On March 30, 2009, the Treasury announced the completion of the twentieth round of TARP Capital infusions. The Treasury purchased a total of approximately $193 million in securities from 14 financial institutions on Friday, March 27, 2009, and has now invested in 533 institutions, totaling approximately $198.8 billion.
Of note in this twentieth round, one more state joined the group of states with an institution receiving TARP Capital — New Mexico, with Trinity Capital Corporation (Los Alamos) receiving a $36 million infusion. This leaves only Montana and Vermont without an institution to have received TARP Capital.
In this round, the largest infusion went to Alpine Banks of Colorado, Glenwood Springs, Colorado: $70 million. The smallest infusion went to Colonial American Bank, West Conshohocken, Pennsylvania: $574,000.
This round showed a slight uptick in the number of institutions to receive funding: from 10 in the previous round to 14 in this round. Nonetheless, the 14 infusions is the third fewest behind 7 in the eighth round and 10 in the nineteenth round. According to a recent GAO report, Treasury is considering approximately 1,190 applications from Qualified Financial Institutions, and the federal banking regulators were still reviewing approximately 750 applications that have yet to be either denied or forwarded to Treasury for final approval. This report further indicated that approximately 250 institutions that had received preliminary approval had decided to withdraw their applications.
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Click here to view our updated list of TARP Capital recipients and a description of our methodology in compiling the list.
On March 23, 2009, the U.S. Treasury Department (“Treasury”) announced the details of the Public-Private Investment Program (“PPIP”). The program is designed to purchase mortgage backed securities and certain troubled loans from U.S. banks. PPIP is part of the broader “Financial Stability Plan” introduced by President Obama. The goal of PPIP is to cleanse the balance sheets of U.S. banks of troubled assets as part of the Troubled Asset Relief Program (“TARP”) and to create access to liquidity for banks and other financial institutions in order to cause the extension of new credit. PPIP is broken up into two key components – the Legacy Loans Program and the Legacy Securities Program.
Legacy Loans Program
The Legacy Loans Program will be launched by Treasury and the Federal Deposit Insurance Corporation (“FDIC”). The intent of this joint program is to combine (i) private capital, (ii) equity co-investment from Treasury and (iii) FDIC debt guarantees in order to assist market priced sales of distressed assets and improve the private demand for distressed assets. The FDIC will supervise the formation, funding and operation of a series of Public-Private Investment Funds (“PPIFs”) which will purchase assets from U.S. banks. Each PPIF will be comprised of a joint venture between private investors and the Treasury. Treasury will manage its investment in the PPIF to ensure that the interest of the public is protected and preserved. However, private investors will retain control of the asset management subject to “rigorous supervision” of the FDIC.
Private investors in the Legacy Loans Program are expected to include but are not limited to financial institutions, individuals, insurance companies, mutual funds, publicly managed investment funds, pension funds, foreign investors with a headquarters in the United States, private equity funds, hedge funds and other long-term real estate investors. U.S. banks of all sizes will be eligible to participate in the program. U.S. banks participating in the program will consult with the FDIC, banking regulators and Treasury to identify assets that they propose to sell. Eligible assets are required to be predominately situated in the United States. The FDIC will hire third party valuation consultants to analyze the assets and determine the level of debt that the FDIC will be willing to guarantee on such properties. The debt guaranteed by the FDIC will not exceed a 6 to 1 debt-to-equity ratio. The FDIC will receive an annual fee for providing the guaranty and such guaranty will be collateralized by the pool of assets purchased.
Treasury is requesting that all TARP Capital Purchase Program participants submit monthly data regarding lending activity. This report is designed to supplement the monthly reports being filed by the largest CPP recipients as well as more detailed analysis to be completed based upon filed Call Reports.
The new CPP Lending Report calls for only three data points: (1) average consumer loans outstanding; (2) average commercial loans outstanding; and (3) total loans outstanding (which should be the sum of the first two data points). Treasury recognizes that the internal reporting capabilities of each institution may vary, and permits institutions to briefly describe how they are reporting each matter. The goal is to maintain the same methodology across time in order to maintain meaningful trend analysis, even if that methodology is different from others.
Reports are due within 30 days of the end of each month, with the first report (for February and March averages) due by April 30, 2009. The Treasury will use the reports only for assessing the effectiveness of the Capital Purcase Program, but the data will be made available, on both an aggregate and institutional level, to the public.
On March 31, 2009, the Government Accountability Office released its March 2009 report on TARP, as well as an accompanying statement. Highlights of the report include almost 2,000 applications still being processes for the TARP Capital Purchase Program, another breakdown of how Treasury is spending the TARP funds (including an apparent 45% reduction in TALF), and a little more guidance on the applicable executive compensation limits.
TARP Capital Recipients and Applications
As of March 27, 2009, 272 publicly held institutions, 248 privately held institutions and 12 community development financial institutions had received TARP Capital Purchase Program funding. Treasury was still in the process of reviewing approval recommendations for 1,190 qualified financial institutions, and more than 750 applicants were still being viewed by the federal bank regulators. More than 250 financial institutions have withdrawn applications, and no applications have been formally denied by Treasury.
The FDIC’s Office of Inspector General report on the Controls Over the FDIC’s Processing of Capital Purchase Program Applications provides some clarity on the number of applications the FDIC has in process, the FDIC’s process for reviewing applications, and the characteristics of TARP Capital Purchase Program funds. While the report was released in late March, the data is generally as of January 15, 2009, and thus may already be significantly out of date for forecasting future results.
Applications Received by the FDIC
As of January 15, 2009, the FDIC had received 1,615 total applications and had recommended 408 applications (or about 25% of the applications it had received) to Treasury for approval, of which 267 had been approved by Treasury. In accordance with Treasury instructions, the report found that the FDIC processed publicly traded applicants first, followed by privately held institutions. However, the report also shows that some private applications (and even two Subchapter S organizations) were forwarded to Treasury while some public applications appeared to remain pending.