Thursday, December 23, 2010
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On December 21, 2010, the U.S. Treasury published the application form, term sheet and other guidance for participation in the $30 billion Small Business Lending Fund (SBLF) that was authorized under the Small Business Jobs Act earlier this year.   As a result, banks considering participation in the program have a variety of new resources available to them via Treasury’s website for the SBLF.   These resources include:

A summary of the SBLF’s principal provisions follows, but is not exhaustive.  Please see the documents listed above and Treasury’s SBLF website for more detailed information about the program and application process.


Asset size: Total assets of less than $10 billion as of the end of the fourth quarter of 2009.  Holding company assets are measured on a consolidated basis.

Type of Institution: Current terms and guidance apply to insured depository institutions and their holding companies.  Treasury is developing separate provisions for mutuals, S corporations and community development loan funds, which will have their own terms and application time frames.


Friday, December 17, 2010
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Congress Passes Tax Package

On Monday, the Senate passed the $858 billion tax package sending the bill back to the House where it passed late Thursday night. The bill now heads to President Obama’s desk for his signature into law. While the package does not include a repeal of the Form 1099 health care requirement or extension of the Buy American Bond program, the bill does the following major items:

  • extends through 2012 the current individual income tax brackets, capital gains and dividends rates for all taxpayers;
  • increases the AMT exemption amounts for 2010 to $47,450 (individuals) and $72,450 (married filing jointly) and for 2011 to $48,450 (individuals) and $74,450 (married filing jointly);
  • extends through 2011 the ability to take an itemized deduction for state and local general sales taxes in lieu of the itemized deduction permitted for state and local income taxes;
  • exempts from taxation the first $10 million of a couple’s estate and the first $5 million of an individual’s estate, with the remaining portion taxed at the 35 percent rate;
  • extends and temporarily increases the bonus depreciation provision for investments in new business equipment;
  • reduces the payroll/self-employment tax during 2011 to 4.2 percent on wage-earners and to 10.4 percent on self-employment income up to the threshold;
  • reinstates through 2011 the research and development credit;
  • extends the 100 percent exclusion of the gain from the sale of qualifying small business stock that is acquired before January 1, 2012 and held for more than five years;
  • extends through 2011 the special 15-year cost recovery period for certain leasehold improvements, restaurant buildings and improvements, and retail improvements;
  • extends through 2011 the $0.50 per gallon alternative fuel credit and credit for energy-efficient improvements to existing homes.

Fed Proposes New Interchange Fees

On Thursday, the Federal Reserve announced a set of new debit-card fee restrictions more aggressive than most industry experts expected. The new restrictions, most of which will not be made final until April 21, are designed to restrict the fees that debit-card issuers can charge merchants. Banks would face a seven-to-12-cent-per-transaction cap on the interchange fees under either of the two proposals unveiled Thursday. Under the first plan, card-issuing banks could use a formula to determine the maximum amount of the interchange fee that it would collect, based on certain processing costs and would set a “safe harbor” standard at seven cents per transaction. The second alternative would set the cap at 12 cents without any safe harbor. Under the Fed’s proposal, the Fed Board would re-evaluate the cap every two years.


Friday, December 10, 2010
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Senate to Vote on Tax Package Monday; House Passage Remains Uncertain

On Thursday, the Senate unveiled final details of its $858 Billion 10-year tax bill and will vote on the procedural motion to pass the bill Monday.  However, it is unclear whether the House can pass the bill in its current form.  Below is a summary of the provisions.  Click here for a copy of the entire bill.

Fannie and Freddie in Negotiations on Write Downs

Reports this week indicate that Fannie Mae and Freddie Mac are in negotiations with the Federal Housing Finance Agency (FHFA) on a plan to write down so-called “underwater loans” on their balance sheets. The Obama administration wants the firms to join a program run by the Federal Housing Administration that allows banks and other creditors, which agree to write down mortgages, to essentially hand off the reduced loans to the FHA. Unlike most loan-modification efforts, the FHA program is open only to borrowers who aren’t behind on their payments. Starting in October, banks were able to receive additional subsidies if they first write down loan balances for borrowers owing at least 15% more than their home’s current value.

House Financial Services Committee Announces New Members

On Thursday, the House Financial Services Committee announced the following leadership for the 112th Congress:

Rep. Spencer Bachus, Chairman

Rep. Jeb Hensarling, Vice Chairman, Financial Services Committee

Rep. Judy Biggert, Chairman, Insurance, Housing and Community Opportunity
Jurisdiction: Insurance generally, housing, urban development, and the Department of Housing and Urban Development.

