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New Site Features

December 8, 2008

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New Site Features

December 8, 2008

Authored by: Robert Klingler

Over the past several days, the website has undergone significant changes behind the scenes to offer additional functionality for our visitors.  If anything is broken, or if there are features that you would like to see, please let us know.  We won’t bore you with all of the behind the scenes changes, but we did want to highlight four of them:

  1. Subscribe to Receive Daily Emails. Anyone can now subscribe to receive daily emails from BankPogo.com which will contain that day’s newest stories.  To subscribe, please enter your email address in the box on the right hand side of any page under “Subscribe for Updates.”  You will then automatically receive an email each morning with the contents of any new posts.
  2. Improved Search. As BankPogo.com expanded, the limitations of the search engine were starting to be felt.  The new search engine is faster, more comprehensive and gives better results.  Give it a try in the top right corner of any page.
  3. Email a Story to a Friend. At the end of every post, you now have the ability to quickly and easily email a copy of the entire post to a colleague or friend.  Just click on the “Email this Content” link at the end of the post and complete the resulting pop-up window.
  4. Related Content. Because the federal regulators are continuously modifying the information about TARP and the Temporary Liquidity Guarantee Programs, new information is added to the website that sometimes modifies previous guidance.  At the end of each post, you will now be presented with an automatically generated list of related content that you may also find informative.

Offsetting the new features slightly was a decision to remove comments from the website.  To date, we had received two useful and informative comments, and almost 100 spam-related comments.  While we were able to suppress the spam comments, they were starting to slow down the site without any benefit to our readers.  If you would like to comment on any content on the website, we encourage you to contact us.

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Map of TARP Capital Recipients

Map of TARP Capital Recipients

December 5, 2008

Authored by: Bryan Cave

To provide a different way of looking (literally) at the list of banks that have received TARP Capital infusions, we have prepared an interactive map showing TARP Capital recipients.

The map uses location of each institution’s headquarters for determining the location of the TARP Capital infusion, which doesn’t necessarily mean much for the larger national banks, but is still very informative for regional and community banks.  By clicking on a pin on the map, you can see the bank’s name and dollar amount of the TARP Capital infusion.  The color of the pin indicates the round of the TARP Capital infusion:

  • the blue pins represent the first round, made on October 28, 2008;
  • the red pins represent the second round, made on November 14, 2008;
  • the green pins represent the third round, made on November 21, 2008;
  • the yellow pins represent the fourth round, made on December 5, 2008;
  • the purple pins represent the fifth round, made on December 12, 2008;
  • the aqua pins represent the sixth round, made on December 19, 2008,
  • the magenta pins represent the seventh round, made on December 23, 2008;
  • the blue tacks represent the eighth round, made on December 31, 2008;
  • the red tacks represent the ninth round, made on January 9, 2009;
  • the green tacks represent the tenth round, made on January 16, 2009;
  • the aqua tacks represent the eleventh round, made on January 23, 2009;
  • the yellow tacks represent the twelfth round, made on January 30, 2009;
  • the purple tacks represent the thirteenth round, made on February 6, 2009; and
  • the magenta tacks represent the fourteenth round and all subsequent rounds.

The map shows that the Treasury seems to be working to approve banks across the country.

View the TARP Map .

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Summary of the FDIC's Master Agreement

The Master Agreement, which the FDIC has created for use with the Debt Guarantee portion of the Temporary Liquidity Guarantee Program, provides an outline for how the guarantee program operates if the FDIC is called upon to honor the Guarantee.  The operative provisions are found in Articles II, III, IV and V.

Article II describes how payments would be made in the event the Guarantee is called upon.  The Section also contains language typically found in a letter of credit reimbursement agreement whereby the Issuer agrees to reimburse the FDIC immediately for any payments made by the FDIC.  The “Reimbursement Payment” will bear interest, if not paid immediately, at a rate equal to the non-default rate of interest on the Senior Unsecured Debt plus 1%.   As a practical matter, this is advantageous for the Issuer since a failure to reimburse would normally trigger a higher rate of interest in similar reimbursement agreements.

Article II also provides that the Issuer waives any defenses to the enforcement of the Senior Unsecured Debt once the FDIC has paid out under its guarantee.  The FDIC is subrogated to the rights of the holder of the Senior Unsecured Debt and does not want the Issuer to raise lender liability defenses to the enforcement of the Debt which might likewise provide a defense to collection of the Reimbursement Payment.  One of the documents found in the Annex to the Agreement is an Assignment by which the lender seeking payment from the FDIC assigns the promissory note or other evidence of indebtedness to the FDIC.

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FDIC Debt Guarantee and Interbank CDs

On the evening of Thursday, December 4, 2008, the FDIC circulated an updated notice regarding the definition of “senior unsecured debt” as it applies to interbank CDs.  A complete copy of that notice is included at the end of this post.

