One of the central themes of the SIGTARP report is that TARP will continue to exist for years.  In addition to programs designed to support the housing market and certain securities markets that are scheduled to last until as late as 2017, 371 banks remain in the TARP Capital Purchase Program.  While I disagree with some of SIGTARP’s conclusions and framework for the issues, I agree that a clear and workable exit plan for community banks is crucial to financial stability.”  SIGTARP has recommended that Treasury develop a clear TARP exit path for community banks, especially in light of a steep rise in the TARP dividend rate from 5% to 9% starting as soon as late 2013.  “Treasury must develop a workable plan in consultation with the regulators and begin executing that plan to remove uncertainty related to these banks.”

Despite its negative public perception, the overall Capital Purchase Program is universally thought to have earned a positive return for the government.  While estimates for the total TARP program continue to show a significant cost, these costs are primarily tied to the housing support programs (which were never intended to be profitable) and relief provided to AIG and the automotive industry.  Estimates on the CPP program, on the other hand, range from a gain of between $7 billion and $17 billion.  Specifically, the Office of Management and Budget estimated on November 18, 2011 (using data as June 30, 2011) that the CPP would result in a $7 billion gain; the Congressional Budget Office estimated on December 16, 2011 (using data as of November 15, 2011) that the CPP would result in a $17 billion gain; and the Treasury estimated on November 10, 2011 (using data as of September 30, 2011) that the CPP would result in a $13 billion gain.  While Treasury may incur losses on some of the remaining investments, the program as a whole (even without considering how bad the economy may have performed in the event the Treasury had not invested in banks under the CPP), will be profitable.  Investing is a risk/reward analysis, and any investment strategy, especially when considering investments in over 700 financial institutions, should be viewed at the portfolio level.  To that extent, TARP generally, and the CPP specifically, should be viewed as a success.

Under the CPP, Treasury invested a total of $204.9 billion of TARP funds in 707 financial institutions.  Through December 31, 2011, 279 banks – including the 10 largest recipients of funds and 137 that exited TARP by refinancing the investment under the Small Business Lending Fund (SBLF) program – had fully repaid CPP or the Treasury had sold the institution’s stock.  In addition, 28 banks converted their CPP investments into CDCI investments and 13 banks have partially repaid.  On the other hand, 12 CPP investments have been sold for less than their par value and 14 are in various stages of bankruptcy or receivership.

As of December 31, 2011, $185.5 billion of the principal (or 90.5%) had been repaid, leaving approximately $19.5 billion outstanding.  Of the repaid amount, $355.6 million was converted into CDCI investments (which is part of TARP), and $2.2 billion was converted into SBLF investments (which is not part of TARP).  In addition, Treasury has received approximately $11.4 billion in interest and dividends and $7.7 billion from the sale of common stock warrants that were obtained in connection with the CPP financings.

The SIGTARP report notes that smaller and medium-sized banks are not existing TARP with the same speed as the larger banks.  Many are not able to pay their dividends and some are operating under an order from their regulator.  Compared with larger banks, the SIGTARP report notes that “community banks may face an uphill battle to exit TARP.”  Community banks do not have the same access to capital as the larger banks and can be more exposed to distressed commercial real estate-related assets and non-performing loans.

SIGTARP reports that “despite the dramatic efforts to expedite the exit of the largest banks from TARP, there appears to be no corresponding concrete plan for community banks’ exit from TARP…” Treasury has acted on a case by base basis to sell its TARP investments (sometimes at a discount) or exchanged for stock with lower priority in connection with a merger, acquisition or sale to a third party that invested new capital, but these actions have remained the exception rather than the rule.  Accordingly, SIGTARP reiterated its prior recommendations:

1. Treasury, in consultation with Federal banking regulators, should develop a clear TARP exit path to ensure that as many community banks as possible repay the TARP investment and prepare to deal with the banks that cannot. Treasury should develop criteria pertaining to restructurings, exchanges, and sales of its TARP investments (including any discount of the TARP investment,
   the treatment of unpaid TARP dividend and interest payments, and warrants).
2. Treasury should assess whether it should renegotiate the terms of its Capital Purchase Program contracts for those community banks that will not be able to exit TARP prior to the dividend rate increase in order to help preserve the value of taxpayers’ investments.

