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This blog is a service of Alston & Bird's Financial Markets Crisis 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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Federal and State Regulators Issue Joint Statement Regarding Prudent Lending to Small Businesses

February 8, 2010 1:23 PM | Posted by Andrew Jones | Topic(s): Federal Regulatory Actions, Federal Reserve, FDIC

On Friday, the federal institutions regulatory agencies and the state supervisors (collectively, the “regulators”) issued a joint statement, entitled Interagency Statement on Meeting the Credit Needs of Creditworthy Small Business Borrowers, restating their supervisory views on prudent lending to creditworthy small businesses. The statement is intended to reassure lenders that prudent small business lending, after a comprehensive review of the borrower’s financial condition, will not be criticized by supervisory actions. In addition, regulators will not adversely classify loans solely due to a decline in collateral value below the outstanding principal balance.

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G-7 Holds Meeting in Iqaluit, Nunavut to Discuss Global Economic Situation

February 8, 2010 12:39 PM | Posted by Maureen Whalen | Topic(s): Events, International Financial Crisis

On Friday and Saturday, the G-7 held an informal meeting in Iqaluit, Nunavut to discuss, among other issues, the global economic situation.  The agenda for the meeting included:

  • Following through on financial sector reforms;
  • Strengthening international financial institutions to enable them to better respond to economic volatility, while ensuring they better reflect the global economy of today; and
  • Ensuring a sustainable global economic recovery.

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Senate Reaches Roadblock in Establishing Financial Regulatory Reform

February 8, 2010 10:01 AM | Posted by Tara Castillo | Topic(s): Federal Legislation/Hearings

On Friday, Senate Banking Committee Chairman Christopher Dodd (D-CT) indicated in an informal statement that bipartisan efforts to agree on financial regulatory reform legislation had reached an impasse. Senator Dodd stated that he would begin drafting new legislation to be considered later this month, but emphasized that he hoped to incorporate many of the agreements reached in bipartisan negotiations over the past two months into the new proposal. Senator Dodd also noted that his counterpart, Senator Shelby (R-AL), the Committee's ranking member, had assured him that he was still committed to finding a consensus on financial reform.

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Community Development Bank, FSB Assumes All of the Deposits of 1st American State Bank of Minnesota

February 6, 2010 7:02 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the Minnesota Department of Commerce closed 1st American State Bank of Minnesota, headquartered in Hancock, Minnesota, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Community Development Bank, FSB headquartered in Ogemaw, Minnesota, to assume all of the deposits of 1st American State Bank of Minnesota. FSB did not pay the FDIC a premium to assume all of the deposits of 1st American State Bank of Minnesota.

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Bank of England Maintains Size of Asset Purchase Program at £200 Billion

February 6, 2010 9:36 AM | Posted by Sarah McElroy | Topic(s): International Financial Crisis

On Thursday, the Bank of England’s Monetary Policy Committee voted to continue with its program of purchases of government and corporate debt financed by the issuance of central bank reserves, and maintained the size of the program at £200 billion.  The Committee took that action, and also agreed to maintain the Bank Rate paid on commercial bank reserves at 0.5%, in light of its latest Inflation Report projections and in order to “keep inflation on track to meet the 2% inflation target over the medium term.” The Committee’s decision to maintain the size of the program follows the program’s November 2009 increase from £175 billion to £200 billion. The Committee noted that the asset purchases, together with the low Bank Rate, would continue to “impart a substantial monetary stimulus to the economy for some time to come.”

GAO Publishes Evaluation Report on Treasury's Decision Making Process on TALF

Today, the Government Accountability Office (GAO) released a report entitled Troubled Asset Relief Program: Treasury Needs to Strengthen Its Decision-Making Process on the Term Asset-Backed Securities Loan Facility.   The objectives of the report were to (1) analyze the risks that the Term Asset-Backed Securities Loan Facility (TALF) presents to TARP funds and taxpayers, (2) evaluate how Treasury analyzed the risk of TALF assets and used this information in making decisions on TALF with the Federal Reserve and Federal Reserve Bank of New York (FRBNY), and (3) assess changes in securitization and credit market conditions before and after TALF's implementation.  The GAO concluded that, while overall market conditions have "generally improved" since TALF's implementation in 2008, the long term risk of loss "remain[s]" and it is too "difficult" to predict how the overall Asset-Backed Securities market will perform in the future and "how borrowers might respond to declines in the market."  In particular, a return to 2008 economic conditions could "have adverse impacts on the [TALF] program, such as significantly reducing the value of TALF collateral, providing an economic incentive for borrowers to walk away from their loans and require TARP funds to buy TALF collateral."

