out CEOs made significantly more than bank CEOs not accepting the FDIC's bailout loan guarantees.
The Debt Guarantee Program stopped guaranteeing outstanding loans at the end of 2012.
Transaction Account Guarantee Program
The Transaction Account Guarantee Program provided for a temporary full guarantee by the FDIC for funds held at FDIC-insured depository institutions in noninterest-bearing transaction accounts above the existing deposit insurance limit. This would continue through the end of 2010. Thereafter section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act provided similar transaction account insurance until the end of 2012.
See also
*
Global financial crisis of 2008
References
FDIC resources for TLGPtext of final rule{{2008 economic crisis
Federal Deposit Insurance Corporation