Capital Purchase Program Warrant Repurchase and Disposition Process Announced

The Treasury Department outlined the warrant repurchase process under the Capital Purchase Program in a press release issued today.  The Capital Purchase Program allows qualified financial institutions to receive a capital injection from the Treasury Department in return for preferred stock and warrants.  When a publicly-traded institution repays the Treasury Department for investments made through the Capital Purchase Program the institution has the "right to repurchase the warrants at fair market value via an independent valuation process," according to the Treasury Department.  Today's press release outlines the four step process.

Click here for the Treasury Department's press release.

It's Not Too Late for TARP -- What To Do Now That The Capital Purchase Program Has Reopened?

In October 2008, we prepared an article entitled “A Look at TARP — What to do now?” Since the date of that article, more than 600 financial institutions, ranging in size from several billion dollars down to a few million dollars, have elected to participate in the Capital Purchase Program (“CPP”) established under the Department of the Treasury’s (the “Treasury”) Troubled Asset Relief Program (“TARP”). The Treasury has issued terms sheets for publicly traded financial institutions, privately held financial institutions and Subchapter S financial institutions. Since October 2008, several hundred financial institutions have elected to participate in the CPP.

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Regulatory Consequences for Banks Participating in the TARP CPP

On January 3, 2009, John F. Bovenzi, deputy to the chairman of the FDIC, in an appearance before the Committee on Financial Services of the U.S. House of Representatives, stated that the FDIC will measure and assess in examination ratings how banks that have received government assistance have utilized these funds to meet the purposes of the U.S. Department of the Treasury’s Capital Purchase Program (CPP), implemented as part of the Emergency Economic Stabilization Act’s (EESA) Troubled Asset Relief Program (TARP).

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New Capital Purchase Program Transaction Report Released

The Treasury Department released details of the latest round of Capital Purchase Program transactions totaling $1.15 billion for 42 banks.  The Capital Purchase Program allows qualified financial institutions to receive a capital injection from the Treasury Department in return for preferred stock and warrants.  Today's report discloses investments ranging from approximately $2 million to $266 million.  The Treasury Department's aggregate investments under the Capital Purchase Program now total $195.33 billion.  Click here for the Treasury Department's press release, and click here for all Capital Purchase Program transactions to date.

Treasury Department Posts Completed TARP Contracts

The Treasury Department will now post TARP contracts within five to 10 business days of execution.  Citing the the need for transparency, the Treasury Department took the first step by posting the first completed transaction contracts under the Capital Purchase Program (CPP), the Significant Failing Institutions program (SSFI), the Targeted Investment Program (TIP) and the Automotive Industry Financing Program (AIFP).  Other completed transaction contracts will be posted on a rolling basis and individual institutions' proprietary information will be redacted.  Click here for today's press release, and click here for the posted completed transaction contracts.

Treasury Department Issues Lobbying Rules and Updates Capital Purchase Program Report

The Treasury Department today issued new rules designed to limit lobbyist influence on the Emergency Economic Stabilization Act's recovery programs.  The new rules include: 1) limiting Treasury Department contacts with lobbyists regarding applying for, and disbursing recovery programs funds, 2) requiring the Office of Financial Stability to certify to Congress that each Treasury Department investment "is based only on investment criteria," 3) publishing a detailed description of banking regulators' investment review process, and 4) requiring a primary banking regulator to determine a bank's eligibility for Treasury Department capital investment.  Click here for today's press release.

Additionally, the Treasury Department released details of another round of Capital Purchase Program transactions totaling $386 billion for 23 banks.  The Capital Purchase Program allows qualified financial institutions to receive a capital injection from the Treasury Department in return for preferred stock and warrants.  Today's report discloses investments ranging from approximately $1 million to $111 million.  The Treasury Department's aggregate investments under the Capital Purchase Program now total $194.1 billion.  Click here for the Treasury Department's press release, and click here for all Capital Purchase Program transactions to date.

Treasury Department Releases Updated Capital Purchase Program Transaction Report

The Treasury Department released details of a new round of Capital Purchase Program transactions,  totaling $1.5 billion for 39 banks.  The Capital Purchase Program allows qualified financial institutions to receive a capital injection from the Treasury Department in return for preferred stock and warrants.  Today's report discloses investments ranging from approximately $1.7 million to $400 million.  The Treasury Department's aggregate investments under the Capital Purchase Program now total $193.8 billion.  Click here for the Treasury Department's press release, and click here for all Capital Purchase Program transactions to date.