The SIGTARP report acknowledged that Treasury has engaged Houlihan Lokey to provide capital markets disposition services for its remaining CPP investments.  Houlihan is earning a flat fee of $375 thousand a month to provide a variety of services to Treasury, including:

• Analyzing, reviewing and documenting financial, business, regulatory, and market information related to potential transactions of CPP investments;
• Advising and monitoring restructuring strategies prior to the disposition of CPP investments;
• Reporting on the potential performance of certain CPP investments and their disposition given a range of market scenarios and transaction structures;
• Analyzing and proposing disposition alternatives and structures, including the use of additional underwriters, brokers, or other capital markets advisors for the best means and structure to dispose of such assets; and
• Maintaining a compliance program designed to detect and prevent violations of Federal securities laws, and identifying documenting and enforcing controls to mitigate conflicts of interest.

The SIGTARP report notes that Treasury’s next steps in developing clear TARP exit paths for the smaller banks are critical, and encourages Treasury to proactively reach out to participant banks rather than waiting for banks to propose exchanges.  While Treasury does not want to devise standard discounts or terms for small banks to exit CPP, saying “each bank’s situation is unique,” SIGTARP reiterates its recommendations that the issues should be addressed solely on a case-by-case basis.

Given the economics at stake, designing multiple exit strategies that facilitate the conclusion of the CPP may be in everyone’s interest.  In its most simple terms, Treasury invested a total of $204.9 billion in cash, received cash proceeds of $204.6 billion, and still has $19.5 billion in principal amount of securities outstanding. Using the estimated gains of between $7 billion and $17 billion for the program, Treasury expects to receive between 36% and 88% of the remaining outstanding CPP funds (without giving any consideration to remaining warrants or dividends and interest).

Related posts:

1. Six Months of TARP Capital Purchase Program Investments
2. Estimating the TARP Capital Purchase Program Value
3. Extension of TARP Capital Purchase Program for Community Banks

Chairman Bair explained, “Banks have been able to raise capital without having to sell bad assets through the Legacy Loans Program, which reflects renewed investor confidence in our banking system. As a consequence, banks and their supervisors will take additional time to assess the magnitude and timing of troubled assets sales as part of our larger efforts to strengthen the banking sector.”

As a next step, the FDIC will test the funding mechanism contemplated by the Legacy Loans Program in a sale of receivership assets this summer.  This funding mechanism draws upon concepts successfully employed by the Resolution Trust Corporation in the 1990s, which routinely assisted in the financing of asset sales through responsible use of leverage. The FDIC expects to solicit bids for this sale of receivership assets in July.

Related posts:

1. FDIC Conference Call on Legacy Loans Program
2. Summary of Public-Private Investment Program
3. Treasury Announces Asset Guarantee Program

• extended the $250,000 deposit insurance limit through December 31, 2013;
• extended the length of time the FDIC has to restore the Deposit Insurance Fund from five to eight years;
• increased the FDIC’s borrowing authority with the Treasury Department from $30 billion to $100 billion;
• increased the SIGTARP’s authority vis-a-vis public-private investment funds under PPIP (including the implementation of conflict of interest requirements, quarterly reporting obligations, coordination with the TALF program); and
• removed the requirement, implemented by the American Recovery and Reinvestment Act of 2009, for the Treasury to liquidate warrants of companies that redeemed TARP Capital Purchase Program preferred investments.  The Treasury is now permitted to liquidate such warrants at current market values, but is not required to do so.

This extension does not affect the Transaction Account Guarantee provided by the FDIC’s Temporary Liquidity Guarantee.  The Transaction  Account Guarantee, which provides an unlimited guarantee of funds held in noninterest bearing transaction accounts, is still scheduled to expire on December 31, 2009.

The FDIC has not revised the official FDIC Insurance sign, which still speaks of insurance limits of up to $100,000.  However, if a financial institution has previously posted a notice of the increase to $250,000 through December 31, 2009, it should update that notice.  As stated by the FDIC, a financial institution may post the following statement next to the official FDIC sign:

The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.

