We’ve received some inquiries regarding the circumstances under which a bank with no or limited senior unsecured debt outstanding at September 30, 2008 might be eligible to issue guaranteed senior unsecured debt under the FDIC’s Temporary Liquidity Guarantee program through June 30, 2009.  Based on the FDIC’s interim rule relating to the program and informal discussions with FDIC representatives, we believe that this will be possible, but that prior FDIC approval will be necessary in order for the guarantee to apply.

At this time, there is no application form or specific procedural guidance, but we have been told that you should contact your primary FDIC regulatory contact to request coverage if you plan to issue senior unsecured debt, would like for it to be guaranteed, but did not have any outstanding at September 30, 2008 or did not have sufficient debt outstanding to guarantee the full amount of the new proposed issuance.  The FDIC will review each request individually and may want you to show how guaranteeing your new debt will be consistent with the FDIC’s public policy of supporting the strength and liquidity of the banking system through next June.

We believe this guidance applies both to banks with a temporary zero balance at September 30, 2008 (i.e., those with a Fed Funds purchased position that day but with sold positions on other days) and to those with a zero balance that they have sustained for a long period of time.  We’ll publish more specific guidance as it becomes available.