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Delay in Legacy Loans Program

On June 3, 2009, the FDIC announced a postponement of the Legacy Loans Program component of the Public Private Investment Partnership for open banks to sell loans.  Formally, development of the Legacy Loans Program will continue, but the previously planned pilot sale of assets by open banks will be postponed.  Accordingly, the government is once again exploring whether the purchase of troubled assets should be part of the Troubled Asset Relief Program.  The federal government appears to have now completed a 540 degree rotation under the Troubled Asset Relief Program. Observers are keen to determine whether the government will land an unprecedented 720, possibly earning an X Games gold medal in the process.

Chairman Bair explained, “Banks have been able to raise capital without having to sell bad assets through the Legacy Loans Program, which reflects renewed investor confidence in our banking system. As a consequence, banks and their supervisors will take additional time to assess the magnitude and timing of troubled assets sales as part of our larger efforts to strengthen the banking sector.”

As a next step, the FDIC will test the funding mechanism contemplated by the Legacy Loans Program in a sale of receivership assets this summer.  This funding mechanism draws upon concepts successfully employed by the Resolution Trust Corporation in the 1990s, which routinely assisted in the financing of asset sales through responsible use of leverage. The FDIC expects to solicit bids for this sale of receivership assets in July.

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Treasury Announces Asset Guarantee Program

On December 31, 2008, the Treasury announced the establishment of an Asset Guarantee Program, as required by Section 102(a) of the Emergency Economic Stabilization Act.  The program provides guarantees for assets originated before March 14, 2008 held by systemically significant financial institutions that face a high risk of losing market confidence due in part to a large portfolio of distressed or illiquid assets.  While the program is required by statute, it appears unlikely that the Asset Guarantee Program will be a significant part of the Troubled Asset Relief Program.  “The program will be applied with extreme discretion in order to improve market confidence in the systematically significant institution and in financial markets broadly.  It is not anticipated that the program will be made widely available.”

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Round 6 of TARP Capital Infusions

On December 23, 2008, the Treasury announced the completion of the sixth round of TARP Capital infusions.  The Treasury purchased a total of approximately $2.8 billion in securities from 49 financial institutions on Friday, December 19, and has now invested in 165 institutions, totaling $170.6 billion.  This leaves approximately $80 billion for the Treasury to invest under the TARP Capital program.

Round six marked the first time that funds were invested in institutions participating under the Treasury’s Non-Public terms.  These “non-public” institutions issued to the Treasury warrants, which the Treasury immediately exercised.  One institution, OneUnited Bank, of Boston, Massachusetts, qualified as a Community Development Financial Institution (a CDFI), eliminating the requirement to issue warrants to the Treasury.

Synovus Financial Corporation of Columbus, Georgia, received the largest infusion of the round, $967.9 million, while Monadnock Bancorp of Petersborough, New Hampshire, received the smallest infusion of the round, $1.8 million.

This round saw five new states, Colorado, Idaho, Iowa, New Hampshire, and Rhode Island,  join the ranks of states whose institutions have received funds under the TARP Capital program.  In total, 41 states and 1 U.S. territory are home to institutions that have received TARP Capital infusions.

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Another Day, Another $20 Billion

Another Day, Another $20 Billion

November 25, 2008

Authored by: Robert Klingler

On November 25, 2008, the Treasury announced it will allocate $20 billion under the Troubled Asset Relief Program (TARP) to back the Federal Reserve Bank of New York’s new lending facility for consumer asset-backed securities.  The Federal Reserve Bank of New York is creating this Term Asset-Backed Securities Loan Facility (TALF) to assist the credit markets in accommodating the credit needs of consumers and small business by facilitating the issuance of asset-backed securities (ABS) and improving the market conditions for ABS more generally.  Our summary of the TALF term sheet is available here.

When combined with the previously announced TARP programs, the Treasury has $15 billion left under TARP that it can invest or otherwise use without Congressional approval (in addition to the amounts that remain available under the TARP Capital Purchase Program).

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Distressed Assets Roundtable

Distressed Assets Roundtable

November 23, 2008

Authored by: Robert Klingler

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Paulson Comments on Interagency Statement and TARP Capital

On November 12, 2008, Secretary Paulson made remarks on the financial rescue package.  We have highlighted certain passages below, with emphasis added.

Today banking regulators issued a statement emphasizing that the extraordinary government actions taken by the Fed, Treasury and FDIC to stabilize and strengthen the banking system are not merely one-sided; all banks – not just those participating in the Capital Purchase Program – have benefited, so they all also have responsibilities in the areas of lending, dividend and compensation policies, and foreclosure mitigation.  I commend this action and I am particularly focused on the importance of prudent bank lending to restore our economic growth.

Secretary Paulson appears to read the Interagency Statement as we have; TARP Capital was designed to benefit the entire industry, and the entire industry will bear the costs of future regulation.

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Audio Presentation of Troubled Assets Conference

Due to popular demand, we are going to be offering the Economic Stabilization Presentation via conference call for clients, contacts, and PoGo attorneys outside of the Atlanta office.  Please note below whether the link is for the the audio or in-person presentation.  If one registers for the audio version of the presentation, then you will NOT be reserving a space at the in-person presentation.

The conference is scheduled to begin promptly at 8:00 am, Eastern Time, on Friday, October 31, 2008.

Register for Audio Presentation

Register for In-Person Presentation [We are currently at capacity for in-person attendance.  Please consider registering for the Audio Presentation instead.]

Speakers:

  • Walt Moeling – Dealing with Community Bank Distressed Assets – What Is Needed to Grease the Skids
  • Jerry Blanchard – The Shifting Boundaries of the Asset Relief Program (“TARP”)
  • David Minkin – What Happened to the Golden Rule? And What Do We Do Now?
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Powell Goldstein Troubled Assets Conference

For more information, or to register, please click the picture or here

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