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Senate Hearing to Examine the Implications of the Volcker Rules for Financial Stability

February 4, 2010 9:40 PM | Posted by Racioppi, Stephen | Topic(s): Failures and Bailouts, Federal Legislation/Hearings

Today, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing regarding the implications of the so called “Volcker rules.”  Today’s hearing marks the second of two hearings this week by the Committee on the Obama Administration’s recent proposal to limit the size and scope of banks and other financial institutions.  Earlier this week, the Committee held its first hearing on the proposal

 

Testifying before the Committee were:

  • Gerald Corrigan, Managing Director, Goldman Sachs
  • Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship, Sloan School of Management, Massachusetts Institute of Technology
  • John Reed, Retired Chairman, Citigroup
  • Hal Scott, Nomura Professor of International Financial Systems, Harvard Law School
  • Barry L. Zubrow, Executive Vice President, Chief Risk Officer, JPMorgan Chase

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PNC Sells Fund Processing Division, Will Pay Back TARP Shares

February 4, 2010 12:15 PM | Posted by Janet Armbruster | Topic(s): U.S. Treasury, M&A, Capital Raising

On Tuesday, PNC Bank and Bank of New York Mellon (BNY) announced their definitive agreement for BNY to acquire PNC's Global Investment Servicing, Inc. for $2.31 billion. Proceeds from the sale, which is slated to close in the third quarter of 2010, will be used by PNC to redeem $7.6 billion of preferred shares held by the Treasury under the TARP program. Upon receipt of this payment, Treasury will have recovered "nearly 70 percent of taxpayer investments in the banking system." In the event the transaction has not been completed by November 1, 2010, PNC has arranged for other offerings and sales to raise the necessary equity.

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Senate Banking Committee Holds Hearing on Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies

February 3, 2010 3:23 PM | Posted by Joseph Bolling | Topic(s): Federal Legislation/Hearings

Yesterday, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Prohibiting Certain High-Risk Investment Activities by Banks and Bank Holding Companies.” The hearing focused on the Obama Administration's recent proposal to limit the size and scope of banks and other financial institutions. Specifically, the President’s proposal would (i) prohibit banks or bank holding companies from “own[ing], invest[ing] in or sponsor[ing] a hedge fund or a private equity fund, or proprietary trading operation unrelated to servicing customers for its own profit” and (ii) “place broader limits on the excessive growth of the market share of liabilities at the largest financial firms.”

Testifying before the committee were the following witnesses: 

    • Paul Volcker, Chairman, President’s Economic Recovery Advisory Board
    • Neal S. Wolin, Deputy Secretary, U.S. Department of the Treasury

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Treasury Releases Initial Quarterly Report on Legacy Securities Program

On Friday, Treasury published  its initial quarterly report on the Legacy Securities Public-Private Investment Program (PPIP). The report includes a summary of PPIP capital activity, portfolio holdings and current pricing, and fund performance. As of December 31, 2009, public-private investment funds (PPIFs) have completed initial and subsequent closings on approximately $6.2 billion of private sector equity capital, which was matched 100% by Treasury, representing $12.4 billion of total equity capital. Treasury has also provided $12.4 billion of debt capital, representing $24.8 billion of total purchasing power. As of December 31, 2009, PPIFs have drawn-down approximately $4.3 billion of total capital which has been invested in certain non-agency residential mortgage backed securities and commercial mortgage backed securities and cash equivalents pending investment. Treasury expects to provide additional information as the program matures in subsequent quarterly reports

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Third Quarterly TARP Special Inspector General's Report Continues to Find Fault with Treasury

February 2, 2010 9:32 AM | Posted by Janet Armbruster | Topic(s): Failures and Bailouts, U.S. Treasury

On Sunday, the Office of the Special Inspector General for the Troubled Assets Relief Program (SIGTARP) released its fourth quarterly report to Congress. Special Inspector General Neil Barofsky was roundly critical of the inability of the Capital Purchase Program (CPP) to increase business and individual financing, and Treasury's failure to implement its small business lending program announced in March. 

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Treasury Issues Press Release Regarding Budget for Fiscal Year 2011

February 1, 2010 10:16 PM | Posted by Margaret English | Topic(s): U.S. Treasury

Today, the U.S. Department of the Treasury (Treasury) issued a press release highlighting key components of President Obama’s budget for fiscal year 2011. The main goals for the budget are to take measures to start reducing the federal deficit and to provide for targeted spending on programs intended to create jobs. With respect to the financial services industry, Treasury states that “This Budget supports the critical work that Treasury is doing to encourage economic growth and ensure that the financial industry plays by new, safer rules.”

