The concept of cross-guarantee liability was added to the Federal Deposit Insurance Act by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). The pertinent provision states that any insured depository institution shall be liable for any loss incurred by the FDIC in connection with:

• the default (failure) of a “commonly controlled” insured depository institution; or
• open bank assistance provided to a “commonly controlled” institution that is in danger of failure.

This means that if two banks are “commonly controlled” and one of them fails, the other bank can be held liable to the FDIC for the amount of its losses or estimated losses in connection with the failure. As many of us see each Friday, the amounts of these estimated losses are often quite high. In fact, the FDIC’s estimated losses for 2011 bank failures were approximately 20 percent of total failed bank assets for the year. Accordingly, the prospect of cross-guarantee liability can be a tremendous financial issue for the surviving bank.

The concept of cross-guarantee liability was developed in response to some perceived abuses by multi-bank holding companies during the 1980s. In those instances, one or more institutions owned by a multi-bank holding company failed, causing significant losses to the FDIC, while the other subsidiaries of the multi-bank holding remained open and viable, allowing the holding company to continue to profit from their operations while the FDIC was stuck with the losses from the failed institutions. With authority to assess cross-guarantee liability now in hand, however, the FDIC has shown a willingness to assert cross-guarantee liability under facts that would not be considered by most to be abusive. In this cycle, the FDIC appears to be willing to take full advantage of the assessment authority granted to it by FIRREA, using cross- guarantee liability as a “sword” to provide a recovery to the Deposit Insurance Fund.

The imposition of cross-guarantee liability starts with an assessment of control. Whether institutions are “commonly controlled” for purposes of determining cross- guarantee liability depends upon whether each institution is under the control of a common entity under the Bank Holding Company Act of 1956, as amended (BHC Act). Because the determination of control is made under the BHC Act, the Federal Reserve’s BHC Act control guidance is helpful. However, this guidance is very dense and can be quite complicated, requiring a review of the ownership structure, management practices, and other business affiliations of the two institutions. However, one thing is clear: In questions of control, institutions that share “management officials”—common directors and/or executive officers—are generally more likely to be found to be under common control than those that do not, all other factors being similar.

As a result, institutions with directors who serve on other bank boards or as officers of other banks should assess potential cross-guarantee risk through the director nomination process. Nominating committees (or other committees of the board reviewing director qualifications) should ask the following questions:

• Does the individual serve on as a director or officer of another financial institution?
• Is there a basis for determining that the two institutions are under common control? Answering this question will likely require consultation with legal counsel.
• Is the other financial institution in a financial condition that is less than sound?

If the answer to all of these questions is “yes,” the nominating committee should think carefully about whether nominating that individual is a good idea. In addition, institutions guaranteeing board seats to investors (such as in connection with a private equity investment) should consider an exception to the nomination requirement when the election of the representative could create a risk of assessment of cross-guarantee liability.

A risk assessment requires an in-depth factual, legal and financial analysis. There are few organizations that will find out this issue places them at risk, but it’s worth attention because the consequences can be severe. As a result, an assessment of this risk should be an integral part of the annual nomination process.

This article was original published on BankDirector.com.

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Even though the guidance comes late in the game, we believe it is helpful for the FDIC to articulate its position on this matter to provide clarity to industry participants. We are disappointed, however, that the FDIC chose to issue this broad guidance through a financial institution letter (which cites no statutory authority or judicial decisions in support of its position) rather than through a formal rulemaking process whereby affected parties could offer comments.

Directors and officers of more than 400 failing financial institutions have faced concerns about bank documents with no formal guidance from the FDIC. A failed bank’s directors’ and officers’ practical concerns were partially related to the fact that the FDIC has sometimes been unwilling or unable to locate or produce bank documents to defense counsel for those directors and officers when they were requested.

Directors and officers of failed banks have the right to contest the FDIC’s charges and have the need for access to records of their service. In addition, under corporate and banking laws of many states, directors have rights to access these documents. Given the restrictions set forth in the FIL, we are hopeful that the FDIC’s processes and procedures for retaining a failed bank’s documents and making them accessible will improve correspondingly.

