Today the Treasury announced the terms for the Capital Assistance Program (“CAP”), which is the new capital assistance program that was announced as part of the Financial Stability Plan on February 10th. For further discussion of the Financial Stability Plan, see the February 11, 2009 Alert. The CAP consists of two core elements, a supervisory assessment and access to a government capital investment. Participation in the CAP is required for the largest U.S. banking institutions — those with assets of more than $100 billion — which are not foreign-controlled. U.S. banking organizations with assets of less than $100 billion may also voluntarily participate in the CAP. Applications to participate in the CAP, including those by the large banking organizations who are required to participate in the supervisory assessments, must be submitted by May 25, 2009. For more information click here.

Yesterday U.S. Treasury Secretary Timothy Geithner announced a broad, multi-faceted program, the Financial Stability Plan (the “FSP”), designed to strengthen the financial system through additional capital injections to banks, creation of a public/private investment fund to buy troubled assets, establishment of guidelines for mortgage modification, and expansion of a Federal Reserve lending program aimed at small businesses and communities.

Initial market reaction and financial commentary was negative, largely based on uncertainty regarding the details of the FSP and therefore its implications for affected financial institutions, businesses and consumers going forward. In these circumstances, the Administration can be expected to move rapidly to flesh out the details of the FSP. Set forth below are some areas which financial institutions will likely focus on as the details of the FSP are made known. [Read more →]