In his speech to the Independent Community Bankers of America, Treasury Secretary Geithner announced that the Treasury will re-open the Capital Purchase Program (“CPP”) application window for banks with total assets under $500 million and raise from 3% of risk-weighted assets to 5% the amount for which qualifying institutions can apply. The application window is being reopened for all term sheets – public and private corporations, Subchapter S corporations, and mutual institutions. For further discussion of the CPP, please see the October 14, 2008, October 21, 2008, and October 27, 2008 Alerts for discussion of the CPP generally and for public institutions, the November 18, 2008 Alert for a discussion of the CPP for private institutions and the April 14, 2009 and April 21, 2009 Alerts for discussion of the CPP for mutual institutions. Current CPP participants will be allowed to reapply, and will have an expedited approval process. The Treasury will also extend the deadline for small banks to form a holding company for the purposes of the CPP. Both the window to form a holding company and the window to apply or re-apply for CPP will be open for six months. The Treasury plans to fund these additional capital investments under the CPP using the proceeds of the repayments it expects to receive from some of the largest banks.

In a letter to Senator Harry Reid (D. Nevada) Timothy Geithner, the Secretary of the Treasury (the “Treasury”) proposed a regulatory framework for regulating over-the-counter (“OTC”) derivatives. The OTC derivatives market, noted the Treasury currently is largely unregulated. The Treasury stated that regulation of the OTC derivatives market, including the market for credit default swaps, should be aimed to achieve four broad objectives: (1) preventing OTC derivatives activities from posing systemic risk to the financial system; (2) making the OTC derivatives market more efficient and transparent; (3) preventing market manipulation, fraud and other market abuses; and (4) seeing that OTC derivatives are not marketed to unsophisticated purchasers. [Read more →]

The Financial Accounting Standard Board (the “FASB”) considered public comments to its proposed staff positions (the “Staff Positions”) on financial reporting. FASB Staff Position FAS 157-e (“FSP FAS 157-e”) addresses fair value measurements, and FASB Staff Position FSP FAS 115-a, FAS 124-a, and EITF 99-20-b (collectively, “FSP FAS 115-a”) address other-than-temporary impairments. The Staff Positions are expected to be issued in final form later this week. Subject to certain conditions, they are to take effect for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. FSP FAS 157-e and FSP FAS 115-a were discussed in the March 24, 2009 Alert. The FASB approved those positions subject to certain modifications. [Read more →]

Recent issues of the Financial Services Alert have dedicated substantial space to the various programs initiated by U.S. and foreign governments to provide capital support and liquidity to financial services firms. As evidenced by the headlines that emerged from the meetings held last week in London by the leaders of the Group of Twenty (“G-20”), attention is now shifting to comprehensive financial services regulatory reform. Although these reform efforts remain at a nascent stage both in the United States and the other nations of the G-20, indications are that reform efforts may well produce the most large-scale and dramatic changes to the financial services regulatory environment since the 1930s and will likely touch virtually all sectors of the financial services industry. Moreover, unlike past efforts at reform, the regulatory framework that emerges may involve significant international coordination both in creating the framework and on an ongoing basis. [Read more →]

The American Recovery and Reinvestment Act of 2009 (the “Stimulus Act”) modifies and expands upon the executive compensation standards that were originally issued under the Troubled Assets Relief Program (the “TARP”) and incorporates certain aspects of the standards announced by the Treasury earlier this month. The Stimulus Act amends Section 111 of the Emergency Economic Stabilization Act (the “EESA”), the source of the TARP standards, thus applying retroactively to all institutions that already participate in the TARP (e.g., financial institutions that received funds under the Capital Purchase Program).  For more information click here.

The FDIC extended the Temporary Liquidity Guarantee Program (“TLGP”) through October 2009. Though this extension allows banking organizations participating in the Debt Guarantee Program under TLGP to issue guarantee for an additional four months, the FDIC will assess an additional premium on guaranteed debt issued between July 1, 2009 and October 31, 2009. For more information click here.

The FRB extended through October 30, 2009, its existing liquidity programs that were scheduled to expire on April 30, 2009. The FRB approved the extension through October 30, 2009 of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (the “ABCP Facility”), the Commercial Paper Funding Facility, the Money Market Investor Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility (the “TSLF”). The Federal Open Market Committee (“FOMC”) also took action to extend the TSLF, which is established under the joint authority of the FRB and the FOMC. For more information click here.

The FDIC proposed a rule (the “Proposed Rule”) that would make certain revisions to the interest rate restrictions in its regulations regarding brokered deposits to provide greater flexibility to institutions that are not well-capitalized. The Proposed Rule would address concerns caused by the fact that the U.S. Treasury bond-yield benchmark for brokered deposits of such institutions under the current rule is abnormally low, making it difficult for the institutions to attract brokered deposits due to compressed limits on permissible brokered deposit rates. For more information click here.

The FDIC issued a final rule (the “Final Rule”) establishing the FDIC’s practices for determining deposit and other liability account balances in the event of a failure of an insured depository institution (a “DI”). The Final Rule is substantially the same as the interim rule issued in July 2008 regarding this topic, and, to a large extent, is a codification of long-standing FDIC practices and procedures. For more information click here.

Goodwin Procter has prepared a Client Alert discussing the provisions of a bill introduced in the U.S. Senate that is designed to require unregistered funds that rely on Sections 3(c)(1) or 3(c)(7) under the Investment Company Act of 1940, as amended, and those funds’ advisers, to register with the SEC. The Client Alert is available on the Goodwin Procter website at Client Alert. For more information click here.

The FDIC issued Financial Institution Letter 01-2009, which states that state nonmember banks should implement a process to monitor their use of capital injections, liquidity support and financing guarantees obtained through the recent financial stability programs established by the Treasury, the FDIC and the FRB. The monitoring processes should help to determine how participation in these federal programs has assisted such institutions in supporting prudent lending or supporting efforts to work with existing borrowers to avoid unnecessary foreclosures. The FDIC encouraged institutions to include a summary of this information in shareholder and public reports, annual reports and financial statements. State nonmember banks should also describe their utilization of federal funding during bank examinations. For more information click here.

As first discussed in the October 21, 2008 Alert, the FRB-NY created a money market investor funding facility (the “MMIFF”) to provide senior secured funding to a series of special purpose vehicles (the “SPVs”) to finance until April 30, 2009 the purchase of certain instruments from registered money market funds (i.e., mutual funds that comply with Rule 2a-7 under the Investment Company Act of 1940 (the “1940 Act”)). The FRB-NY recently announced two changes to the MMIFF that became effective January 7, 2009. For more information click here.