Economic Recovery Task Force

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the “Act”), Title VII of which imposes new and more stringent limits on executive compensation for participants in the United Stated Department of Treasury (“Treasury”) Troubled Assets Relief Program (“TARP”) under the Emergency Economic Stabilization Act of 2008 (the “EESA”).  These new restrictions apply retroactively and prospectively, to existing and new participants in the TARP Capital Purchase Program, for so long as the TARP participant retains any obligation arising from the financial assistance it received under TARP (the “Restricted Period”). Once the TARP participant has redeemed its preferred stock from Treasury, the restrictions go away — importantly, the restrictions do not apply during any period for which the federal government only holds warrants to purchase common stock of a TARP participant. In addition, Title VII of the Act permits TARP participants, with the approval of the Secretary of the Treasury (the “Secretary”) and the applicable federal bank regulatory agency, to redeem its preferred stock at any time, notwithstanding the original restrictions on redemption set forth in the EESA. (more…)

The economic stimulus bill to be signed by President Obama today will provide $7.2 billion for broadband deployment. Because the purpose of the law is to provide early stimulus to the economy, grants will be awarded on an accelerated schedule, and should be of interest to those in the broadband and telecommunications industries, utilities, school districts, local governments, nonprofit organizations and firms that finance broadband ventures. (more…)

On Tuesday, February 10, 2009, U.S. Treasury Secretary, Timothy Geithner, unveiled a new plan (“Plan”) designed to address the U.S. credit crisis and restore stability to the nation’s financial system. While many details are still to be released, the Plan will deliver as much as $2 trillion to the U.S. financial markets through the following four key elements: (more…)

As the 111th Congress begins its work, one of the first items to receive attention will be the Troubled Assets Relief Program, better known as TARP.  This Monday, at the request of President-elect Obama, President Bush asked Congress to approve the second $350 billion tranche of TARP funds.  Under TARP, the funds will be released unless the House and Senate pass resolutions of disapproval.  Resolutions have been introduced in both the House and the Senate, and votes could occur as early as the end of this week.  If either house fails to pass the disapproval resolution, or if Congress cannot override a Presidential veto of the joint resolution, then the funds will be available to the Executive branch.  Notwithstanding the disapproval resolutions, Congress appears poised to make statutory changes to TARP that could impact past and future recipients of TARP funds.

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On Friday, November 21, 2008, the Office of the Comptroller of the Currency (“OCC”) announced approval of a new type of national bank charter intended to facilitate investment into or acquisition of troubled or failed banks and thrifts.  Under the new process, the OCC grants preliminary approval to investors for a national bank charter which remains inactive, or “on the shelf”, until such time as the investor group is in a position to acquire a troubled institution. 

Generally, private investors who do not already hold a financial institution charter must be approved for a new banking charter prior to being eligible to participate in FDIC auctions of troubled or failing banks or thrifts.  Approval of a new charter generally requires significant amounts of time and a specific business plan, which has served as a major disadvantage for private investors seeking to participate in fast paced auctions of failing or failed institutions.  The new process announced by the OCC allows for potential investors to receive preliminary approval of a charter based on a streamlined business plan.  The charter remains on the shelf for up to 18 months following preliminary approval by the OCC.  The availability of this new type of charter should serve to minimize current disadvantages faced by potential investors, and thereby expand the pool of bidders for failing institutions.  (more…)