BankBryanCave.com

Bank Bryan Cave

Capital Purchase Program

Main Content

Trapped by TARP – An Update on the Capital Purchase Program

January 30, 2012

Authors

Robert Klingler

Trapped by TARP – An Update on the Capital Purchase Program

January 30, 2012

by: Robert Klingler

On January 26, 2012, the Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) released its latest Quarterly Report to Congress.  At 302 pages, I can’t say that it’s recommended reading for anyone, but there are portions of it that may be of significant interest to those in the industry.

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,

Read More

Can We Stop Using the Term Bailout?

April 1, 2011

Authors

Robert Klingler

Can We Stop Using the Term Bailout?

April 1, 2011

by: Robert Klingler

On March 30, 2011, the Treasury announced that the TARP Capital Purchase Program has now generated more money for taxpayers than it originally cost.  Through March 30, 2011, the Treasury had collected, on behalf of the U.S. taxpayers, over$251 billion from the financial institutions that Treasury invested in through repayments, dividends, interest, and other income.

This exceeds the original investment Treasury made in these banks by approximately $6 billion, and Treasury currently estimates that the bank programs under TARP will ultimately provide a lifetime profit of approximately $20 billion to taxpayers.

We have attempted to emphasize the investment nature of the Capital Purchase Program since 2008, but the term “bailout” helps sell papers and has generally stuck.  As we noted on October 30, 2008:

The emphasis should be on supporting the Government’s program to strengthen the entire banking system in order to enable banks to continue

Read More

Senate Considering $30 Billion Small Business Lending Fund for Community Banks

July 6, 2010

Authors

Bryan Cave

Senate Considering $30 Billion Small Business Lending Fund for Community Banks

July 6, 2010

by: Bryan Cave

On June 29, 2010, the Senate voted to commence debate on the Small Business Jobs and Credit Act of 2010, a bill passed by the House on June 17, 2010 which includes a $30 billion fund for small business lending through the provision of capital to community banks. This legislation would implement the program described in President Obama’s State of the Union address earlier this year.  Obama has promoted the program by saying that it “takes money repaid by Wall Street banks to provide capital for community banks on Main Street” that can in turn help small businesses create jobs. In the latest version of the bill presented to the Senate,  certain banks with less than $10 billion in assets would be eligible for government infusions of capital, dividend payments on which would decrease with increasing levels of small business lending.  Banks are also generally permitted to use

Read More

TARP Use of Capital Survey Due Thursday, April 15, 2010

April 12, 2010

Authors

Robert Klingler

TARP Use of Capital Survey Due Thursday, April 15, 2010

April 12, 2010

by: Robert Klingler

The Treasury Department is conducting a survey on how all TARP CPP recipients used the capital provided by TARP during 2009.  Specifically, the Treasury is seeking to collect information to understand what actions institutions took, or were able to avoid taking, because of CPP funding.  In addition to collecting feedback through the surveys, the Treasury will also publish summary balance sheet and income statement information from each institution’s regulatory filings.

Survey responses are due Thursday, April 15, 2010.

While responding to the survey is not required under the TARP CPP agreements or regulations, banks failing to respond are likely subject to possible criticism from their primary regulator.  For example, FIL-1-2009 encourages state non-member banks to document how the CPP funds were used and encourages summarizing such information in public documents.  While the Use of Capital Survey is not explicitly listed, FDIC examiners may take the failure to respond

Read More

TARP Special Master Requests Historical Compensation Data

March 30, 2010

Authors

Robert Klingler

TARP Special Master Requests Historical Compensation Data

March 30, 2010

by: Robert Klingler

On March 23, 2010, the Special Master for TARP Executive Compensation issued a letter to all financial institutions that received TARP CPP funds prior to February 17, 2009.  The letter requests compensation data to permit the Special Master to review all bonuses, retention awards and other compensation paid to the institution’s senior executive officers and next 20 most highly-compensated employees from the receipt of TARP CPP funds through February 17, 2009.

In the event the Special Master determines that such compensation is inconsistent with the purposes of TARP or otherwise contrary to the public interest, the Treasury shall seek to negotiate with the TARP CPP recipient and the affected employee for appropriate reimbursements to the federal government.

The review is applicable to all institutions that received TARP assistance prior to February 17, 2009, even if the institution has repaid such funds.  Institutions that received TARP assistance after February 17,

Read More

Treasury Expands TARP Program for CDFI's; Contemplates Private Matching Investments

February 4, 2010

Authors

Robert Klingler

Treasury Expands TARP Program for CDFI's; Contemplates Private Matching Investments

February 4, 2010

by: Robert Klingler

On February 3, 2010, the Treasury Department announced enhancements to the TARP Capital Purchase Program for Community Development Financial Institutions (CDFIs).  In addition to significant improvements for CDFIs, for the first time the Treasury Department has formally announced that it will consider private matching investments to determine bank viability – which could be a significant signal of how the Treasury might treat community banks under the proposed $30 billion Small Business Lending Fund.