Related posts:

1. Interest Rate and Brokered Deposit Restrictions
2. Revised Call Report for Transaction Account Guarantee
3. TLGP Opt-Out Lists

While the city’s residential real estate lot inventory woes are well known to the investment community, we believe the extent of inventory in CRE property types like office and retail centers is not fully appreciated.  We took some photos of residential and CRE properties around Atlanta, which is admittedly a small sample.  Based on our observations and the statistics, we believe there are significant and growing vacancies around the city, particularly in the outer suburban areas like Alpharetta and Cumming (North of Atlanta).  We witnessed particularly high vacancy rates in numerous outer suburb strip and neighborhood retail centers.  Atlanta’s retail vacancy rate was 9.9% at the end of 1Q09, compared to the national average rate of 7.2% and Atlanta’s 4Q08 level of 9.0%.  This is the sixth highest level of retail vacancy among the 63 major U.S. retail markets.  Moreover, Atlanta led all major U.S. markets in aggregate retail space delivered during 1Q09, with 1.7 million square feet hitting the market.

Related posts:

1. Does the Treasury need to Mark-to-Market?
2. Stimulus for Small Businesses — Unlocking the Credit Market

Investors wishing to participate in the Legacy Loans Program should complete the preliminary application.  The Legacy Loans Program Summary, Fact Sheet, and FAQ are also available.

At the outset, the FDIC repeatedly advised that this call was for information and discussion purposes only and specifically “not for attribution” to the FDIC.

The FDIC Chairman, Sheila Bair, presented very brief opening remarks, and gave certain background information.   She reminded callers that on March 23, 2009, Mr. Geitner announced the Legacy Loans Program, to be administered by the FDIC.   The FDIC’s Proposed Term Sheet regarding the Legacy Loans Program is currently on the FDIC’s website, where the FDIC is currently still seeking comment and input, until tomorrow, April 10, 2009.  The Term Sheet provides the FDIC’s 17 initial questions.   Ms. Bair confirmed that the Legacy Loans Program is intended for all banks, large and small and that today’s call focuses on the investor perspective.

John Bovenzi, the FDIC’s Chief Operating Officer, then made brief remarks before opening the call to questions.  He confirmed that all FDIC insured institutions of all sizes can participate as sellers.  The FDIC will be hiring, registering, and opening up bids for contractors to help administer the program, including specifically valuation experts.  What was most clear from the call is that virtually all aspects of the sales process continue to be worked on, including material terms such as eligibility of assets, the FDIC fee for its guarantee, and the terms of the loan documents.

Selected questions and answers follow:

• Timing:  “As promptly as we can.”
• Guarantee Fee:  Will be based on the underlying portfolio, rather than on the skill set of the investor group.  The fee is being structured, and is expected, to cover all FDIC costs, included any potential losses.
• Exit strategy:  Deal documents will set forth the requirements for the management and disposition of assets, which will vary by asset pool, whether commercial, residential, raw land, development, or otherwise.
• OREO:  The FDIC has not yet determined whether OREO will be included as eligible assets.  The eligibility of mezzanine loans secured by equity, with a real estate component, also has not been determined, nor have other asset categories.
• Write-down:   Banks still need to write-down losses on each loan.  One question proposed a longer term during which the bank can write-down loan losses.
• Guaranteed debt:  The terms of the FDIC guaranteed debt, including whether public or private, are still undetermined.

Many questions were actually comments, which, as stated above, are due April 10, 2009. Much more information will certainly follow.

Related posts:

1. Summary of Public-Private Investment Program
2. FDIC Updates FAQ on Temporary Liquidity Guarantee Program
3. Revised Call Report for Transaction Account Guarantee

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.

Private investors that are pre-qualified with the FDIC will bid for the assets in an auction conducted by the FDIC.  Each bidder will be required to post a deposit equal to 5% of its bid value which will be refunded if such bid is not accepted.  In an effort to maintain fairness, private investors will be prohibited from cooperating with one another once the auction process is commenced.  The equity contribution together with the amount of debt previously agreed to be guaranteed by the FDIC will comprise the purchase price of the assets.  The U.S. bank selling such assets will then be permitted to decide whether or not to accept the offer price.

