Economic Recovery Task Force

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…)

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…)

In an effort to help institutions unfreeze lending and spur economic growth, the Federal government—drawing on funds from the recently passed $700 billion bank rescue plan—will commit up to $250 billion to purchase preferred equity shares in financial institutions, with $125 billion of that amount directed at nine large financial institutions.  The remaining $125 billion will be directed to small and midsize institutions that must elect to participate in the program by November 14, 2008.  Allocation decisions will be made thereafter, following consultation with the appropriate banking agency (Treasury Announces TARP Capital Purchase Program Description).  The capital infusion plan was formulated jointly by the U.S. Department of Treasury (the “Treasury”), the Board of Governors of the Federal Reserve System (the “Fed”) and the Federal Deposit Insurance Corporation (the “FDIC”) and is accompanied by efforts to allow the FDIC to temporarily guarantee, for a fee, certain types of new debt called senior unsecured debt issued by banks and thrifts, and for the Fed to finalize a program to serve as a buyer of last resort for commercial paper. (more…)

Congress is moving closer to adopting a comprehensive legislative package designed to “bailout” financial institutions and stabilize the economy: the Emergency Economic Stabilization Act of 2008.  We are closely monitoring negotiations between Congress and the White House, and we are analyzing the draft legislation.  This email provides an overview of the newest draft bill, highlighting provisions that have been under discussion since Treasury unveiled its proposal last week. (more…)