The FIL acknowledges that bank directors and officers must have access to bank documents to properly perform their functions in overseeing and managing their banks. Clearly it would be a great disservice to the industry for the FDIC to limit a current director’s access to bank information in any way. However, given the restrictions set forth in the FIL and the potential penalties associated with conduct that the FDIC deems objectionable, it is important for bank directors and officers to be aware of the FDIC’s position stated in the FIL. Given the variance between the FDIC’s position and the needs of failed bank directors and officers to access bank documents and information, we recommend seeking the advice of counsel before taking action. Please contact any member of Bryan Cave’s Financial Institutions group for additional information regarding the FIL.

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This movement by the FDIC comes at an unfortunate time given overall downward trend in the number of FDIC consent orders being issued as banks continue to identify and manage their problems. From a practical standpoint, the publication of a new FDIC order may result in perception that a bank’s condition is worsening when in fact the bank is well on its way to compliance with the existing state order.

As background, in some states, including Georgia and Florida, it has been the common practice of state regulators to issue a Consent Order (formerly referred to as an Order to Cease and Desist) following an examination led by the state regulator at which deficiencies were identified. If the FDIC led the examination, the FDIC would issue the order. If the state issued the order, the FDIC would acknowledge the order, specifically stating that the acknowledgement represented a commitment by the bank’s board of directors to the FDIC to comply with the order.

The FDIC has apparently concluded, however, that it needs to have an order in place that it issues (and not simply acknowledges) in order to meet its internal enforcement objectives. For banks receiving an order for the first time, this goal is being accomplished through the issuance of joint orders by the FDIC and the state regulator. We believe that a significant part of the FDIC’s analysis is centered on the definition of “well capitalized” in 12 C.F.R. §325.103, which requires that a bank not only meet or exceed the 5%, 6%, and 10% capital ratios that we are all familiar with but also that the bank not be subject to a written agreement, order, capital directive, or prompt corrective action directive issued by the FDIC to maintain specific capital levels.

The FDIC believes that a bank meeting the statutory capital ratios could be deemed to continue to be “well capitalized” even if subject to a state-led order with a capital requirement. Because there are a number of important implications associated with a bank’s being less than well capitalized, including automatic application of interest rate caps on deposit products, we believe the FDIC wants to be sure that all institutions subject to orders are deemed less than well capitalized. There are also other legal implications of being subject to an order issued by a federal regulator, including those related to further enforcement actions such as civil money penalties.

If your institution is the subject of a state-led Consent Order or Order to Cease and Desist, you should expect the FDIC to ask your institution to consent to a “new” order following your next examination or in connection with any pending application. As is the case with all enforcement actions, we recommend that you consider the overall impact to your institution of consenting to the order as opposed to seeking an administrative hearing, keeping in mind that many of the order’s requirements are likely consistent with your goals to restore the condition of the bank.

In addition, we recommend that banks in this situation take measures to ensure that the new FDIC order is consistent with, or no broader than, the existing state-led order unless your bank’s circumstances justify broadening the scope of the existing order. We understand that some states are willing to take actions that eliminate duplication of regulatory burdens. Finally, because the FDIC-led orders will be published on the FDIC’s website, we recommend that institutions prepare a thoughtful public relations strategy to address any adverse publicity associated with the order.

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Enlist internal audit

To initiate the self examination, the audit committee of the bank’s board of directors should charge management with preparing a report that outlines the current and projected status of the bank’s key areas of risk. Ideally, the bank’s internal audit function will take the lead in performing the examination and preparing the related report. In order to maximize the value of this report, the audit committee should direct management to deliver the report at least 60 days prior to the bank’s next scheduled regulatory exam. The self examination report, in its most basic form, should cover the areas that are the focus of the bank’s regulators: CAMELS (capital, asset quality, management, earnings, liquidity and sensitivity to market risk). The report should also address any key areas of risk identified by the directors.

Analyze your market

In addition to analyzing the typical CAMELS components and other areas of risk, a very important part of the self examination process is a market study. The report should present facts, trends and projections related to the market area in order to define the opportunities and challenges being faced by the bank’s customers. While many bank directors have a good feel for market trends, we have found that this data, when presented with specific facts and trends, can inform the board’s discussions of a variety of topics a great deal. It can also provide the bank with support for dealing with its examiners, who conduct their own market analysis prior to each examination.