The notice may cause some confusion, as we believe most banks are unlikely to have any relevant interbank CDs, insured or otherwise.  Only the amount of certificates of deposits owed to non-affiliated banks in excess of $250,000 should be included in the amount of senior unsecured debt outstanding as of September 30, 2008.

The definition of “senior unsecured debt” contained in the final regulations does include “U.S. dollar denominated certificates of deposit owed to an insured depository institution.”  However, there are a number of exceptions that effectively swallow this rule.

First, debt “owed to an insured depository institution” includes only debt owed to the institution “solely in its own capacity and not as agent.”  As a result, brokered deposits or deposits placed through the CDARS network do not meet the definition of senior unsecured debt and should neither be included in the amount of senior unsecured debt outstanding as of September 30, 2008 nor be eligible for the FDIC guarantee.

Second, debt to “affiliates, including parents and subsidiaries, and institution-affiliated parties” are excluded from the definition of senior unsecured debt.  As a result, any CDs between affiliated banks should be excluded from the amount of senior unsecured debt outstanding as of September 30, 2008, regardless of the amount of such CDs.

Third, as noted in the FDIC notice, certificates of deposits owed to non-affiliated banks should only be included to the extent the CDs exceeded FDIC insurance limits as of September 30, 2008.

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TLGP and Public Funds

TLGP and Public Funds

December 4, 2008

Authored by: Robert Klingler

As noted in the FDIC’s latest Frequently Asked Questions on the TLGP, the FDIC will fully guarantee public funds deposits in NOW accounts so long as the interest rate does not exceed 0.5 percent and the institution has committed to maintain the interest rate at or below 0.5 percent (assuming the institution has not opted out of the Transaction Account Guarantee).  The amount of collateral required for such guaranteed public funds, if any, is imposed by state law and not by the FDIC’s regulation.  As noted by the FDIC, the amount of collateral will depend upon the wording and meaning of each state’s laws.

As noted below, the Georgia statutes are not 100% clear, but we believe that Georgia depository institutions should not be required to provide collateral for public funds that are fully guaranteed by the FDIC under the Transaction Account Guarantee portion of the TLGP.  We believe the statutes should be read as treating the FDIC guarantee in the same manner as FDIC insurance.  Although the FDIC has generally been careful to use the term “guarantee” rather than “insurance” for the Transaction Account Guarantee portion of TLGP, in their December 4th press release, the FDIC stated that such funds will be “fully insured by the FDIC.”

We also understand that the going rate for public funds in Georgia is currently in excess of the 50 basis points permitted for NOW accounts to be treated as noninterest-bearing transactional accounts under TLGP.  However, given moving rates and the possibility of fully guaranteed FDIC funds, we could see enterprising bankers using this provision to their advantage.

Moreover, all banks with public fund deposits should re-examine their calculations for the amount of securities that must be pledged to confirm that they have taken into effect the increase in FDIC deposit insurance from $100,000 to $250,000.

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TLGP Transaction Account Guarantee Disclosures

In connection with the TLGP Transaction Account Guarantee Program, all depository institutions that offer noninterest-bearing transaction accounts will have new disclosures that must be made in the lobby of its main office and each domestic branch office, and, if the institution offers “Internet deposit services,” on its website.  The disclosures must be in place by December 19, 2008, and must have made adequate disclosures in a commercially reasonable manner before that time.

Standard Disclosures. The FDIC regulations provide the following sample disclosures.

For Participating Institutions:

[Institution Name] is participating in the FDIC’s Transaction Account Guarantee Program. Under that program, through December 31, 2009, all noninterest-bearing transaction accounts are fully guaranteed by the FDIC for the entire amount in the account. Coverage under the Transaction Account Guarantee Program is in addition to and separate from the coverage available under the FDIC’s general deposit insurance rules.

For Non-Participating Institutions:

[Institution Name] has chosen not to participate in the FDIC’s Transaction Account Guarantee Program. Customers of [Institution Name] with noninterest-bearing transaction accounts will continue to be insured through December 31, 2009 for up to $250,000 under the FDIC’s general deposit insurance rules.

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TLGP's Debt Guarantee

TLGP's Debt Guarantee

December 3, 2008

Authored by: Robert Klingler

How does the Debt Guarantee Program Work?

The FDIC will guarantee, through June 30, 2012, newly issued senior unsecured debt with a stated maturity of more than 30 days that is issued prior to June 30, 2009.

What is the Dollar Limit on the Debt Guarantee Program?

The FDIC will guarantee, for each eligible entity, up to 125% of the amount of senior unsecured debt outstanding that entity had at September 30, 2008 that was scheduled to mature on or before June 30, 2009.

However, for depository institutions that had either (i) no senior unsecured debt outstanding at September 30, 2008, or (ii) only had Federal funds purchased outstanding at September 30, 2008, the FDIC will guarantee up to 2% of the depository institution’s total liabilities as of September 30, 2008.

What are the fees for the Debt Guarantee Program?

