Financial Crisis News Center

Financial Stability Reform Bill Clears House Panel

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The House Financial Services Committee voted 31 to 27 December 2 in favor of a broad legislative package that targets systemic risk by allowing a new council of regulators to break up large, failing financial firms that are considered a risk to the economy. The bill also seeks to put an end to taxpayer bailouts of troubled institutions.

House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., said he expects H.R. 3996, the Financial Stability Improvement Act, to move to the House floor next week for three days of debate, followed by a vote.

Money Market Funds Guarantee Program Expires

This story appeared in Bank Digest.

The Guarantee Program for Money Market Funds expired on Sept. 18, 2009. The program was designed by the Treasury to stabilize markets after a large money market fund’s announcement that its net asset value had fallen below $1 per share (“broke the buck”) in the wake of the failure of Lehman Brothers in September of 2008. The program was initially established for a three-month period that could be extended up through Sept. 18, 2009. Treasury Secretary Tim Geithner noted, “The Guarantee Program for Money Market Funds served its purpose of adding stability to the money market mutual fund industry during market disruptions last fall and ultimately delivered a healthy return to taxpayers.”

TG-293 at http://www.ustreas.gov/press/releases/tg293.htm

Status Report on Financial Stabilization Efforts Released

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guideand Bank Digest.

The Treasury Department has issued a “status report“ summarizing the Obama administration's financial system stabilization efforts to date and describing planned steps toward ending the current support programs. According to the report, some of the programs already are winding down, with the Money Market Mutual Fund Guarantee Program scheduled to end on Sept. 18, 2009, and the Debt Guarantee Program component of the Temporary Liquidity Guarantee Program (TLGP) scheduled to end on Oct. 31, 2009. Market condition improvements mean that there is no plan to extend either of these programs, although an emergency facility may be put in place to allow banks to issue guaranteed debt for an additional six months.

Geithner Sees Government Winding Down Support for Financial System

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Treasury Secretary Tim Geithner said the government must begin to wind down some of the extraordinary support put in place for the financial system as its strategy evolves from one of crisis response to recovery.

Speaking September 10 to the Congressional Oversight Panel (COP), the watchdog body overseeing the government’s $700 billion Troubled Asset Relief Program (TARP), Geithner said that while the U.S. financial system is in “substantially stronger” shape than it was three, six or nine months ago, it is still the case that “substantial, enormous” challenges lie ahead.

Section 105 Congressional Report Released

This story appeared in Bank Digest.

The Treasury Department has released the Section 105(a) Troubled Assets Relief Program Report to Congress for the Period June 1, 2009, to June 30, 2009.The Treasury noted that it continued to refine and implement a number of programs under the Troubled Assets Relief Program and took a number of further steps to promote financial stability.

Obama Administration Announces New Details on Making Home Affordable Program

This story appeared in Bank Digest.

The Obama administration announced two new initiatives to help responsible homeowners as part of the Making Home Affordable Program. Under the Second Lien Program, mortgage-servicing companies that participate in the loan-modification program for second liens must automatically modify the second mortgage when the first mortgage is reworked. The government will share in the cost of reducing the interest rate on second mortgages for five years. As an alternative, it will pay holders of second mortgages to extinguish that debt. The other initiative seeks to incorporate the FHA's Hope for Homeowners program into Making Home Affordable. Under the revision, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing. Financial incentives are included to encourage refinances.

News Release  http://www.ustreas.gov/press/releases/tg108.htm

Second Lien Program: Fact Sheet http://www.financialstability.gov/docs/042809SecondLienFactSheet.pdf

Second Lien Program: Two Case Examples: http://www.financialstability.gov/docs/042809HousingExamples.pdf

Geithner Says Most Banks Have Adequate Capital

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, April 21, 2009.

Treasury Secretary Timothy Geithner said April 21 that the “vast majority” of banks currently have more capital than they need to be considered well-capitalized by their regulators.

Geithner, appearing before the Congressional Oversight Panel, also said maintaining confidence in key financial institutions, particularly as they raise new capital and restructure, has to remain a central objective of financial policy.

Latest Section 105 Report Released

This story appeared in Bank Digest.

The Treasury Department has released its latest Section 105(a) Troubled Assets Relief Program Report to Congress. The report covered activities during the month of March 2009. In the report, the Treasury noted that it “continued to develop, launch, and implement a number of programs under the Troubled Assets Relief Program (TARP) and the Financial Stability Plan (FSP) pursuant to the goals of the Emergency Economic Stabilization Act of 2008 (EESA).”

Bank Stress Test Data Available in Early May, Says White House

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, April 15, 2009.

The United States will release some of the results of stress tests being conducted by regulators on the nation’s 19 largest banks by the beginning of May, the White House said April 15.

White House spokesman Robert Gibbs said that “early in May you will see in a systematic and coordinated way the transparency of determining and showing to all involved some of the results of these stress tests.”

Sanders Amendment Requires Fed to Provide Disclosure about Firms Receiving Funds

James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

An amendment to the budget bill offered by Senator Bernard Sanders requires the Federal Reserve Board to reveal the names of institutions and companies that have received taxpayer funded assistance from the Board, to specify how much money each entity received, and to detail what the financial institutions and firms are doing with the financial assistance they have received. The amendment passed the Senate by a vote of 59-39. The Federal Reserve has lent out more than $2 trillion to hundreds of financial institutions and firms, said the senator, but Congress does not know who they are and how much they have received from the taxpayers. Senator Sanders, at a Budget Committee hearing on March 3, asked Fed Chair Ben Bernanke to name the hundreds of firms that have taken money since the financial crisis began. But the Fed Chair refused to name any of the financial institutions. He would not say how much assistance was provided to each firm, nor detail what the firms are doing with the money.