Evaluate the bank

In the report, management should report on the current status of the various risk areas (for example, capital levels and levels of problem assets), comparisons to peers and steps being taken to improve the current status. While it may be difficult for the officers of the bank to evaluate the bank’s management in the way that the bank’s examiners would, the management portion of the report should address the organizational chart of the bank to ensure that appropriate resources are allocated to each of the bank’s functions. After reviewing the draft report, the audit committee can evaluate the need for further analysis before presenting the final report to the full board. This report should give the audit committee, and eventually the full board, good perspective on the condition of the bank and the need for corrective actions.

Use self exam in multiple ways

The final self examination report should be clearly organized and comprehensive, though concise. The report can be used to color a variety of discussions that the board may have in the normal course of overseeing the bank’s operations. It can serve as the basis for strategic planning discussions in analyzing the opportunities in the bank’s market and the adequacy of the bank’s earnings. It can also be a guide to more basic discussions, such as the pricing of deposits, based on the information related to the bank’s liquidity and opportunities for loan growth. Essentially, the report provides a comprehensive guide to the current and projected health of the bank that the bank’s directors can use for a quick point of reference in making their decisions.

Prepare a presentation for regulators

In addition to business planning purposes, the self examination can be a key tool in preparing for a regulatory examination. Using the results of the self examination, management should prepare a presentation for the examiners that highlights the bank’s key metrics, areas of progress and actions taken to address areas of concern. The market analysis portion of the self examination can be a key component of this presentation. While the bank’s examiners should be generally familiar with the bank’s market, they will not have the specific and direct perspective that the self examination report can provide. Using this market data, the bank can provide factual, documented support for its projections and for any actions it is taking. This presentation should be conveyed to the bank’s examiners at the initial meeting related to the exam, at which a representative of the board should be present. By alerting the bank’s examiners to the focus of the board on the bank’s condition and the steps being taken to improve the bank’s condition, the bank increases the likelihood that the examiners will conclude that the board is performing its duties and that the bank’s internal controls are adequate.

The self examination report can be a very useful tool for bank directors. At its best, it will provide a roadmap for making key strategic decisions. In its most basic form, it documents the board’s focus on oversight of the bank. While producing such a report will use management resources, much of the analysis that should be included in the report can be extracted from management’s ongoing reports to the board. Producing and discussing the self examination report is a healthy exercise, and the bank’s examiners will agree.

This article was first published on BankDirector.com.

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Specifically, FDIC examiners have begun to scrutinize bank insurance policies to determine whether the policies provide coverage for civil money penalties (“CMPs”) that may be assessed against bank officers or directors. If any bank insurance policies are found on examination to contain an endorsement extending coverage for CMPs to officers or directors, the FDIC is citing such policies as being in violation of Part 359 of the FDIC’s Rules and Regulations.

Part 359, among other things, prohibits banks and affiliated holding companies from making certain “prohibited indemnification payments.” These prohibited payments include any payment or agreement to pay or reimburse bank officers or directors for any CMP or judgment resulting from any administrative or civil action which results in a final order or settlement in which that officer or director is assessed a CMP, removed from office or ordered to cease and desist from certain activities. As a matter of public policy, this provision is designed to prevent banks from bearing the costs of penalties assessed against individuals for actions that could result in harm or potential harm to a bank or to the safety and soundness or integrity of the banking system more generally.

Part 359 explicitly permits reasonable payments by banks to purchase commercial insurance policies, provided that the policy not be used to pay or reimburse an officer or director the cost of any judgment or CMP assessed against him or her. However, Part 359 does permit the insurance paid for by the bank to cover (1) legal or professional expenses incurred in connection with such a proceeding and (2) the amount of any restitution to the bank, its holding company, or its receiver.

For individuals serving as officers or directors of banks, CMP assessments represent a potential risk to personal assets. In addition, CMPs are generally assessed not through the civil litigation process, but rather through an administrative proceeding or enforcement action, where burdens of proof and standards of review generally favor the assessing agency, and intent to violate the rule giving rise to a CMP assessment is not necessarily required in order for the penalty to be assessed. As a result, there has been a long-standing demand for some form of coverage for bank officers and directors to address this risk. A solution used by the insurance industry for decades has been to offer CMP coverage by way of a separate endorsement to the D&O insurance policy purchased by the bank. This endorsement is then invoiced separately, and the individuals covered under the endorsement pay the premium associated with the endorsement out of their own pockets.

However, in recent months, this approach has been criticized by the FDIC, which has cited any policy written in the name of the bank or its holding company that, by endorsement, provides CMP coverage for individual officers or directors, regardless of who actually paid the premium associated with such coverage.

