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This blog is a service of Alston & Bird's Financial Markets Task Force and focuses on the rapidly changing business and legal issues raised by the current financial markets crisis. Our lawyers are experienced with a wide range of domestic and international business, regulatory and litigation issues in this arena.

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Financial Crisis Inquiry Commission Holds Hearing on “Too Big to Fail” Institutions

September 2, 2010 9:22 AM | Posted by Jarrett Ellis | Topic(s): Bailouts and Failures, International Financial Crisis

Yesterday, the Financial Crisis Inquiry Commission (FCIC) held the first of a two-day hearing entitled “Too Big to Fail: Expectations and Impact of Extraordinary Government Intervention and the role of Systemic Risk in the Financial Crisis.” Testifying before the FCIC were the following witnesses:

Session 1: Wachovia Corporation

  • Scott G. Alvarez, General Counsel, Board of Governors of the Federal Reserve System
  • John H. Corston, Acting Deputy Director, Division of Supervision and Consumer Protection, U.S. Federal Deposit Insurance Corporation (FDIC)
  • Robert K. Steel, former President and Chief Executive Officer, Wachovia Corporation

Session 2: Lehman Brothers

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IMF Announces Enhanced Crisis Prevention Toolkit

September 1, 2010 12:16 PM | Posted by Aaron Hendricson | Topic(s): International Financial Crisis

Yesterday, the International Monetary Fund (IMF) announced that it had expanded and enhanced its lending tools to help contain the occurrence of financial crises. As part of ongoing efforts to enhance the IMF’s crisis-prevention capabilities, the IMF’s Executive Board increased the duration and credit available under the existing Flexible Credit Line (FCL) and established a new Precautionary Credit Line (PCL) for members who, despite sound fiscal policies, may not meet the FCL’s stringent qualification requirements.

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FDIC Holds First in a Series of Roundtables on Financial Reform

September 1, 2010 9:36 AM | Posted by Martin Dozier | Topic(s): Bailouts and Failures, Capital Requirements, Dodd-Frank Act

On Tuesday, the FDIC held the first in a series of proposed roundtable discussions on the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which is intended to bring transparency to the rulemaking process. Government officials, industry executives, academics and investors were invited to participate in the discussion.

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FOMC Releases Minutes from the August 10, 2010 Meeting

September 1, 2010 8:30 AM | Posted by Melinda Calisti | Topic(s): Federal Regulatory Actions, Federal Reserve

Yesterday, the Federal Open Market Committee (FOMC) released minutes from the August 10, 2010 meeting, which indicated division over whether Federal Reserve officials should resume purchases of Treasury bonds and what impact the move could have on the nation’s economy.

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Treasury Releases Completed Transactions Report

August 31, 2010 11:42 AM | Posted by Janet Armbruster | Topic(s): Bailouts and Failures, Structured Finance, U.S. Treasury, Capital Raising

Yesterday Treasury released its most recent transactions report for the period ended August 26, 2010. The report reflects the exchange of a total of $320,235,000 of preferred stock from Mission Valley Bancorp , M&F Bancorp, Inc. and Sterling Financial Corp. from the Capital Purchase Program (CPP)  into the Community Development Capital Initiative (CDCI). Sterling has fulfilled the conversion conditions laid out in the Certificate of Designations for its mandatorily convertible preferred stock, resulting in Treasury's $303 million of preferred stock being converted to 378,750,000 shares of common stock.

There is now $124,191,000 invested in the CDCI and $55,083,238,785 (net of repayments) invested in the CPP.

Chairman Bernanke Gives Speech on Economic Outlook and Monetary Policy

August 30, 2010 1:36 PM | Posted by Joseph Bolling | Topic(s): Federal Reserve

On Friday, Federal Reserve Chairman Ben Bernanke gave a speech entitled “The Economic Outlook and Monetary Policy” at the Federal Reserve Bank of Kansas City Symposium. In his speech, Chairman Bernanke focused on the current economic outlook, the Federal Reserve’s response and future policy options “should the recovery falter or inflation decline further.”

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Committee of European Banking Supervisors Publishes Revised Guidelines on Stress Testing

August 27, 2010 7:43 PM | Posted by Andrew Jones | Topic(s): International Financial Crisis, Capital Requirements

Yesterday, the Committee of European Banking Supervisors (CEBS) published revised guidelines on stress testing intended to force banks to more accurately estimate their potential losses during a period of financial turmoil. Influenced by the stress-testing guidelines developed in January 2009 by the Basel Committee on Banking Supervision and followed by a four-month public consultation period, the new guidelines supersede portions of the guidelines issued by the CEBS in December 2006 and complement the CEBS’s Guidelines on the Application of the Supervisory Review Process under Pillar 2. The guidelines, which must be implemented by December 31, require banks to test their ability to meet minimum capital standards over a longer period of financial turmoil, consider the interplay between different risks and conduct the tests independently, collectively, or both, depending on the circumstances, across a range of their business units.