If the bid is accepted by the bank selling the assets, the private investors that won the bid will contribute 50% of the equity to the PPIF, and Treasury will contribute the remaining 50%.  However, private investors may be permitted to accept a smaller equity contribution from Treasury subject to a minimum equity contribution yet to be determined.  In accordance with the Emergency Economic Stabilization Act of 2008 (the “EESA”), Treasury will also receive warrants in the PPIF for its equity contributions.  The terms of such warrants have yet to be disclosed by Treasury.  The debt issued by a PPIF in connection with the purchase of a pool of assets is expected to be initially placed at the bank that sold such pool of assets.  The selling bank will be able to resell the debt into the market.  It is contemplated that the credit-enhancement of the FDIC guaranty will make the debt more attractive to potential buyers in the market.

The executive compensation restrictions that currently apply to TARP will not apply to a “passive private investor” in this program.  At this stage it is unclear whether or not the entities that manage the PPIF will be impacted by the executive compensation restrictions.  The exact structure of the Legacy Loans Program will be subject to the standard comment and rulemaking procedures of the FDIC.  The FDIC is currently in the process of accepting public comments until April 10, 2009.

Legacy Securities Program

The Legacy Securities Program, which will be administered by Treasury, is designed to provide both equity and debt financing to make it possible to acquire legacy securities that will initially include residential and commercial mortgage backed securities.  The Legacy Securities Program consists of two components.  The first component involves the selection of approximately five (5) fund managers (each an “FM”) by Treasury with which Treasury will co-invest in PPIFs to acquire legacy securities.  The other component is the expansion of the Term Asset-Backed Securities Loan Facility (“TALF”) to provide non-recourse loans to investors to be utilized in the purchase of legacy security assets.

Legacy Securities PPIFs

The Legacy Securities PPIFs component of the program will provide each of the FMs a limited period of time to raise at least $500 million in private equity capital through a private investment vehicle.  Private investors will be prohibited from withdrawing any money invested in the private investment vehicle for three years after the private investment vehicle’s first investment in a legacy security.  ERISA plans will be permitted to invest in the private investment vehicles, but the amounts of such investments will be left to the FM to determine.  Once the FM raises at least $500 million, the FM would contribute the private equity capital raised by it to a PPIF.  Treasury would invest TARP funds in the newly created PPIF matching the funds raised by the FM dollar-for-dollar.  One major concern that FMs need to be aware of is that Treasury maintains the right, in its sole discretion, to refuse to fund any committed but undrawn Treasury equity capital and debt financing (described below) at any time.  In addition to Treasury’s equity interest in the PPIF, Treasury will receive warrants in accordance with the EESA for its investment in the PPIF.  The terms of such warrants have yet to be disclosed by Treasury.

Provided that the structure of the PPIF meets certain guidelines yet to be determined, the FMs will have the opportunity to apply for senior debt from Treasury in amount up to 50% of the PPIF’s total equity capital, but Treasury will consider requests for up to 100% of the PPIF’s equity capital subject to asset level leverage, redemption rights, disposition priorities and any other factors deemed relevant by Treasury.  Treasury intends this debt to have the same duration as the underlying fund and such debt shall be repaid on a pro-rata basis as proceeds are realized by the PPIF.  The loans described above will be structurally subordinated to any loans made by the New York Federal Reserve under TALF.

Treasury expects the PPIFs to initially target commercial mortgaged back securities and residential mortgaged backed securities that received an AAA rating or an equivalent rating by at least two nationally recognized ratings organizations which are secured directly by the actual mortgage loans, leases and other assets.  Nevertheless, each FM will control the asset selection, pricing, liquidation, trading and disposition of such assets.  The PPIFs will be prohibited from purchasing legacy securities from (i) affiliates of its FM,  (ii) 10%-or-larger private investors invested in the PPIF or (iii) any other FM or such FM’s affiliates.  FMs will be permitted to charge a fixed management fee to Treasury and private investors based on a percentage of equity capital invested by such party.  All fees and expenses paid by Treasury in connection with the PPIF will be paid out of the equity contributions made by Treasury to the PPIF.

Treasury plans to make its preliminary selections of FMs by May 1, 2009.  Fund managers interested in participating in the Legacy Securities Program have until April 10, 2009 to submit an application to Treasury.  Per Treasury, each candidate must (i) be able to raise at least $500 million of private equity capital, (ii) have experience and a track record investing in comparable assets, (iii) have $10 billion of comparable assets under management and (iv) demonstrate the capacity to manage the PPIF in accordance with guidelines established by Treasury.