Rep. Shelley Moore Capito, Chairwoman, Financial Institutions Subcommittee and Consumer Credit
Jurisdiction: Banks and banking, depository institutions, federal deposit insurance, and safety and soundness.

Rep. Scott Garrett, Chairman, Capital Markets and Government-Sponsored Enterprises Subcommittee
Jurisdiction: Capital markets, securities, and government sponsored enterprises.

Rep. Ron Paul, Chairman, Domestic Monetary Policy Subcommittee
Jurisdiction: Domestic monetary policy, currency, precious metals, valuation of the dollar, economic stabilization, defense production, commodity prices, financial aid to commerce and industry.

Rep. Gary Miller, Chairman, International Monetary Policy Subcommittee
Jurisdiction: International monetary policy, international finance and banking, international financial and monetary organizations, including the IMF and World Bank, and the promotion of international trade in financial services.

Rep. Randy Neugebauer, Chairman, Oversight and Investigations Subcommittee
Jurisdiction: Oversight of all matters within the jurisdiction of the full Committee.

While not yet formally announced, the expected new members on the committee are:

Rep. Blaine Luetkemeyer (R-MO), Rep. Lynn Westmoreland (R-GA), Nan Hayworth (R-NY), Rep. Michael Grimm (R-NY), Rep. Robert Hurt (R-VA), Rep. Steve Stivers (R-OH), Rep. Bob Dold (R-TX), Rep. Bill Huezienga (R-MI), Rep. Michael Fitzpatrick (R-PA), Rep. Steve Pearce (R-NM), Rep. Quico Canseco (R-TX), Rep. Sean Duffy (R-WI), Rep. Randy Hultgren (R-IL)

Friday, December 3, 2010
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With attorneys and staff worldwide, Bryan Cave often makes the news.  Recent media mentions  include Rob Klingler of the Financial Institutions group on NPR.

Atlanta Associate Robert Klingler was interviewed Nov. 23 on National Public Radio’s “All Things Considered” concerning the FDIC’s recently released list of problem banks. The number has gone up again – 860 institutions are on its official watch list. That’s the most since 1993. “We’ve had banks that survived the Great Depression but couldn’t make it through the Great Recession, and each one is a traumatic event,” Klingler said. Click here to read a full transcript of the interview.

Monday, November 29, 2010
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Irish Bailout Finalized Sunday

On Sunday, Ireland finalized plans for a bailout from the European Union (EU) and International Monetary Fund (IMF), after approval from EU finance ministers. European leaders hoped that such a measure would be a firewall against further bailouts in other Eurozone countries, but concern has grown over the past week that Portugal and Spain could also need such loans. The rescue package for Ireland is estimated to be worth tens of billions of dollars. Individual European nations have also announced their own loans to Ireland. Britain is putting together a $11.5 billion package and Sweden’s prime minister announced a $1.5 billion loan on Thursday. Irish Prime Minister Brian Cowen last week announced a four-year “austerity plan” designed to cut spending and increase taxes. The plan would save $13.4 billion through welfare cuts and raise $6.7 billion through higher taxes. The plan’s spending cuts include reductions in the minimum wage and public-sector pay and fee increases in the VAT, utilities, education tuition, and income taxes.

Car Czar Announces Reduction in Government Oversight of GM

On Friday, the Obama administration’s “Car Czar” Ron Bloom said the government will reduce its oversight of General Motors (GM) as the government sells more of its GM stock. Since GM emerged from bankruptcy sixteen months ago, it has provided the Treasury with “regular, detailed” briefings on its financial condition. Bloom and other Administration officials took an active role during the run-up to GM’s initial public stock offering Thursday, helping to determine how much stock to sell and what price the underwriters should pay. Bloom and others will also attend GM’s first annual meeting as a public company and will vote the government’s shares on key issues. Bloom denied that the government exerted any pressure and pushed for an early IPO. However, Bloom noted that the size of the deal, the pricing and the fees to be paid to underwriters were in the government’s purview. The government ultimately sold more shares than it previously had planned — 358 million of its 912 million shares — at $33 a share. The government will need to sell its remaining shares at an average price of $52.80 to break even.

Geithner Opposes Reduction in Fed Mandate and Extension of Bush Tax Cuts

November’s election results have empowered Congressional Republicans to assert new found authority, leading Republicans to increase their criticisms of the Federal Reserve’s plan, known as “quantitative easing,” to buy $600 billion in assets, saying it would fuel inflation and asset bubbles. Republicans have cited the Fed’s dual mandate to pursue full employment as well as to promote price stability as the cause of the problem. On Tuesday, in reaction to Republican attacks, U.S. Treasury Secretary Timothy Geithner said the Obama administration would oppose any effort to strip the Federal Reserve of its mandate to pursue full employment, saying such attacks by Republicans would politicize the central bank. While Geithner also declined to say what compromise the Obama administration would be willing to make on extending the Bush income tax cuts, he did say he opposed making permanent the tax reductions for those making more than $250,000.