The CEBS published the results of stress tests on 22 banking groups in October 2009 and 91 banks in July 2010. Guidelines on bank liquidity buffers were published in December 2009.

FHFA Releases First Conservator’s Report on Fannie Mae and Freddie Mac

On Thursday, the Federal Housing Finance Agency (FHFA) released its first Conservator’s Report regarding Fannie Mae and Freddie Mac's financial condition. FHFA will release a similar report on a quarterly basis following the filing of Fannie and Freddie's financial results with the SEC. According to FHFA Acting Director Edward J. DeMarco, the reports are intended to enhance public understanding of Fannie Mae and Freddie Mac's financial situation before and during conservatorship.  

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House Oversight Subcommittee Holds Hearing on Financial Literacy

August 27, 2010 10:49 AM | Posted by Sarah Whitlock | Topic(s): Federal Legislation/Hearings

On Tuesday, the House Financial Services Subcommittee on Oversight and Investigations held a field hearing at the University of Kansas entitled “Empowering Consumers: Can Financial Literacy Education Prevent Another Financial Crisis.” The panelists included state officials, educators and a recent college graduate, and the testimony focused on various educational programs that have been implemented to address financial literacy.

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SEC Adopts New Rules Mandating Shareholder Access to Proxy Statements

August 26, 2010 10:06 PM | Posted by Ian Grant | Topic(s): Articles and Advisories, Federal Regulatory Actions, SEC, Dodd-Frank Act

On Wednesday, invoking in part authority provided in Section 971 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission adopted, by a vote of 3-2, new rules that give shareholders unprecedented access to a company’s proxy statement. New Rule 14a-11 will require a company, in certain circumstances, to include in its proxy materials nominees for election to the board of directors, submitted by a shareholder or a group of shareholders.

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Federal Reserve to Sponsor National Neighborhood Stabilization Summit

August 26, 2010 6:13 PM | Posted by Tara Castillo | Topic(s): Events, Federal Legislation/Hearings, Federal Reserve

Today, the Federal Reserve announced that it will sponsor a national summit to “discuss methods and resources for encouraging neighborhood stabilization in the aftermath of the U.S. home mortgage foreclosure crisis.”  The summit will take place on September 1st and 2nd at the Federal Reserve in Washington D.C. Speakers will include Federal Reserve Governor Elizabeth Duke; U.S. Department of Housing and Urban Development Secretary Shaun Donovan; Federal Reserve Presidents Charles Evans (Chicago), Sandra Pianalto (Cleveland), and Eric Rosengren (Boston); and “representatives of various sectors involved in the foreclosure process and community stabilization efforts.”

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CFTC Begins Comments Period for OTC Derivatives Rulemaking

Today, the Commodity Futures Trading Commission (CFTC) filed a notice that it will begin to accept the views of  interested parties in connection with its rulemaking process to regulate the over-the-counter (OTC) derivatives marketplace.  The CFTC’s announcement follows the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) on July 21, 2010.  The Dodd-Frank Act, among other things, mandates comprehensive regulation of OTC derivatives.

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FSA Publishes Discussion Paper on Fundamental Changes to Trading Activity Regulation‬

August 25, 2010 6:55 PM | Posted by Anjali Desai | Topic(s): International Financial Crisis

Today, the U.K. Financial Services Authority (FSA) published a discussion paper entitled “The prudential regime for trading activities - a fundamental review” that considers fundamental changes to the regulation of trading activities.  The Discussion Paper resulted from recommendations of the Turner Review following material trading losses incurred during the global banking crisis.‬

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European Commission Extends the Slovenian Bank Liquidity Support Scheme

August 25, 2010 9:56 AM | Posted by Racioppi, Stephen | Topic(s): Bailouts and Failures, International Financial Crisis

Yesterday, the European Commission announced the extension of the liquidity support scheme for banks in Slovenia until the end of 2010.  The extended scheme requires banks to pay higher premiums for the loans granted by the state to encourage banks to finance themselves without state support and to limit distortions of competition.  The Slovenian liquidity support schedule was originally approved on March 20, 2009 and complemented the guarantee scheme already in place, which was previously extended through year-end 2010.