TALF Expansion

The second component of the Legacy Securities Program deals with the expansion of TALF eligible assets to include certain non-agency commercial and residential mortgaged back securities that were originally AAA rated.  TALF is currently governed by the New York Federal Reserve.  Although the interest rates, minimum loan size and term of TALF loans for this program have not been established, Treasury has indicated that it is working with the New York Federal Reserve to modify the current structure of TALF loans so that TALF can accommodate this new class of eligible assets.  Borrowers will need to meet certain criteria in order to be eligible for TALF funds, but this criteria has yet to be established.  As stated earlier, all TALF loans will be structurally senior to any Treasury loans made under the Legacy Securities Program because of certain requirements of the New York Federal Reserve.  Many additional questions regarding the expansion of the TALF program will hopefully be addressed when program specifics are disseminated by the New York Federal Reserve and Treasury.

Conclusion

Treasury plans to initially invest an aggregate of $75 to $100 billion of TARP funds between both the Legacy Loans Program and the Legacy Securities Program.  This investment, together with the capital invested by private investors, will produce $500 billion in purchasing power with the ability to expand to $1 trillion over time to help improve the health of financial institutions and unlock the credit markets.

Resources:

• Public-Private Investment Program Fact Sheet, March 23, 2009
• Public-Private Investment Program Press Release, March 23, 2009
• Public-Private Investment Program White Paper, March 23, 2009
• Legacy Loans Program Term Sheet, March 23, 2009
• Legacy Loans Program Frequently Asked Questions, March 23, 2009
• Legacy Securities Program Term Sheet, March 23, 2009
• Legacy Securities Program Frequently Asked Questions, March 23, 2009
• Application for Private Asset Managers under Legacy Securities Program, March 23, 2009

Related posts:

1. Public vs. Private, Round 2
2. TARP Capital Investment Agreements for Private Companies
3. Treasury Announces Targeted Investment Program

• a map showing the local impact of the TARP Capital Purchase Program (larger view).  Like BankBryanCave.com, the Treasury also provides a Google Map of TARP Recipients.  Unfortunately, the Treasury’s Google Map suffers from a “feature” of Google Maps that limits the number of pins shown on the map; as a result, only the first 100 or so recipients (alphabetically) are included on the map.  The BankBryanCave.com Map of TARP Capital Infusions shows all TARP Capital Purchase Program recipients, and also differentiates between recipients based on when the TARP Capital funds were received.  (For comparison purposes, the Treasury’s map was created on March 11, 2009 and, as of March 31, 2009, has been viewed 265 times.  Our map was created on November 25, 2008 and has been viewed over 11,294 times.)
• simplified economic data, which may help citizens (and bank customers) understand and monitor the need and impact of TARP.
• a secret decoder ring* to help translate the various terms and acronyms used under TARP.  ABS, AGP, CAP, CPP, EESA, MBS, SSFI, TIP and TARP are all included.

*It’s not actually a decoder ring, but is called the “Decoder.”

The website appears to still be actively being developed and revised, as links to various documents from the previous website have appeared while this post was being edited.

Related posts:

1. TLGP and the Election Form
2. An Update on All Things TARP
3. The Shifting Boundaries of the TARP Capital Purchase Program

In stepped the Federal Reserve.  As opportunity funds and hedge funds across the country and across the world begin to digest the parameters, requirements, and restrictions relating to the Fed’s $1 Trillion lending initiative known as TALF (Term Asset-Backed Securities Loan Facility) attempting to revitalize the stagnant credit markets, several issues have begun to emerge.

The most important criterion for many of our clients is eligibility.  TALF was announced in November as an attempt to create a market for small business loans.  It has been enlarged to include equipment financing, auto paper, and other consumer credit.

The initial key for hopeful participants will be establishing the primary dealer relationship, as described in the FAQ.

How does an entity participate in the TALF program?

An eligible borrower must be a customer of a primary dealer and must have executed a customer agreement authorizing the primary dealer, among other things, to execute the master loan and security agreement (MLSA) as agent for the borrower and to perform all actions required on their behalf. The MLSA will provide further details on the requirements that will apply to the entities seeking to borrow from the FRBNY under the TALF.

