The FDIC is expanding the pool of those qualified to bid on the deposits and assets of failing depository institutions. Previously only institutions with a bank charter could participate, but today that standard has been modified. Click here for more information on the qualification process.
The Treasury Department and Federal Reserve announced two significant initiatives today to bolster lending in the financial markets.
First, the Treasury Department announced it will use $20 billion in TARP funds to assist the Federal Reserve in establishing a $200 billion lending facility for consumer assets and related asset-backed securities. The program's goal, known as the Term Asset Backed Securities Loan Facility, or TALF, is intended to increase liquidity for financial institutions providing small business loans, credit cards, as well as automobile and student loans. Click here for the Federal Reserve's TALF term sheet.
Separately, the Federal Reserve announced it would purchase up to $100 billion in direct obligations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks. The Federal Reserve would also purchase up to $500 billion in Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities. Click here for more information.
The Treasury Department, Federal Reserve and the FDIC released a joint statement today on the government's agreement to provide guarantees with respect to an asset pool owned by Citigroup consisting of residential and commercial mortgage loans and mortgaged-backed securities. Click here to read the joint statement.
In other news, the Treasury Department extended the Temporary Guarantee Program for Money Market Funds until April 30, 2009. The guarantee protects shareholders in participating money market funds for the amounts held as of the close of business on September 19, 2008. However, funds must both file for an extension and pay an extension fee by December 5, 2008. Click here for the details.
The FDIC has taken the final step necessary to implement the Temporary Liquidity Guarantee Program in order to bolster bank lending. The Program is a two pronged approach consisting of both a debt guarantee program (a guarantee of newly issued senior unsecured debt of banks, thrifts and certain holding companies) and a transaction account guarantee program (providing coverage for non-interest bearing deposit transaction accounts such as payroll accounts). Click here for all the details.
The FDIC issued its final rule on the Temporary Liquidity Guarantee Program on Friday, November 21, 2008. Details follow...
Continue Reading...The Emergency Economic Stabilization Act of 2008 (the “Act”) contains many provisions and law changes that directly affect financial institutions. Among other provisions, the Act would (i) establish a Financial Stability Oversight Board to review and make recommendations regarding the exercise of authority under the Act, (ii) authorize a study on and restate the Securities and Exchange Commission’s authority to suspend application of mark-to-market accounting standards and (iii) temporarily increase FDIC deposit insurance coverage from $100,000 per account to $250,000 per account (until December 31, 2009).
Continue Reading...The FDIC has provided information related to the terms of its loan modification program plan at IndyMac Federal Bank. The FDIC "Mod in a Box" Program Guide provides a framework and tools to assist servicers and investors in developing similar loan modification programs, including workout guidelines and sample documents to determine modification parameters and loan modification reporting. Click here for all of the documents and tools on the FDIC website.
On November 17, 2008, the United States Department of the Treasury (“Treasury”) issued its much-anticipated Summary Term Sheet detailing the terms for participation by nonpublicly traded banks and bank holding companies in the Treasury’s Troubled Asset Relief Program’s Capital Purchase Program (“CPP”). In addition, the Treasury also issued a related Private Bank Program Q&A (“Q&A”). Privately held banks and bank holding companies interested in participating in the CPP must file their applications by December 8, 2008. The Treasury will determine eligibility and allocation for applicants after consultation with their appropriate federal banking agency.
Continue Reading...The Treasury Department released today the term sheet for privately held financial institutions wishing to apply to the Capital Purchase Program as part of the Government's $700 billion economic rescue package. The application deadline for interested privately held financial institutions is December 8, 2008. Click here for the Treasury Department's term sheet, and click here for the Treasury Department's answers to frequently asked questions.
Effect of Emergency Economic Stabilization Act of 2008 on Executive Compensation
Congress recently passed the Emergency Economic Stabilization Act of 2008 (the “EESA”). This legislation authorizes the Treasury Department to purchase “troubled assets” from financial institutions under a new Troubled Asset Relief Program. Included in the EESA are a number of important provisions affecting executive compensation arrangements of participating financial institutions. These provisions include limits on the ability of participating financial institutions to deduct compensation paid to certain executives, excise taxes, mandatory “clawback” provisions for certain types of executive bonus arrangements, and absolute prohibitions on certain compensation. The Treasury Department’s guidance provides for three primary programs in which financial institutions may, depending on their circumstances, participate — the Capital Purchase Program, the Troubled Asset Auction Program and the Program for Systemically Significant Failing Institutions. The specific applicable executive compensation provisions/limitations will depend on the program under which the financial institution participates. This alert gives an overview of the methods of participation provided in the legislation and the applicable executive compensation provisions. Implementation of, and guidance regarding, the legislation is rapidly evolving. We understand, for example, that the government may limit direct asset purchasing under these programs.