Monday, November 22, 2010
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With attorneys and staff worldwide, Bryan Cave often makes the news.  Recent media mentions of attorneys in the Financial Institutions group include:

Blanchard in Atlanta Business Chronicle

Atlanta Partner Jerry Blanchard was quoted Nov. 4 in the Atlanta Business Chronicle in connection with a resurgence of energy from Georgia banks. The state has suffered numerous bank failures, and even those that did not go under have in large part been hibernating during the recession. But now they are starting to look for capital again, he said. “To the extent that everybody has been looking for light at the end of the tunnel, this is a little light,” Blanchard said.

Klingler in Banker & Tradesman.

Atlanta Associate Robert Klingler was quoted extensively Oct. 18 in Banker & Tradesman on the good and bad that small banks have seen since accepting TARP funds. Banker & Tradesman is a banking trade publication out of Massachusetts.

Moeling in American Banker

Atlanta Partner Walt Moeling was quoted Nov. 4 by American Banker concerning an announcement by our client Brand Group Holdings Inc. that it will raise up to $200 million through affiliates of Carlyle Group, Stephens Group LLC and Nonami LLC, owned by the Cousins family in Atlanta. Analysts say the deal is the first time in years that private equity has made a big traditional investment in Georgia, rather than using shelf charters or failed banks. “We haven’t had a significant infusion of capital in any Atlanta-based community bank in three years, essentially,” Moeling said. “The banks that are still standing may be battered and bruised but, by God, they’re still standing and the biggest hits have been taken.” Click here to read the article, republished by Bank Investment Consultant. He also was quoted Oct. 27 by American Banker on Ameris Bank, one of the few homegrown banks in Georgia to have bid successfully on multiple failed banks. Ameris just made its fourth failed-bank purchase in the past year – notable given that Ameris has had eight consecutive quarters of net losses largely owing to credit deterioration in real estate-related loans. Analysts say the bank has become a serial acquirer by proving it can handle these takeovers in its recession-battered market.

Monday, November 22, 2010
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Debate Over Extension of Bush Tax Cuts Continues

On Thursday, House Majority Leader Steny Hoyer (D-MD) and House Speaker Nancy Pelosi (D-CA) told House Democrats at a closed door meeting that the House would vote before the end of the year on extending the Bush tax cuts for only those individuals making less than $250,000. However, even if such a measure were to pass in the House, it is unclear whether the Senate will agree to such a vote. There is still the possibility the bill may not pass the House if Republicans are able to successfully pass a procedural response, known as a “motion to recommit,” that could force a House vote on a full extension of the Bush tax cuts.  According to sources, Pelosi told President Barack Obama that House Democrats remain firmly committed to allowing Bush-era tax cuts to expire for earners making more than $250,000, which complicates the Administration’s efforts to reach a compromise with Senate Republicans.

Preview of Next Year’s Budget Fight

On Thursday, Senate Minority Leader Mitch McConnell (R-KY) announced he would oppose the pending omnibus appropriations bill, thereby forcing Congress to rely on another stopgap “continuing resolution,” or CR, to keep the government funded after December 3. If Republicans are able to block the omnibus spending bill, it would set up an early confrontation with President Obama next year over not just deeper cuts from the President’s 2011 budget but also tens of billions of dollars in rescissions from prior years. The White House is seeking a continuing funding resolution which would cover the next 10 months of the fiscal year until September 30, which would deny House Republicans a chance to defund portions of the healthcare bill early next year.

Fed Orders New Stress Tests

On Wednesday, the Federal Reserve announced plans to scrutinize the nation’s top 19 banks through a second round of “stress tests.” The stress tests will require the bank-holding companies to submit capital plans by early 2011 proving their capability to handle losses under a set of conditions including “adverse” economic conditions and continuing real estate-related problems. In its announcement, the Fed said it plans to perform such reviews regularly on an ongoing basis. The Fed also issued a road map for banks that want to raise dividends or buy back stock saying firms must show they have sufficient capital in place to withstand losses over the next two years and demonstrate an ability to satisfy new, tougher global capital requirements.

