Category — Credit Crisis & Government Intervention

On February 2, 2010, President Obama announced a proposal (the Proposal) to establish a new Small Business Lending Fund (the SBLF) to encourage and facilitate increased lending by community banks to small businesses.  As proposed, the SBLF would offer up to $30 billion for equity investments in community banks, which are defined as banks with assets under $10 billion. The SBLF would be separate and distinct from the Treasury’s TARP program but would be funded with $30 billion of repaid TARP capital.  [Read more →]

The credit crisis that gripped U.S. and global markets and the subsequent recession have created fresh investment opportunities for private equity funds.  Traditionally, private equity funds were discouraged from investing in banking institutions by two primary factors: (1) high entity valuations dominated the banking industry, and (2) significant investments in banking institutions could trigger considerable regulatory burdens.  However, recently announced regulatory policy changes and significant declines in stock prices across the financial industry have combined to create a more attractive environment for private equity to invest in banking institutions.  [Read more →]

The Obama Administration has announced a comprehensive plan for regulatory reform of the financial services industry. The plan, entitled “A New Foundation: Rebuilding Financial Supervision and Regulation” was announced by President Obama and Treasury Secretary Geithner at the White House on Wednesday, June 17, 2009. [Read more →]

The Helping Families Save Their Homes Act of 2009

On May 20, 2009, the President signed The Helping Families Save Their Homes Act of 2009. The new law contains a number of provisions, including amendments to the HOPE for Homeowners Program, protections for servicers of mortgage loans who modify mortgage loans, and extensions of the credit facilities from the U.S. Treasury to the Federal Deposit Insurance Corporation. However, Section 404 of the Act amends the Truth in Lending Act (TILA) to require that a new notice be given to consumers within 30 days after the sale, transfer or assignment of the consumer’s mortgage loan. [Read more →]

In addition to the previous announcement that commercial mortgage-backed securities (CMBS) issued on or after January 1, 2009 are eligible collateral under the TALF, the Federal Reserve has announced that certain high-quality commercial mortgage-backed securities issued before January 1, 2009 (legacy CMBS) will become eligible collateral. [Read more →]

The Treasury Department announced that the results of its comprehensive bank stress tests will be made available soon. The comprehensive stress tests and other traditional methods of evaluating bank performance are yielding results that some banks will find of critical importance in dealing with regulators, their customers and their shareholders. The public disclosure of this information by Treasury complicates matters. During this critical time, financial institutions in crisis need to focus on four key areas among the many challenges they face. [Read more →]

Created by the Economic Stabilization Act or 2008, the Special Inspector General for the Troubled Asset Recovery Program (“SIGTARP”) has the powers to audit and investigate TARP awards and to make recommendations to the Treasury Department on how it should manage TARP programs.  Acting with the attention of the Congress, oversight over Treasury, the authority to deal directly with TARP recipients, and the required cooperation of the Federal Reserve, the Securities and Exchange Commission and federal and state law enforcement, SIGTARP Neil Barofsky has a broad jurisdiction and extensive powers.  While his formal power of compulsion ends with court-enforced subpoenas and he must refer criminal matters for prosecution to the Department of Justice, in two months of activity, he has initiated 20 criminal investigations, audited the use of TARP funds and the executive compensation of its 364 recipients, and set a schedule of audits and investigations across the spectrum of TARP programs. [Read more →]

On March 23, 2009, the Treasury – in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve – announced the initial details of its Public-Private Investment Program (PPIP) which is designed to (i) remove toxic real estate loans and securities from the balance sheets of U.S. depositary institutions, which include banks and thrifts (Participant Banks), (ii) rejuvenate real estate credit markets and (iii) restart the real estate loan securitization market. PPIP is divided into two programs, (a) the Legacy Loans Program dealing with residential and commercial real estate loans held by Participant Banks and (b) the Legacy Securities Program dealing with commercial mortgage backed securities (CMBS) and residential mortgage backed securities (RMBS). [Read more →]

On March 23, 2009, the Treasury – in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve – announced the initial details of its Public-Private Investment Program (PPIP) which is designed to (i) remove toxic real estate loans and securities from the balance sheets of U.S. depositary institutions, both large and small, which are insured by the FDIC (Participant Banks), (ii) rejuvenate real estate credit markets and (iii) restart the real estate loan securitization market. PPIP is divided into two programs, (a) the Legacy Loans Program dealing with residential and commercial real estate loans held by Participant Banks, and (b) the Legacy Securities Program dealing with residential and commercial mortgage backed securities which were originally issued prior to 2009 and are presently held by Participant Banks. [Read more →]

On March 23, 2009, Treasury announced details of its two-part Public-Private Partnership Investment Program aimed at relieving financial institutions of toxic loans and securities.  The program will use the collective resources of the Treasury, the Federal Reserve, and the FDIC, together with private funding and management, to remove from bank balance sheets whole loans and pre-2009 residential and commercial mortgage-backed securities, collectively referred to as Legacy Assets.  This Public-Private Partnership Investment Program will be funded with $75 – $100 billion in TARP capital in addition to capital from private investors to create $500 billion to $1 trillion in Legacy Asset Purchases.  [Read more →]