The FDIC's proposed mortgage modification plan targets both home owners and mortgage servicers. Mortgage servicers would be paid $1,000 per modified loan and, if the modified loan later defaults, the FDIC would cover up to 50% of the losses. The modification plan only applies to mortgages for owner-occupied properties, but those home owners could have their mortgage payments modified to 31% of their monthly income. Click here for all the details of the FDIC's new proposal.
The Treasury Department announced today the government's $700 billion economic rescue package will continue to focus on capital purchase programs in the near term, rather than buying and selling distressed assets, which was the plan's original aim. The Treasury Department revealed that it is considering both broadening the Capital Purchase Program to include smaller specialty finance firms and to require newcomers to the program to raise matching funds. For further details click here to read Treasury Secretary Henry Paulson's entire statement.
Meanwhile, financial regulators released an interagency statement encouraging lenders to meet the needs of creditworthy borrowers, both business and consumers. The interagency statement warned against tightening underwriting standards "excessively." Click here for the entire statement.
The Treasury Department, HOPE NOW, and the Federal Housing Finance Agency (FHFA) announced today a new fast-track approach for homeowners behind in their mortgage payments. Specifically, the program streamlines the modification process for homeowners who are: 1) three or more monthly payments behind, 2) own and occupy their home as their primary residence, and 3) have not filed for bankruptcy. The program attempts to move such homeowners to monthly payments of not more than 38% of their household gross monthly income. For more information, click here to read FHFA Director James Lockhart's statement and related questions and answers relevant to homeowners and mortgage servicers, which follow his remarks.
The Treasury Department will purchase $40 billion in American International Group's senior preferred stock as part of its $700 billion authorization under the Stabilization Act, explaining that the investment will enable AIG to pay down a Federal Reserve credit line.
Click here for the press release, and continue to monitor this web page for the latest updates on TARP and all other news on the Act.
In July 2008, the FDIC published an interim rule that generally was effective upon publication. This rule primarily addressed the treatment of sweep accounts in connection with bank failures.
Just a few short months ago it seemed that the FDIC was confident that it could address the number of problem banks without any rash of bank failures. Instead, economic conditions deteriorated. As a result, the U.S. Department of the Treasury promulgated the capital purchase program under the Troubled Assets Relief Program and the FDIC Temporary Liquidity Guarantee Program. What has seemed to escape notice by many bankers is the interrelationship between the FDIC’s process for closure of a failed bank and the Liquidity Guarantee Program.
Continue Reading...Thrift holding companies are not subject to any quantitative capital guidelines or leverage limitations. Accordingly, such companies do not calculate risk-based assets on a consolidated basis at the holding company level. There are a number of thrift holding companies that have considerable financial services activities at the holding company level.
The Capital Purchase Program ("CPP") provides that a financial institution can receive senior preferred securities equal to no less than 1% or more than 3% of risk-weighted assets (subject to an overall cap of $25 billion).
The Office of Thrift Supervision ("OTS"), the federal regulator of holding companies over federal savings banks and state savings banks that have made a 10(l) election, has been concerned that thrift holding companies may be overstating their risk-weighted assets. When a thrift holding company's consolidated risk-weighted assets significantly exceed the risk-weighted assets of the subsidiary financial institution, the OTS is requiring more information in order to deem the CPP application to be informationally complete. Specifically, the holding company must detail how it "risk weights" its assets and that it is using a methodology that is consistent with the thrift financial report instructions. The OTS is considering whether to require an independent third-party verification in such circumstances (the OTS has not required such a verification to date).
When the FDIC is concerned with the asset quality of an applicant under the Capital Purchase Program, it is asking the applicant to complete the attached spreadsheet indicating a bank's current and pro forma condition on certain key ratios. Click here to view.
This website is for general information purposes only. Information posted is not intended to be legal advice. For more information, please see the Disclaimer and Privacy Notice links.
Enter keywords:
