Emergency Economic Stabilization Act Implications For Banks
The Emergency Economic Stabilization Act of 2008 (EESA), signed by the President on October 3, 2008, authorized the Secretary of the U.S. Department of the Treasury to establish the Troubled Assets Relief Program (TARP) to purchase “troubled assets.”
If you are a bank and want to learn more about participating in the relief afforded by the newly enacted "bail-out" legislation, here are some things to consider:
Troubled Assets Relief Program (TARP) to Purchase “Troubled Assets”
Troubled Asset Auction Program for Troubled Mortgage Related Assets
- Assets must have originated or have been issued on or before March 14, 2008
- Limits on executive compensation
Capital Purchase Program (CPP)
- Application deadline November 14, 2008
- $250 billion of senior preferred stock to be purchased from qualifying banks
- Minimum investment of 1%, maximum investment of 3% of risk-weighted assets
- Preferred stock to be non-voting
- Mandatory executive compensation limitations while Treasury holds equity securities
Temporary Liquidity Guaranty Program by FDIC
- Mandatory executive compensation limitations while Treasury holds equity securities
- Banks automatically covered until November 13, 2008
- Must affirmatively opt out, otherwise, will be enrolled for duration of Program and fees will be assessed effective November 14
- Insurance for previously uninsured amounts in non-interest bearing deposit accounts and certain newly issued senior unsecured debt
- No executive compensation requirements
- No requirement of a capital investment by a federal regulator
Fannie Mae and Freddie Mac Losses
Certain losses on preferred stock may be treated as ordinary losses
Click here for more information on the Emergency Economic Stabilization Act of 2008.
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