Tonight at midnight, a bank bailout program will die, despite the lobbying of the American Bankers Association and the community bank lobby. How could this happen in our special-interest-dominated Congress? Credit unions and mutual funds lobbied to kill the subsidy, called the Transaction Account Guarantee, or TAG

During my reporting on this column, I figured out another factor: the big banks didn’t care nearly as much as the small banks did about saving TAG — a program of infinite deposit insurance. My brother John at CNBC talked to some big bankers who explained that if you’re already too big to fail, you don’t need explicit taxpayer backstops:

Some bankers even wondered, privately of course, whether the mega-banks got any benefit at all from TAG. Citigroup and the like just aren’t going to be allowed to fail, depositors know this very well. Few people are going to withdraw money just because the accounts at mega-banks lose their officially protected status.

The mega-banks also get to stop paying those pesky TAG fees, which were only being used to bailout the accounts of the small banks anyway. From the point of view of JP Morgan Chase, for instance, TAG fees were a subsidy to community banks. The threat of TAG fees rising to cover the cost of the program, of course, is now moot. (The mega-banks hated the idea of rising TAG fees because they would have paid the lion’s share of higher fees due to their high market share of these accounts, while recouping almost nothing since they’re never going to be allowed to fail.)….

They may even have wanted it to die since they and their customers know that all of their deposits are protected by an implicit guarantee that doesn’t cost a dime in fees.