In response, as policies with CMP endorsements begin to expire, insurance carriers are likely to begin pulling the CMP endorsements from these policies on renewal. While Part 359 would not prohibit individual officers and directors from independently purchasing their own policies for CMP coverage, outside of the framework of the bank’s base policy document, insurance professionals have indicated that such stand-alone policies are not generally available at the present time. Given the generally low premiums historically associated with CMP coverage in the community bank space, carriers will not necessarily have strong economic motivation to rush to develop stand-alone CMP products for community bankers. In addition, a stand-alone CMP product, if and when created, may likely carry with it a somewhat elevated premium, as carriers would need to recover the incremental costs of that product’s development.

Even with strong economic motivation, it would likely take time for such products to be developed, resulting in an intermittent period where coverage remains unavailable and this risk to officers and directors remains unmitigated. As a point of comparison, products designed over the past several years to address the shortfalls in the regulatory coverage being offered by primary carriers only began to appear in the community bank space some months after shortfalls in regulatory coverage began to become a widespread phenomenon, notwithstanding that the premiums associated with regulatory coverage products were proportionally much larger than CMP coverage premiums.

A stopgap solution could be for carriers to restrict the definition of losses covered under the CMP endorsement to account for “defense costs” and reimbursement to the institution only — those items specifically carved out by the language of Part 359 – but such an approach, from the perspective of the individual, would not mitigate the risks to personal assets posed by the CMPs themselves.

Exactly how things will develop on this front remains to be seen. However, the likely net result of this trend – at least in the near term – will be increased costs to individuals serving as officers and directors of financial institutions, whether actual or contingent. The general trend of increasing exposure for bank officers and directors continues notwithstanding that salaries and fees for services rendered by officers and directors remain subject to increased scrutiny and, in many cases, are being frozen or cut proactively in the interests of cost savings. In addition, officers and directors continue to face elevated demands on their time as they seek to navigate the challenging economic waters and ensure the safe and sound operation of their institutions. At some point, finding or retaining qualified individuals who are willing to bear the costs associated with service – particularly service as a director – may become a challenge for some financial institutions.

The specific terms and scope of coverage provided by insurance policies vary widely, and bankers with questions about their specific insurance policies should contact their insurance professional or coverage counsel.

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There was recent news from the FDIC though that I think qualifies pretty strongly as green shoots material.  On September 14 the FDIC announced that it will be closing down its Midwest Temporary Satellite Office located in Schaumburg, IL toward the end of September 2012. The FDIC had previously indicated that the office would remain open until the end of the second quarter of 2013. The FDIC had announced earlier this year that its West Coast Satellite Office will close January 30, 2012.

The Southeast Temporary Satellite Office located in Jacksonville is theoretically scheduled to stay open until the end of 2013 due to the larger number of bank receiverships located across Georgia and Florida. I believe, however, there is a fair chance that the late 2013 date will, in fact, be moved up closer to early 2013 or even late 2012 based upon a review of the latest CALL Reports. While there are still a fair number of troubled banks moving through the FDIC pipeline toward receivership the numbers of troubled banks are definitely in the decline.

There is a corresponding decline in the number of new problem credits banks are seeing. Whereas a year ago bank special assets departments were bringing in two new credits for each one they resolved, now the ratio is one to one or even less. There is also much more internal pressure at institutions to rehabilitate credits if possible so that they can be moved out of special assets and back to the line.

Banks clearly face tremendous challenges due to the sluggishness of the national economy and lack of new loan demand.  There are other challenges as well as banks move out of real estate and into C&I lending and we all deal with the deleveraging that the American consumer is experiencing. Even acknowledging all of those issues, however,  over the next twelve months we should see much less focus on Texas ratios and much more attention on how do banks grow business after having survived the great financial panic of 2008.

Boards and senior management need to be focused on the issue of organic growth and how to best accomplish it.  In some cases it may be more appropriate to consider strategic acquisitions. In any event, the role of careful strategic planning on the part of boards and senior management has never been so important. Whether you do it with a banking consultant that you have dealt with for years or one of our experienced lawyers, the key is to plan now in order to control your future.