TARP Capital Purchase Program -- Subchapter S Corporation Term Sheet

On January 14, 2009, the United States Department of Treasury (“Treasury”) issued its much anticipated Summary Term Sheet detailing the terms for participation in Treasury’s Troubled Asset Relief Program’s Capital Purchase Program (“CPP”) by bank and bank holding companies that have elected to be taxed under Subchapter S of Chapter 1 of the U. S. Internal Revenue Code (the “Code”). Subchapter S banks and bank holding companies interested in participating in the CPP must file their applications by February 13, 2009. Similar to the private (non-Subchapter S) and public company programs, Treasury will determine eligibility and allocation for applicants after consultation with their appropriate federal banking agency. As of January 14, 2009, Treasury has invested a total $189 billion in 257 banks in 42 states and Puerto Rico. The largest investment was $25 billion and the smallest investment was $1 million.

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Capital Purchase Program Term Sheet for S Corporations Released

The Treasury Department released today both a term sheet and answers to frequently asked questions of Subchapter S corporations applying to the Capital Purchase Program.  The term sheet provides for a qualified financial institution definition applicable to Subchapter S corporations.  The deadline for Subchapter S corporations to apply to the Capital Purchase Program is February 13, 2009.  Click here for the Treasury Department's term sheet, and click here for answers to frequently asked questions.

Treasury Department Releases Capital Purchase Program Transaction Update

The Treasury Department released details of the most recent round of Capital Purchase Program transactions,  totaling $14.77 billion for 43 banks.  The Capital Purchase Program allows qualified financial institutions to receive a capital injection from the Treasury Department in return for preferred stock and warrants.  Today's report discloses investments ranging from approximately $1 million to $10 billion.  The Treasury Department's aggregate investments under the Capital Purchase Program now total $192 billion.  Click here for the Treasury Department's most recent Capital Purchase Program transactions, and click here for all Capital Purchase Program transactions to date.

Treasury Department Releases Congressional TARP Report

Today the Treasury Department released its second TARP report to Congress.  The report covers transactions made from December 1, 2008 through December 31, 2008, including actions taken under the Capital Purchase Program, the Asset Guarantee Program, the Targeted Investment Program, and the Automotive Industry Financing Program.  The Emergency Economic Stabilization Act requires the Treasury Department to provide Congress with detailed reports for actions taken through TARP.  Click here for today's report, and click here for the first report sent to Congress on December 5, 2008.

More Capital Purchase Program Funds Invested in Banks

The Treasury Department has released details of a $15 billion investment in seven banks through TARP's Capital Purchase Program. To date the Treasury Department has committed to invest $177.5 billion in financial institutions in exchange for stock and warrants under the Capital Purchase Program. Click here for the Treasury Department's press release, and click here for the transaction details.

$165 Billion Spent Through the Capital Purchase Program, According to Latest Report

The Treasury Department has released the latest transaction report for the Capital Purchase Program under TARP. Over $165 billion has now been spent providing financial institutions liquidity in exchange for shares held by the Treasury Department since the first purchases on October 28, 2008. The report provides an update to the transactions detailed to Congress by the Treasury Department this past Friday, December 5, 2008. The latest purchases range from $935 million for shares in Popular, Inc., in San Juan, Puerto Rico to $1.7 million for shares in Manhattan Bancorp in El Segundo, California, according to today's Treasury Department report.
 
Click here for the latest Capital Purchase Program transaction report.

Click here for Hunton & William's prior posting on the Treasury Department's TARP Report to Congress.

Treasury Department Defends Capital Purchase Program

Interim Assistant Treasury Secretary for Financial Stability Neel Kashkari today cited the role played by the Capital Purchase Program under TARP in preventing the collapse of the U.S. financial system. The Capital Purchase Program, which provides financial institutions liquidity in exchange for shares held by the Treasury Department, has disbursed $151 billion since the end of October, according to the Treasury Department. 
 
Mr. Kashkari said, "People often ask: how do we know our program is working? First, we did not allow the financial system to collapse. That is the most direct, important information. Second, we know the system is more stable than it was when Congress passed the legislation. While it is difficult to isolate one program's effects given regulators' numerous actions, one indicator that has pointed to reduced risk in the system is the average credit default swap spread for the eight largest U.S. banks, which has declined almost 207 basis points since before Congress passed the EESA. Another key indicator of perceived risk that we are tracking is LIBOR: 1 month LIBOR has declined 217 basis points and 3 month LIBOR 202 basis points." 
 
Click here for Mr. Kashkari's complete remarks.
 

Thrift Holding Companies

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).