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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Safe Harbor for Loan Modification Plans

As the Obama Administration announced the details of its Home Affordable Modification Program (“HAMP”) in March and April, 2009, one crucial element remained missing: a “safe harbor” for loan modifications made under HAMP. That safe harbor was provided by the Helping Families Save Their Homes Act of 2009 (the “Act”), which was enacted by Congress on May 19, 2009, and signed into law by President Obama the following day.

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Treasury Department Sends TARP Tranche Report to Congress

The Treasury Department released its fourth TARP tranche report to Congress today as required under the Emergency Economic Stabilization Act. Today's report covers all transactions for the Capital Purchase Program, the Automotive Industry Financing Program and the Targeted Investment Program since the last tranche report, submitted to Congress on December 2, 2008. The report notes that although the Treasury Department's total TARP commitment level has reached $266.9 billion, it has effectively allocated the first $350 billion under TARP. Allocations in excess of the commitment level represent undisbursed funds still subject to regulatory and shareholder approval. Click here for the report, and click here for the report's appendix.

Treasury Department Releases Targeted Investment Program Guidelines and Asset Guarantee Program Report

Today the Treasury Department released guidelines and a description for the Targeted Investment Program used for the Treasury Department's investment in Citigroup on November 23, 2008.  Although there is no deadline for participation in the Targeted Investment Program, and inclusion is on a case-by-case basis for Financial Institutions as defined in the Emergency Economic Stabilization Act, the guidelines do provide eligibility considerations for the Treasury Department. Those considerations include, but are not limited to, the extent to which destabilization of such a Financial Institution could threaten the viability of creditors and counterparties exposed to the Financial Institution. Also, like the Treasury Department's Capital Purchase Program, the Targeted Investment Program requires that the Treasury Department receive warrants for shares, or another form of consideration, in return for the investment. Click here for the Targeted Investment Program's details and click here for Hunton & Williams' prior posting on the Treasury Department's investment in Citigroup.
The Treasury Department also released a report today outlining to Congress how it is considering using of the Asset Guarantee Program, created under the Emergency Economic Stabilization Act, to fulfill the guarantee provisions of the Treasury Department's November, 23, 2008 agreement with Citigroup.  Under the Asset Guarantee Program the Treasury Department assumes a loss position on certain insured assets held by "systemically significant financial institutions", according to the Treasury Department.  However, the report notes to Congress the Asset Guarantee Program would be used with "extreme discretion," on a case-by-case basis, and it is "not anticipated that the program will be made widely available." Click here for the Treasury Department's press release, and click here for the full report.