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Federal Reserve Vice Chairman Kohn Speaks on Bank Interest Rate Exposure

January 31, 2010 8:17 PM | Posted by Alice Green | Topic(s): Federal Reserve

On Friday, Federal Reserve Vice Chairman Donald L. Kohn spoke at the FDIC‘s Symposium on Interest Rate Risk Management in Arlington, Virginia.  

 

Vice Chairman Kohn stated that, although the Federal Open Market Committee (FOMC) made clear at its meeting earlier this week that it expects interest rates to remain low for an extended period, it will be appropriate at some point to raise rates as the economy recovers.  Kohn noted that interest rate risk is inherent in the business of banking, as detailed in the interest rate risk advisory released by the federal financial regulators in early January.  Given this inherent risk and the uncertainties surrounding the timing and impact of future changes in interest rates, it is challenging to effectively manage interest rate exposure.  However, banking organizations must remain vigilant in employing sound interest rate risk management, even in the midst of the current credit crisis, to prevent interest rate risk from undermining the safety and soundness of lenders. 

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Senate Confirms Federal Reserve Chairman Bernanke for a Second Term

January 30, 2010 8:56 PM | Posted by Tara Castillo | Topic(s): Federal Legislation/Hearings, Federal Reserve

On Thursday, by a 70-to-30 vote, the Senate confirmed  Chairman Ben Bernanke of the Board of Governors of the Federal Reserve System for a second four-year term despite recent  criticism the Federal Reserve has faced under his leadership by policymakers. 

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Columbia State Bank Assumes All of the Deposits of American Marine Bank

January 30, 2010 6:03 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the Washington Department of Financial Institutions closed American Marine Bank, headquartered in Bainbridge Island, Washington, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Columbia State Bank, headquartered in Tacoma, Washington, to assume all of the deposits of American Marine Bank. Columbia State Bank will pay the FDIC a 1% premium for the deposits of the failed bank.

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First-Citizens Bank & Trust Company Assumes All of the Deposits of First Regional Bank

January 30, 2010 5:59 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the California Department of Financial Institutions closed First Regional Bank, headquartered in Los Angeles, California, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank & Trust Company, headquartered in Raleigh, North Carolina, to assume all of the deposits of First Regional Bank. First-Citizens Bank & Trust Company did not pay the FDIC any premium for the deposits of the failed bank.

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SCBT, N.A. Assumes All of the Deposits of Community Bank and Trust

January 30, 2010 5:53 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the Georgia Department of Banking and Finance closed Community Bank and Trust, headquartered in Cornelia, Georgia, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with SCBT, N.A., headquartered in Orangeburg, South Carolina, to assume all of the deposits of Community Bank and Trust. SCBT, N.A. did not pay the FDIC any premium for the deposits of the failed bank.

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United Valley Bank Assumes All of the Deposits of Marshall Bank

January 30, 2010 5:47 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the OCC closed Marshall Bank , National Association, headquartered in Hallock, Minnesota, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with United Valley Bank, headquartered in Cavalier, North Dakota, to assume all of the deposits of Marshall Bank. United Valley Bank will pay the FDIC a premium of 7.35% for the deposits of the failed bank.

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Premier American Bank Assumes All of the Deposits of Florida Community Bank

January 30, 2010 5:38 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the Florida Office of Financial Regulation closed Florida Community Bank , headquartered in Immokalee, Florida and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Premier American Bank, National Association, headquartered in Miami, Florida, to assume all of the deposits of Florida Community Bank. Premier American Bank will pay the FDIC a premium of 0.4% for the deposits of the failed bank. Last week, Premier American Bank acquired its first failed bank.

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Community & Southern Bank Assumes All of the Deposits of First National Bank of Georgia

January 30, 2010 5:33 PM | Posted by Kimbro, Lawanna | Topic(s): Failures and Bailouts, Federal Regulatory Actions, FDIC, M&A

On Friday, the OCC closed First National Bank of Georgia , headquartered in Carrollton, Georgia, and the FDIC was named receiver. As receiver, the FDIC entered into a purchase and assumption agreement with Community & Southern Bank, a newly chartered Georgia bank, to assume all of the deposits of First National Bank of Georgia. Community & Southern Bank agreed to pay the FDIC a premium of 1.25% for the deposits of the failed bank.

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