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Representatives Shelley Moore Capito, Spencer Bachus, Lynn A. Westmoreland and David Scott each heard testimony from panels of federal banking regulators and Georgian bankers about the condition of banking in Georgia, including the effect that federal banking regulations, guidance, policies and actions have had on community banks.  Copies of the written testimony submitted, including that of the FDIC, OCC and Federal Reserve are now available on the Subcommittees website.

Although it is hard to draw any overall themes from the hearings (other than possibly that the issues involved aren’t easily addressed in this format), there were several good points made.

From the FDIC’s written testimony, addressing the challenges faced by Georgia banks:

As the Subcommittee has discussed in previous oversight hearings, the collapse of the U.S. housing market in 2007 led to a financial crisis and economic recession that has adversely affected banks and their borrowers in Georgia and nationwide.  Georgia’s economy was hit especially hard following years of strong economic growth characterized by rising real estate prices, abundant credit availability, and robust job creation.   Financial institutions, whose performance is closely linked to economic and real estate market conditions, have been significantly affected by a rise in the number of borrowers who are unable to make payments.

Gil Barker, the Deputy Comptroller for the Southern District, specifically addressed many concerns expressed by bankers in his written testimony, including statements of regulators criticizing loans to a particular industry, performing non-performing loans, criticizing loans merely because of a decline in collateral value, and the second guessing of independent appraisers.  While one can certainly question whether the interpretations provided by Mr. Barker line up with some of the actions of the on-site examiners, it is definitely a good read for anyone dealing with the OCC in the Southern District.

The loss share method of resolving closed institutions seems to have significant benefits over the FDIC retaining the assets for bulk sale, but there is significant disagreement as to whether the loss share agreements properly incent the acquiring bank with regard to working with borrowers to minimize losses.  The representatives seemed particularly attuned to the additional issues related to loan participations where the lead bank has gone through receivership.

The often excessively harsh language of examination reports, especially to the extent they don’t match up with the exit meetings of regulators was frequently mentioned.  It was also noted that the written reports, which ultimately form the official record, fail to acknowledge the bank’s history and any progress that the bank has obtained. We believe the harsh language is unnecessary in motivating banks to resolve their issues and the failure to acknowledge progress ultimately hurts the credibility of the regulators.  It was also pointed out that management ratings have frequently fallen from excellent to horrible without any change in the management or the board.

A common solution, to the apparent surprise of several on the banking panel, was that regulators, especially local regulators, need to be given more discretion and flexibility to assist institutions recover.

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The FHLB system has been a major source of liquidity to its over 8,000 members during the financial crisis and faces many challenges as the system deals with:

• shrinking demand for loan advances;
• losses incurred in mortgage backed securities that have led to a number of the FHLB’s having to enter into Consent Orders with  their primary regulator; and
• greater Congressional scrutiny of all government sponsored entities.

Banking regulators deal with the consequences of FHLB policies and actions when financial institutions are taken into receivership. In some instances, the availability of FHLB advances may have led to some banks to incurring more risk than they would  have otherwise  incurred.

Jerry’s presentation addressed how the banking regulators view the role of the FHLB ‘s and how those views might affect bank examinations in the future.  If you would like more information, a copy of Jerry’s FHLB presentation is available online, or reach out to Jerry Blanchard to discuss further.

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On March 24, 2011, the ABA’s Banking Journal published an article by Bryan Cave attorney Jim McAlpin, “How good is your bank’s D&O policy?”

In the article, Jim highlights ten possible enhancements that you may be able to obtain in your D&O coverage, including:

• limiting the definition of “Application” in the policy to public filings for the past 12 months;
• expanding the definition of “Claim” in the policy;
• obtaining non-rescindable Side A coverage;
• limiting insured vs. insured carve-backs for derivative suits and bankruptcy;
• carving back defense costs from regulatory exclusions; and
• including coverage for punitive damages.

Read the complete article on the ABA’s website for all ten possible enhancements, as well as additional information regarding potential improvements to your bank’s D&O insurance coverage.

If you’d like to discuss further, please consider reaching out to Jim McAlpin or any other member of Bryan Cave’s Financial Institutions practice.

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The original Obama proposal called on Congress to transfer TARP money to create the fund, but the fund has evolved as a completely separate initiative.  Acknowledging this possible confusion, Section 3111(a) of the bill specifically provides that the fund “is established as separate and distinct from the Troubled Asset Relief Program established by the Emergency Economic Stabilization Act of 2008” and that an institution “shall not, by virtue of a capital investment under the Small Business Lending Fund Program, be considered a recipient of the Troubled Asset Relief Program.”  Proponents continue the political battle to detach this potentially negative association from a bill that would target recovery on Main Street.

