Community banks have been furiously lobbying Congress in recent weeks to extend a program that provides a bigger backstop for certain customer deposits, particularly those of businesses. The Transaction Account Guarantee program, which covers an estimated $1.4 trillion worth of deposits, was created in 2008 during the financial crisis and extended for two years in 2010. It is set to expire at the end of the year.

The small bank lobby argues that without the security of this enhanced guarantee, provided by the Federal Deposit Insurance Corp., businesses will pull their funds and put them in what may be considered safer investments, such as money market funds and accounts at large banks, delivering a blow to a community banking industry that is still reeling from the financial crisis.

This argument, however, has yet to gain much traction with key Republican lawmakers even as Democrats have thrown their support behind an extension in recent days.

“I know that we’ve got a lot of community banks up here lobbying us about extending the TAG program, but to me, it’s questionable at best,” Sen. Bob Corker (R-Tenn.), a member of the Banking Committee, told POLITICO. “You know, we do things in times of crisis and then they never go away. … I’m skeptical about an additional governmental guarantee that did not exist prior to the crisis.”

In the House, Financial Services Committee Chairman Spencer Bachus (R-Ala.) has yet to state his position on the issue. Asked whether he supports an extension, Sen. Richard Shelby (R-Ala.), the ranking member of the panel, simply said, “It’s up to Congress.”

The feet dragging over the issue illustrates an awkward political dilemma for the GOP and community banks.

Supporting small banks usually entails advocating for less of a government role in their operations, and community bankers like to portray themselves as small businesses that would do just fine without Washington’s meddling.

Here, however, the support being sought comes down to continuing a de facto government subsidy to the industry.

“This is one of those classic legislative banking issues where there are no clean alliances and there are no easy answers from a policy perspective on how to move forward,” said Kevin Petrasic, a partner at the law firm Paul Hastings who follows banking issues in Washington.

Some senior members on the House Financial Services Committee are uneasy about extending a government guarantee program, said a Republican aide familiar with discussions.

“I’m sure there’s some sentiment within the committee and within the overall conference that we should be scaling back government guarantees instead of extending them,” the aide said.

The Independent Community Bankers of America and the American Bankers Association have joined forces to lobby Congress to keep the TAG program alive with a minimum two-year extension. ICBA has been the most vocal and argues that smaller banks have yet to recover from the financial crisis spawned by Wall Street and that extending the guarantee, which targets noninterest-bearing accounts, will help small banks compete with their larger competitors until the economic picture brightens.

Paul Merski, the ICBA’s executive vice president and chief economist, said when TAG was given a two-year extension through Dodd-Frank in 2010, there was the expectation that community banks would have regained their strength by the end of 2012. This hasn’t been the case, he said.

TAG “is working tremendously well … it’s doing its job,” Merski said. “People are secure with their deposits. So why play with fire and $1.4 trillion worth of deposits, largely small-business deposits? Why play with fire when you can simply do a temporary extension?”

Community banks’ efforts have recently resulted in Democrats coming out in favor of extending the program.

Senate Banking Committee Chairman Tim Johnson (D-S.D.) and fellow panel Democrat Sherrod Brown of Ohio asked the White House Office of Management and Budget last week to endorse a two-year extension of the program. Johnson’s office, however, would not say whether the senator will move a bill before the end of the year. “Sen. Johnson continues to work with his colleagues to find consensus on an issue that is important to community banks,” his spokesman said in a statement.

Democrats are not united in their support of the program with Treasury Secretary Timothy Geithner saying last week that the Obama administration does not consider an extension necessary. The FDIC is choosing not to pick a side, maintaining that an extension is up to Congress.

If the TAG program does become a thing of the past, members on both sides of the political aisle should brace themselves for meetings with angry community bankers.

“Nobody wants to have the finger pointed at them, that they allowed the program to expire, if it did end up destabilizing the community banks,” Petrasic said.