Dodd-Frank News Center

TALF Agents Granted Limited Exchange Act Exemption

This story appeared in Bank Digest.

The Securities and Exchange Commission has granted to any broker-dealer designated by the Federal Reserve Bank of New York as a Term Asset-Backed Loan Facility (TALF) agent a limited exemption pursuant to Section 36 of the Exchange Act from the prohibitions on arranging for the extension or maintenance of credit contained in Section 11(d)(l) of the Exchange Act solely with respect to such broker-dealer's facilitation of extensions and maintenance of nonrecourse credit on behalf of the FRBank to purchasers of asset-backed securities pursuant to the TALF.

New Schedule of Margins Announced

This story appeared in Bank Digest.

The Federal Reserve Board has announced a new schedule of margins applicable for collateral pledged by depository institutions to secure discount window and Term Auction Facility loans and for payment system risk purposes. The new margins are part of the Fed's continuing efforts to ensure effective risk management policies and procedures in its lending programs to depository institutions. They reflect data and methodological improvements that better account for differences in various risk characteristics across collateral types.

TALF to Be Extended

This story appeared in Bank Digest.

The Treasury Department and Federal Reserve Board have approved an extension to the Term Asset-Backed Securities Loan Facility (TALF) and announced that they do not anticipate any further additions to the types of collateral that are eligible for the facility. The Treasury announcement stated that, although conditions in financial markets have improved considerably in recent months, the markets for asset-backed securities (ABS) backed by consumer and business loans and for commercial mortgage-backed securities (CMBS) are still impaired and seem likely to remain so for some time. Therefore, to promote the flow of credit to businesses and households and to facilitate the financing of commercial properties, the Fed and Treasury have approved extending TALF loans against newly issued ABS and legacy CMBS through March 31, 2010.

Financial Stability Oversight Board Minutes Released

This story appeared in Bank Digest.

The Financial Stability Oversight Board has released the minutes of its June 25, 2009, meeting. Discussion during the meeting focused on the executive compensation and corporate governance regulations recently issued by the Treasury Department under: the Troubled Asset Relief Program; the Capital Purchase Program; the Public-Private Investment Partnership program; and developments in the financial and housing markets.

Minutes at http://www.financialstability.gov/docs/FSOB/FINSOB-Minutes-062509.pdf

Latest FSOB Minutes Released

This story appeared in Bank Digest.

The Financial Stability Oversight Board (FSOB) has released the minutes from its meeting held on May 28, 2009. Discussion during the meeting focused on the Supervisory Capital Assessment Program (SCAP), the Capital Assistance Program (CAP), the Term Asset-Backed Securities Loan Facility (TALF), the Home Affordable Modification Program (HAMP), and the Automotive Industry Financing Program (AIFP).

In regards to the SCAP, the Board discussed the reviewed the status of the efforts of all institutions subject to the SCAP in raising capital from private sources, issuing nongovernmental guaranteed debt, and taking other steps to improve their capital position.

List of Banks Able to Repay TARP Funds Expected Next Week

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter, June 3, 2009.

The Federal Reserve Board is expected to release a list of banks next week that will be allowed to repay Troubled Asset Relief Program (TARP) funds with interest after having been judged sufficiently sound and able to lend, Fed Chairman Ben Bernanke told Congress June 3.

Questioned during a hearing of the House Budget Committee on the likely recovery of TARP funds, Bernanke replied that “I think our recovery will be excellent.” Turning to the Term Asset-Backed Securities Loan Facility (TALF), Bernanke said the Fed is “very comfortable” that the program is opening the markets for consumer credit, and that the credit risks to the Fed are “quite minimal.”

Financial Stability Oversight Board Minutes Released

This story appeared in Bank Digest.

The Financial Stability Oversight Board has released the minutes for its April 6, 2009, meeting. Among the topics discussed were: recent initiatives and actions taken by the Treasury Department under the Troubled Asset Relief Program (TARP), the current level of funding of TARP programs, and the administrative activities of the Office of Financial Stability; the terms, conditions and timing of the key components of the Public-Private Investment Partnership; the status of, and recent developments concerning, the Term Asset-Backed Securities Loan Facility; and the recent actions taken under the Automotive Industry Financing Program to assist the domestic automotive industry in becoming financially viable.   http://www.financialstability.gov/docs/FSOB/FINSOB-Minutes-040609.pdf

President Signs Legislation Strengthening Securities Fraud and Financial Fraud Enforcement; Creating Commission to Examine Causes of Financial Crisis

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

President Obama has signed the Fraud Enforcement and Recovery Act (FERA) improving the enforcement of securities and commodities fraud and financial institution fraud involving asset-backed securities and fraud related to federal assistance and relief programs. The legislation expands the scope of securities fraud provisions to include commodities and derivatives fraud and extends the prohibition against defrauding the federal government to the TARP program and to the stimulus bill. The legislation also provides the Department of Justice with the tools it needs to fight fraud in the use of funds under TARP and the American Recovery and Reinvestment Act. The legislation creates the Financial Crisis Inquiry Commission to examine and report on the causes of the financial crisis.

Fed Expands Eligible Collateral under TALF

This story appeared in Bank Digest

The Federal Reserve Board has announced that, starting in July, certain high-quality commercial mortgage-backed securities issued before January 1, 2009 (legacy CMBS) will become eligible collateral under the Term Asset-Backed Securities Loan Facility (TALF). The CMBS market, which has financed approximately 20 percent of outstanding commercial mortgages, including mortgages on offices and multi-family residential, retail and industrial properties, came to a standstill in mid-2008. The extension of eligible TALF collateral to include legacy CMBS is intended to promote price discovery and liquidity for legacy CMBS. The resulting improvement in legacy CMBS markets should facilitate the issuance of newly issued CMBS, thereby helping borrowers finance new purchases of commercial properties or refinance existing commercial mortgages on better terms.

To be eligible as collateral for TALF loans, legacy CMBS must be senior in payment priority to all other interests in the underlying pool of commercial mortgages and meet certain other criteria designed to protect the Federal Reserve and the Treasury from credit risk. The Federal Reserve Bank of New York will review and reject as collateral any CMBS that does not meet the published terms or otherwise poses unacceptable risk.

In announcing the collateral expansion, the Fed also provided a frequently-asked-questions document, specific to legacy CMBS, as well as frequently-asked-questions document for newly issued asset-backed securities and CMBS.

COP Issues Report on TALF Effect on Small Business, Consumer Lending

This story appeared in Bank Digest.

The Term Asset-Backed Securities Loan Facility may succeed in improving investor demand for asset-backed securities, according to the Congressional Oversight Panel's May report, although the panel added there was “reason for caution in predicting the ultimate impact of TALF.” It is not clear that the TALF was designed well to accomplish its goal, the report said, and the program could not address issues of creditworthiness. A dissenting report issued by panel member Rep. Jeb Hensarling, R-Texas, criticized the report for going beyond the panel's role and also expressed concern over the effect that proposed operating restrictions for lenders could have on the availability of credit.