Dodd-Frank News Center

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.

Dodd, Frank Pledge Collaborative Effort on Regulatory Modernization

This story appeared in Bank Digest .

Sen. Chris Dodd, D-Conn., Chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Rep. Barney Frank, D-Mass., Chairman of the House Financial Services Committee, have pledged to work with each other and the Administration to modernize the country's financial regulatory system. In a letter  to President Obama, sent as he prepares to leave for the upcoming G-20 Summit Meeting in London, the chairmen said they would work “expeditiously, carefully and deliberately” to create a framework for 21st century regulation that will enhance financial stability and protect consumers and investors.

Mortgage Loan Modification Guidelines Overview

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter and Bank Digest, March 4, 2009.

The Treasury Department has released the guidelines that outline which consumers will be eligible for mortgage loan modifications under the Obama administration's "Making Home Affordable" program. The guidelines also set out the modification terms, the incentive payments that lenders and servicers may receive, and transparency and accountability requirements. According to the Treasury, the two aspects of the program--one which will offer refinancing loans and one which will offer modification of existing loans--could help as many as nine million homeowners, with four to five million homeowners being able to refinance their loans and three to four million being able to obtain loan modifications.

Making Home Affordable Program Guidelines Issued

The Obama Administration announced new Treasury Department guidelines for the “Making Home Affordable” program which is part of the Homeowner Affordability and Stability Plan. The Making Home Affordable program will enable servicers to begin modifications of eligible mortgages and bring relief to responsible homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosure such as lower housing prices, increased crime and higher taxes.

Funding for Business and Household Lending to be Available

As part of the Financial Stability Plan, the Treasury Department and Federal Reserve Board have launched the Term Asset-Backed Securities Loan Facility (TALF) as a component of the Consumer and Business Lending Initiative (CBLI). The TALF has the potential to generate up to $1 trillion of lending for businesses and households. To implement the CBLI, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated asset-backed securities (ABS).

In addition, the Fed revised the terms and conditions for the TALF and released a revised set of frequently asked questions. The revisions include a reduction in the interest rates and collateral haircuts for loans secured by asset-backed securities guaranteed by the Small Business Administration or backed by government-guaranteed student loans.  The modifications are warranted by the minimal credit risk on these assets owing to the government guarantees, and, by making the terms of the TALF loans more attractive, they should encourage greater flows of credit to small businesses and students. http://www.federalreserve.gov/newsevents/press/monetary/20090303a.htm

Citigroup Exchange Agreement Increases Treasury Department's Risk Exposure

The Treasury Department has agreed to convert a part of its preferred share investment in Citigroup into common equity by participating in a series of exchange offers. Under the agreement, the Treasury will convert up to $25 billion of the preferred shares it received under the Capital Purchase Program into common shares, but only to the extent that private holders of preferred shares make the same exchange. Any remaining shares held by the Treasury and shares held by the Federal Deposit Insurance Corporation will be converted into trust preferred securities with a higher seniority. Treasury is willing to participate in this arrangement to the extent Citigroup is able to reach agreement with its other preferred holders, under the following conditions:

• Treasury would convert its security to match dollar for dollar the private preferred exchanges;
• Treasury would convert up to the $25 billion of preferred stock issued under the Capital Purchase Program. Remaining Treasury and FDIC preferred issued under the Targeted Investment Program and Asset Guarantee Program would be converted into a trust preferred security of greater structural seniority that would carry the same 8% cash dividend rate as the existing issue; and
• Treasury will receive the most favorable terms and price offered to any other preferred holder through this exchange.

Treasury noted that the transaction does not increase the amount of Treasury's investment in Citigroup.  

http://www.ustreas.gov/press/releases/tg41.htm

Treasury Releases Details on CAP

The Treasury Department has released the terms and conditions for the Capital Assistance Program (CAP) which is a core element of the Obama Administration's Financial Stability Plan. The purpose of the CAP is to restore confidence throughout the financial system that the nation's largest banking institutions have a sufficient capital cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers.

Along with the terms and conditions, the Treasury also released a white paper which discusses the CAP’s role in the Financial Stability Plan, as well as a set of Frequently Asked Questions (FAQs).

http://www.ustreas.gov/press/releases/tg40.htm

Republicans Urge Administration to Reconsider “Cramdown”

“Cram down policies could potentially strangle our already tight and uncertain credit markets, while leaving taxpayers even more vulnerable. And worse, this action could also jeopardize successful FHA and VA programs that help millions of American families,” Congressmen Spencer Bachus, R-Ala., Lamar Smith, R-Texas, Shelley Moore Capito, R-W.Va., and Trent Franks, R-Ariz., stated in a letter to Treasury Secretary Timothy Geithner raising concerns about the Obama administration's plan to allow judicial modifications of home mortgages during bankruptcy. According to the representatives, “Financial Services Committee Republicans will continue to work to see that borrowers and lenders that made bad decisions are not bailed out at the unnecessary expense of the almost 95 percent of working families still making their mortgage payments on time.” http://republicans.financialservices.house.gov/media/Geithner%20Letter%20(final%20022309).pdf

President Obama Declares U.S. Will Recover from Economic Crisis

By Sarah Borchersen-Keto, Jeff Carlson, Stephen K. Cooper and Paula Cruickshank, CCH Washington News Bureau, Contributing Authors, the CCH Federal Banking Law Reporter, Feb. 25, 2009.

President Obama, in his first address to a joint session of Congress, spoke in stark terms about the deepening economic recession but assured Americans that they will prevail. “We will rebuild, we will recover, and the United States of America will emerge stronger than before,” the president declared.