The Small Business Lending Fund

Title III of the bill currently before the Senate establishes the fund and authorizes the government to make up to $30 billion in capital investments into eligible institutions.  These investments would be similar to TARP infusions but would not result in executive compensation and other restrictions.  Banks up to $10 billion in assets would generally be eligible to apply for funding. However, the Small Business Lending Fund will not be a source of capital for the banks most in need of additional capital.  Banks on the FDIC’s Troubled Bank List (generally those with composite CAMELS ratings of 4 or 5) would be ineligible to participate. As with the Capital Purchase Program, the program is designed to provide assistance to otherwise healthy institutions.  Each institution’s primary federal banking regulator will continue to have a significant say in whether the institution should receive any funds under the Small Business Lending Fund.

The investment vehicles, which could take the form of preferred stock, equity equivalent capital or debt, would have a ten-year repayment schedule and carry interest, an element proponents say will lead to taxpayer profit in the long run. To incentivize the use of this capital for small business lending, the dividend payments owed to the government on its investment would decrease with increasing use of the funds for such purposes.  Specifically, Section 3103(d)(4)(A) of the bill provides for an adjustment to the payable dividend rate within the first two years of the government’s investment from an initial 5 percent to as little as 1 percent.  That decrease would be triggered by a 10% or more increase in the bank’s small business lending during that period.  Smaller, incremental reductions are also contemplated.  Changes would be measured against the bank’s average amount of “small business lending” during the four quarters immediately prior to the bill’s enactment, minus adjustments for small business loan chargeoffs and gains due to merger, acquisition, or purchase.  Under the bill, “small business lending” generally includes all commercial, industrial, and agricultural loans for less than $10 million except any loan to a business with more than $50 million in revenues.

Institutions with less than $1 billion in assets would be limited to a capital infusion not greater than 5 percent of risk-weighted assets, less any TARP investment.  The cap would be 3 percent, less TARP funds, for the larger eligible banks ($1-10 billion).  Holding company limits would be based on consolidated asset totals.  Any funds could generally be used to refinance existing TARP investments, however (i) TARP recipients that are now on the Troubled Bank list would not be eligible for funds, and (ii) TARP recipients are not permitted to refinance if they have missed more than one dividend payment due under the CPP.

Loss Amortization Under the House Bill

Under the version of the bill passed in the House, “eligible” institutions would also be permitted to amortize losses and write-downs.  Accordingly, the capital hits resulting from losses and write-downs could be offset in future periods by future earnings. Importantly, the substitute amendment introduced by Sen. Harry Reid (D-NV) does not contain a comparable provision, the most significant departure from the bill adopted by the House.

Set forth in the House bill’s Section 113, the loss amortization provision would permit banks to amortize or write-down losses on certain OREO and NPAs secured by real estate on a quarterly straight line basis over—depending on measured increases in small business lending—between six and ten years.  Loans eligible for this amortization would be those originated between January 1, 2003 and January 1, 2008.  However, as discussed above, any bank on the FDIC’s Troubled Bank list would be ineligible to amortize losses or write-downs.  Accordingly, even if the Senate ultimately adopted the House provision, troubled institutions would not benefit.

Proponents have attempted to distinguish this specific proposal from the widely available and poorly supervised “forbearances” launched at the failing savings and loan industry in the 1980s.  Added by an amendment sponsored by Rep. Ed Perlmutter (D-Co.), supporters say this GAAP sidestep would have broad-reaching stabilizing effects on the economy at a fraction of the cost of TARP.  However, the ultimate impact would appear to be minimal given the exclusion of currently troubled banks.

Future of the Plan

As Congress considers this plan, regulators and commentators will continue to debate an underlying question:  is weak demand for small business loans the primary explanation for declines in such lending activity?  Other parts of this bill would extend $900 million to state programs encouraging small business lending, and a companion bill increases the permissible tax deduction for small business “start-up” expenses.  Some estimates are that banks could use the proposed fund to leverage up to $300 billion in small business loans.  All together, this proposal should generate an interesting follow-on debate to the “big bank” discussion that has dominated the larger and still-pending Dodd-Frank bill.

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