AIG Repays Nearly $4 Billion Under Federal Reserve Bank of New York Revolving Credit Facility

August 24, 2010 10:07 PM | Posted by Maureen Whalen | Topic(s): Bailouts and Failures, Federal Reserve

Yesterday, AIG announced its largest single cash reduction to the balance of its revolving credit facility with the Federal Reserve Bank of New York (“FRBNY”).  The $3.95 billion payment was made using funds obtained by AIG from the International Lease Finance Corporation following its recent debt offering.  The payment reduced AIG’s outstanding principal balance to approximately $21 billion, including accumulated interest and fees, and reduced AIG’s available credit line with FRBNY to $30 billion.  Robert H. Benmosche, President and CEO of AIG, described the repayment as “continuing tangible evidence of AIG’s progress in repaying the American taxpayers.”  These amounts are in addition to the U.S. Treasury’s roughly $49 billion of investments in AIG preferred stock and the FRBNY’s approximately $39.5 billion of loans to the two Maiden Lane SPVs and approximately $25 billion preferred interest in SPVs for two AIG insurance company subsidiaries.

House Financial Services Committee Holds Hearing on State of Midwestern Banks and Credit Unions

August 24, 2010 4:27 PM | Posted by Aaron Hendricson | Topic(s): Federal Legislation/Hearings, Dodd-Frank Act

Yesterday, the House Financial Services Committee's Subcommittee on Oversight and Investigations held a field hearing entitled “Too Big Has Failed: Learning From Midwest Banks and Credit Unions.” The hearing was held in Overland Park, Kansas on the campus of Johnson County Community College. The Committee heard testimony from the following witnesses:

Panel One: 

    • Thomas M. Hoenig, President and Chief Executive Officer, Federal Reserve Bank of Kansas City

Panel Two:

    • Chuck Stones, President, Kansas Bankers Association
    • David L. Herndon, President and Chief Executive Officer, First State Bank
    • J. Mariner Kemper, Chairman and Chief Executive Officer, UMB Financial Corporation
    • Jonathan M. Kemper, Chairman and Chief Executive Officer, Commerce Bank – Kansas City and Vice Chairman, Commerce Bancshares, Inc.
    • Marla Marsh, President and Chief Executive Officer, Kansas Credit Union Association
    • John Beverlin, President and Chief Executive Officer, Mainstreet Credit Union

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Rep. Kanjorski and Rep. Frank Urge FHFA to Pursue All Possible Fraud Claims on Behalf of Fannie and Freddie‬

August 24, 2010 10:56 AM | Posted by Colin Roberts | Topic(s): GSEs, Federal Legislation/Hearings, Housing Markets and Foreclosure Relief

Last week, Congressmen Paul Kanjorski (D-PA) and Barney Frank (D-MA) sent letters to President Obama encouraging the Federal Housing Finance Administration (FHFA) to pursue claims against private companies that used fraudulent practices to sell loans or securities to Fannie Mae and Freddie Mac.

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Westamerica Bank of California Assumes Deposits of Sonoma Valley Bank

August 23, 2010 9:04 AM | Posted by Jessica Hartzog | Topic(s): Bailouts and Failures, Federal Regulatory Actions, FDIC, M&A

On Friday, the California Department of Financial Institutions closed Sonoma Valley Bank, headquartered in Sonoma, California, and appointed the FDIC as receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Westamerica Bank, headquartered in San Rafael, California, to assume all of the deposits of Los Padres Bank.

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Pacific Western Bank of California Assumes All Deposits of Los Padres Bank

August 23, 2010 9:01 AM | Posted by Jessica Hartzog | Topic(s): Bailouts and Failures, Federal Regulatory Actions, FDIC, M&A

On Friday, the Office of Thrift Supervision closed Los Padres Bank, headquartered in Solvang, California, and appointed the FDIC as receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Pacific Western Bank of San Diego, California, to assume all of the deposits of Los Padres Bank.

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Rabobank of California Assumes Deposits of Two Institutions in California

August 23, 2010 8:59 AM | Posted by Jessica Hartzog | Topic(s): Bailouts and Failures, Federal Regulatory Actions, FDIC, M&A

On Friday, the California Department of Financial Institutions closed Butte Community Bank, headquartered in Chico, California, and Pacific State Bank, headquartered in Stockton, California, and appointed the FDIC as receiver for the two banks. As receiver, the FDIC entered into a purchase and assumption agreement with Rabobank of El Centro, California, to assume all of the deposits and to purchase essentially all the assets of the two failed banks.

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