Important Links:

• Federal Reserve FAQ
• Federal Reserve Terms and Conditions
• Federal Reserve White Paper

Related posts:

1. Summary of Tax Impact of Economic Stimulus Legislation
2. Treasury and the Federal Reserve Announce the Term Asset-Backed Securities Loan Facility
3. Summary of the FDIC's Master Agreement

And that got Price to thinking: What if Citizens were to use its federal bailout money to offer below-market mortgage rates with no closing costs to consumers who would buy a house, or a house lot, from builders and developers who had borrowed money from Citizens?

Price asked some of his loan officers to check with the builders and developers, who not surprisingly were excited enough about the project to be willing to chip in some money to help cover a portion of the forgone closing costs.  So last week, Citizens launched its marketing campaign for the $20.5 million program, in collaboration with its builder-developer customers, offering 30-year loans with an initial teaser rate of 3.5 percent for the first two years, rising to a fixed 5.5 percent rate (the current market rate) for the balance of the loan.

“As we see it, it’s a win-win-win situation all round,” Price explained to me. The builders and developers win by having a tool to help move their unsold inventory.  The consumer wins by getting a cut-rate loan.  And Citizens wins because it lowers the risk that it will have to write off even more of its commercial loans while taking a modest step to help stimulate the local economy.  And, of course, the public relations bump isn’t bad either.

Offering special mortgage rates to consumers who buy lots from the bank’s builders can be a great way to address the slowing real estate market generally, with or without TARP Capital.

Related posts:

1. Treasury to Ask Recipients About Use of TARP Funds
2. Kashkari Comments on Use of TARP Capital Funds
3. TLGP and Public Funds

1. New Capital Investments - The Treasury will invest an indeterminate amount of preferred stock, to be held in a newly formed “Financial Stability Trust,” to provide a “capital buffer” to help absorb losses and serve as a bridge to private capital.  The terms of the preferred stock were generally not announced, but will be convertible at a discount to the institution’s stock price as of February 9, 2009.  It appears the capital  plan, and the required “comprehensive stress test” is designed primarily for the largest institutions, however the Treasury states that the banking institutions with less than $100 billion “will also be eligible.”  Recipients will be subject to the new additional restrictions addressed below.

2. A Public-Private “Bad Bank” – The Treasury plans to leverage public funds with private capital to form a bad bank to purchase “toxic assets.”  Pricing, how assets will be chosen, and the structure of the private capital partnership have not been detailed.

3. Expansion of TALF to $1 Billion and Inclusive of CMBS – The Treasury will expand the previously announced Term Asset-Backed Securities Loan Facility from $200 billion to $1 trillion, and include commercial mortgage-backed securities.  Only newly packaged AAA loan packages will be purchased.

4.  New Requirements and Executive Compensation Limitations – Banks receiving assistance under the new Financial Stability Trust will be required to indicate in their application that they intend to use the funds to expand lending and will be required to file monthly reports with the Treasury demonstrating such use.  Recipients will also generally not be permitted to pay more than $0.01 per share in dividends, repurchase shares, or make cash acquisitions of other healthy banks until the government’s investment is repaid.  Recipients will also be subject to the restrictions on senior executive compensation previously announced by the Treasury.  None of these additional restrictions appear to apply to the existing TARP Capital Purchase program, regardless of whether the investment has been completed.

5. Foreclosure Prevention. The Treasury and the Federal Reserve will establish guidelines for loan modification programs to reduce monthly payments on owner-occupied homes.  It is expected that $50 billion in government assistance will be allocated to this program, and that all Financial Stability Plan recipients will be required  to participate.

6. Small Business Lending Initiative. The administration plans to finance the purchase of AAA-rated SBA loans, increase guarantees for SBA loans from 75% to 90% and reduce fees while improving the bureaucratic process for SBA lending.

The Treasury also announced the formation of FinancialStability.gov as a new location for increasing the transparency of the Treasury’s actions.

Related posts:

1. How Much TARP Capital is Left?
2. Several TARP Updates
3. Round 12 of TARP Capital Infusions – TARP Map Updated