Generally, the fees are as follows, and will be paid as guaranteed debt is issued in a single payment to the FDIC via ACH, and is equal to the amount of the guaranteed debt times the term of the debt (expressed in years) times the following annualized assessment rates:

  • If the debt has a maturity of 31 to 180 days, the annualized assessment rate will be 50 basis points.
  • If the debt has a maturity of 181 to 364 days, the annualized assessment rate will be 75 basis points.
  • If the debt has a maturity of 365 days or more, the annualized assessment rate will be 100 basis points.

If the debt matures after June 30, 2012, then June 30, 2012 will be used as the maturity date for purposes of determining the fee.

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TLGP and the Election Form

TLGP and the Election Form

December 3, 2008

Authored by: Robert Klingler

While the FDIC’s Temporary Liquidity Guarantee Program (TLGP) remains an “opt-out” program, institutions must take affirmative action if they do not opt-out of the Debt Guarantee portion of the TLGP. Moreover, the FDIC’s Election Form Instructions state that all eligible entities must file the Election Form no later than 11:59 p.m., Eastern Standard Time, on December 5, 2008.

Failure to opt-out by 11:59 p.m., Eastern Standard Time, on December 5, 2008 constitutes an irrevocable decision to remain in both components of the TLGP, as described in the following paragraph.  However, it is unclear whether institutions will be able to actually participate in the Debt Guarantee portion of the TLGP unless they have affirmatively opted-in.

About the TLGP

On October 14, 2008, the FDIC announced the TLGP to strengthen confidence and encourage liquidity in the banking system.  The TLGP consists of two components: a temporary guarantee of newly-issued senior unsecured debt (the “Debt Guarantee”) and a temporary unlimited guarantee of funds in noninterest-bearing transaction accounts at FDIC-insured institutions (the “Transaction Account Guarantee”).  The FDIC has provided a TLGP website and Frequently Asked Questions.  In addition, all posts on BankPogo.com regarding the TLGP can be accessed here.

The TLGP Election Form

The TLGP Election Form must be submitted for all eligible entities using FDICconnect.  The FDIC has also provided PDF versions of a Sample Election Form and the Election Form Instructions, which should be reviewed before completing the Election Form on FDICconnect.

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TLGP Updated FAQ

TLGP Updated FAQ

December 3, 2008

Authored by: Robert Klingler

On December 2, 2008, the FDIC added several questions and answers to its TLGP FAQ.  We have highlighted some of these clarifications below.

  • Credit unions are not eligible to participate in any aspect of the TLGP.
  • Fed funds purchased can be covered under the Debt Guarantee Program, so long as the term of the debt exceeds 30 days.
  • CDs owed to an insured depository instutiton through the CDARS network are not considered senior unsecured debt, and therefore not eligible to be guaranteed.  Under the Debt Guarantee Program, certificates of deposit owed to an insured depository instituion are considered senior unsecured debt (and eligible for an FDIC guarantee) only if they are owed to the institution solely in that bank’s own capacity and not as an agent.
  • Negotiable (or transferable) CDs are excluded from the definition of senior unsecured debt for purposes of the Debt Guarantee Program.
  • The FDIC will calculate the 2 percent of liabilities debt guarantee limit using Call Report Schedule RC, Item 21 (total liabilities).
  • Interbank CDs will not be assessed under the Debt Guarantee Program to the extent the CDs are otherwise insured on the date the CD is issued.  Whether a CD is otherwise insured will be determined by first applying deposit insurance to all existing deposits owed to the holder of the CD in the same right and capacity.  Institutions will be required to provide the FDIC with a good faith estimate of the amount of interbank CDs that are uninsured.
  • The Fee for the Debt Guarantee Program is based on the amount and type of debt issued.  If a participating entity opts into the program, but never issues senior unsecured debt, no fee will be assessed.
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Treasury and the Federal Reserve Announce the Term Asset-Backed Securities Loan Facility

On November 25, 2008, Treasury and the Federal Reserve announced the creation of the Term Asset-Backed Securities Loan Facility (“TALF”).  The intent of TALF is to assist the credit markets in meeting the needs of consumers and small businesses by facilitating the issuance of, and improving the market for, asset-backed securities (“ABS”).  To fulfill this intent, the Federal Reserve Bank of New York (“FRBNY”) will provide up to $200 billion for non-recourse loans that are fully secured by eligible ABS.  Treasury will use funds from TARP to provide $20 billion in credit protection to the FRBNY.

Collateral eligible for a TALF loan includes dollar-denominated, ABS that not only must receive the highest possible long-term investment rating from at least two nationally recognized ratings agencies but also cannot be rated by any rating agency below the highest possible long-term rating.  Newly or recently originated auto loans, student loans, credit card loans, or small business loans guaranteed by the U.S. Small Business Administration must comprise all or substantially all of the credit exposure underlying the ABS. The underlying credit exposure cannot include exposures that are themselves cash or synthetic ABS.

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