Basic Program Terms

  • CDFI’s can apply for capital equal to up to 5 percent of their total risk weighted assets.
  • The dividend rate on the preferred stock will be 2% for eight years (as opposed to 5% for five years under the original Capital Purchase Program) before increasing to 9%.
  • CDFI’s with existing TARP Capital Purchase Program investments will be eligible to transfer those investments into this program (effectively lowering the carrying costs of the
    Read More

President Obama Proposes $30 Billion Small Business Lending Fund

February 2, 2010

Authors

Robert Klingler

President Obama Proposes $30 Billion Small Business Lending Fund

February 2, 2010

by: Robert Klingler

Carrying through with his announcement in the State of the Union, on February 2, 2010, President Obama provided the outlines of a proposed $30 billion Small Business Lending Fund to provide capital to community banks, with incentives to increase small business lending.  As proposed, the program will require Congressional approval to move the funds outside of TARP, which should remove the applicability of the executive compensation and governance restrictions and is also hoped to remove the stigma associated with TARP funds.

Based on the initial fact sheet, the terms appear generally comparable to the financial terms under the Capital Purchase Program, with reductions in the dividend rate for the first five years triggered by increases in small business lending.  Every 2.5% increase in small business lending through December 31, 2011 over 2009 levels would trigger a 1% decrease in dividend rate, down to a minimum rate of 1%.

Read More

State of the Union – TARP Money for Community Banks

January 28, 2010

Authors

Robert Klingler

State of the Union – TARP Money for Community Banks

January 28, 2010

by: Robert Klingler

In his January 27, 2010 State of the Union address, President Obama renewed his call for using some of the TARP money for community banks in an effort to drive small business lending.

So tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat.

This proposal would be consistent with President Obama’s speech last October in which he stated the broad outlines of a new program to provide additional capital to community banks in an effort to spur lending to smaller business, as well as Secretary Geithner’s extension of the TARP program.

We understand that government officials have indicated that additional details on the program will be rolled out by Treasury officials in the coming days.  We have previously analyzed the known terms of

Read More

TARP Programs Completed

January 25, 2010

Authors

Bryan Cave

TARP Programs Completed

January 25, 2010

by: Bryan Cave

Two of the more commonly discussed programs that Treasury implemented pursuant to its discretion under TARP, the Capital Purchase Program (the “CPP”) and the Capital Assistance Program (the “CAP”), have been closed.

According to the Treasury’s FAQs, as of December 31, 2009, the Treasury will not make any additional investments under the CPP.  Over 700 institutions participated in the CPP, representing institutions from every state, except Montana and Vermont, and from Puerto Rico and Washington D.C.  California’s institutions were most highly represented, with 72 institutions receiving CPP funds.  Illinois and Missouri followed with 47 and 32 institutions, respectively, receiving CPP funds.

Although Treasury Secretary Geithner has extended TARP generally to October 3, 2010 and President Obama previously announced an that initiative would be developed for small community banks, there is currently no Treasury program aimed at providing capital support for community banks.

The CAP, which was intended to provide capital support to financial institutions in conjunction with the

Read More

December TARP Capital Infusions – TARP Map and List of Recipients Updated

January 22, 2010

Authors

Bryan Cave

December TARP Capital Infusions – TARP Map and List of Recipients Updated

January 22, 2010

by: Bryan Cave

During the month of December, the Treasury completed rounds fifty-two, fifty-three, fifty-four, fifty-five, and fifty-six of TARP Capital infusions.  In these five rounds, which closed on December 4,  December 11, December 18, December 22, and December 29, respectively, the Treasury purchased a total of approximately $159 million in securities from 37 financial institutions (24 of which previously received a TARP capital infusion).  Through December 2009, the Treasury had invested in 709 institutions, totaling approximately $204.9 billion.

In these five rounds, First Community Financial Partners received the largest infusion, $22 million, and Valley Financial Group Ltd. received the smallest infusion, $1.3 million.

Read More
The attorneys of Bryan Cave LLP make this site available to you only for the educational purposes of imparting general information and a general understanding of the law. This site does not offer specific legal advice. Your use of this site does not create an attorney-client relationship between you and Bryan Cave LLP or any of its attorneys. Do not use this site as a substitute for specific legal advice from a licensed attorney. Much of the information on this site is based upon preliminary discussions in the absence of definitive advice or policy statements and therefore may change as soon as more definitive advice is available. Please review our full disclaimer.