Sunday, November 14, 2010
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As we have previously discussed, FDIC determinations that a bank is operating in a “high rate area” remains effective only for the calendar year in which it was granted.  All banks that received a high-rate determination in 2010 are required to submit a new request to the FDIC in order to continue their ability to use the local market average calculation method for determining their rate cap in 2011.

The FDIC has informed us that these requests will not be processes prior to year-end, but that banks that submit a request will be entitled to continue to use the local market average calculation method until notified in writing otherwise by the FDIC.

The FDIC has also confirmed that all of the states within the Atlanta region continued to be considered high-rate areas for the fourth quarter of 2010.  This determination, which is separate from a specific determination that any specific bank operates in a high rate area, has been made at the beginning of each quarter since the effectiveness of the national rate cap rule.  Any bank operating in a state that is considered a high-rate area will receive an affirmative high-rate determination letter if requested by the bank.  Without a state-wide determination, the FDIC will look to the specific markets served by the bank to determine whether a high rate area determination is appropriate.

Friday, November 12, 2010
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Obama Trade Mission to Asia

On Friday, President Obama landed in Japan, the last leg of his 10-day, four-nation trade mission which included previous stops in India, Indonesia, and South Korea. The most recent stop in Seoul was marred by negotiators’ failure to finish a long-delayed U.S.-South Korea free trade agreement and squabbling at a G-20 summit over U.S. monetary policy. In Japan, Obama will attend an Asia-Pacific economic summit in Yokohama, which will set the stage for the next APEC summit scheduled for 2011 in Hawaii. He will also meet with Japan’s new prime minister, Naoto Kan, to discuss Japan’s potential membership in the U.S.-backed Transpacific Partnership free-trade initiative. However, Kan faces opposition from Japan’s politically powerful farm groups who oppose Japan’s membership in the trade measure.

Axelrod on Taxes and Healthcare

On Wednesday, White House Senior Advisor David Axelrod acknowledged during an interview that President Obama might agree to extend the Bush tax cuts for all income brackets. In the interview with the Huffington Post, Axelrod said ” we have to deal with the world as we find it. The world of what it takes to get this done. There are concerns that Congress will continue to kick the can down the road in the future by passing temporary extensions for the wealthy time and time again. But I don’t want to trade away security for the middle class in order to make that point.” Axelrod also said that President Obama would veto repeal of the recently passed health care reform law, which was the first time that a top Administration figure had issued such a threat on the record.

Deficit Commission Releases Preliminary Report

On Wednesday, Deficit Commission co-chairs former Clinton White House Chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-WY) unveiled their preliminary report that would cut $200 billion in spending by 2015, raise taxes by $100 billion, and continue deficit cutting until 2020. However, Bowles and Simpson did not bring the report to a vote of the 16 other members of the commission because they acknowledged its passage was unlikely. The 18-member commission appointed by President Barack Obama earlier this year was supposed to produce a 14-vote majority around a deficit reduction plan – a margin that would have required Congress to vote on the package unchanged. But the commission was dominated by current Members of Congress who staked out inflexible partisan positions. The seven Republicans office-holders, including Sen. Judd Gregg of New Hampshire and Rep. Jeb Hensarling of Texas said they would not support a plan that raises taxes. The Democratic lawmakers on the commission, including Sen. Dick Durbin, D-Ill., said they would not agree to Social Security adjustments or Medicaid benefit cuts.


Thursday, November 11, 2010
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A recent Ninth Circuit Court of Appeals decision provides several clear messages regarding the dangers of poorly thought out involuntary bankruptcy petitions. In In re Southern California Sunbelt Developers, Inc., 608 F.3d 456 (9th Cir. 2010), the two debtors placed into involuntary bankruptcies won an attorney fee award of $745,000 and a punitive damages award of $130,000 against all 13 petitioning creditors.

Section 303(b) of the Bankruptcy Code provides the general rule that an involuntary chapter 7 or 11 case may be commenced “by three or more entities, each of which is either a holder of a claim . . . that is not contingent as to liability or the subject of a bona fide dispute as to liability or amount, or an indenture trustee representing such a holder, if such noncontingent, undisputed claims aggregate at least $13,475 . . .” more than the value of the underlying collateral (if any). (There are different rules for entities with less than 12 creditors and partnership debtors. See 11 U.S.C. § 303(b)(2), (3).)

In Southern California Sunbelt, the circumstances were somewhat unusual. Two individuals controlled all 13 petitioning creditors. The debtors proved the 13 petitioning creditors had debts which were the subject of a bona fide dispute. Their counsel then litigated whether or not the involuntary filings were “bad faith filings” which would open up the petitioning creditors to an award for actual or punitive damages.