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Banking and
Financial Institutions Law Update November 24, 2008
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Banking and
Financial Institutions Team Leaders
Jean M. Weipert
Team Members
William G.
Asimakis, Jr.
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UNDER THE
"TARP"
TROUBLED ASSET RELIEF PROGRAM
RELATED ISSUES
-- TEMPORARY LIQUIDITY GUARANTEE PROGRAM
FDIC Approves
Final Rule
The Board of
Directors of the FDIC approved a
final rule on Friday, November 21, with respect
to the Temporary Liquidity Guarantee Program
("TLGP"). The TLGP guarantees newly issued senior
unsecured debt of banks, thrifts, and certain holding companies, and
provides full coverage of non-interest bearing deposit transaction
accounts. In addition to the final rule, the FDIC has issued a
series of FAQs
, Election
Form Instructions and a Sample
Election Form. The actual election form is available
to eligible financial institutions on FDICconnect.
Eligible
entities have until December 5, 2008, to opt out of the TLGP.
If a financial institution does not opt out, it remains in the
program for the duration. In addition, an institution which
opts out of the TLGP is not eligible to participate in the program at
a later date.
The final rule
contains several significant changes from the interim rule which was
approved on October 23rd. First, the debt guarantee will be
triggered by a payment default rather than bankruptcy or receivership
of a participating institution. Also, in order to facilitate
longer term lending, short-term debt issued for one month or less
will not be included in the TLGP. Finally, the fee structure
for the debt guarantee will be based on a sliding scale, depending on
length of maturity. Shorter term debt will have a lower fee
structure and longer term debt will have a higher fee. The
FDIC's final rule and FAQs provide a complete description of the TLGP
and the changes.
Clark Hill will strive to keep you
consistently updated and informed about the Troubled Asset Relief
Program and the government's evolving response to the turmoil in our
capital markets. Click
here to view our previous newsletters and
articles. Please contact one of our Clark Hill banking and
financial institutions team members should you have any questions
about TARP or other newsletter topics.
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To find out
more about Clark Hill and our Banking and Financial Institutions
Law Group, visit clarkhill.com
or call 800.949.3124
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