Open for Comment
An interim rule by the Federal Deposit Insurance Corp. detailing the mechanics of the agency's temporary guarantees of bank debt and no-interest checking deposits. The rule outlines the FDIC's authority for administering the program, including that the agency can do on-site reviews of participating banks and levy a special premium on the industry if fees paid by participants are insufficient to fund the program.Under the plan, institutions wanting to opt out must do so by Dec. 5. Banks can have their unsecured debt guaranteed until June 30, 2012, if it was issued between Oct. 14 of this year and next June 30, and must pay a 75-basis-point premium. Banks can have no-interest accounts covered until the end of 2009 for a 10-basis-point surcharge on deposit insurance above the standard coverage limit.
Published in the Federal Register on Oct. 29. Comments due today.
A proposal by federal bank and thrift regulators to let financial institutions hold less capital behind debt issued by Fannie Mae and Freddie Mac. The risk-weight on debt issued by Fannie and Freddie is 20%, but the agencies proposed reducing that to 10%. Published Oct. 27. Comments due Nov. 26.
An interim rule by the Fed to let bank holding companies participating in the Treasury's capital purchase program count the senior preferred stock issued to the Treasury as Tier 1 capital. Published Oct. 22. Comments due Nov. 21.
An interim rule by the FDIC to carry out a temporary increase in the standard deposit insurance coverage limit, to $250,000 per account, and to simplify deposit-insurance rules for mortgage servicers' accounts. Published Oct. 17. Comments due Dec. 16.
A proposal by the Federal Deposit Insurance Corp. to double deposit insurance premium rates. The plan would raise rates on Jan. 1 to between 12 and 14 basis points for most institutions but would add more risk elements in the second quarter to let that range be 2 basis points lower. Most banks now pay 5 to 7 basis points.
The plan would also give banks incentives to reduce their assessment rate an additional 2 points by taking steps to minimize the cost of a failure if one were to occur.
The proposal would impose penalties on banks whose failure would be more expensive. Institutions with significant secured liabilities, such as brokered deposits and Home Loan bank advances, could be charged an additional 7 basis points in premiums.
Published Oct. 16. Comments due Nov. 17.
An interim rule by the FDIC that would simplify and modernize its deposit insurance rules for revocable trust accounts. The interim rule would eliminate the concept of qualifying beneficiaries, among other changes. Published Sept. 26. Comments due Dec. 1.
A proposal by federal bank and thrift regulators that would require institutions to submit more detailed data about items including residential construction loans and structured investment products on their call reports. Published Sept. 23. Comments due Nov. 24.
The Department of Housing and Urban Development completed a rule Nov. 12 that would overhaul implementation of the Real Estate Settlement and Procedures Act. The rule would require lenders to give borrowers a three-page good faith estimate, among other things.Lending Guidance
The federal bank and thrift regulators released guidelines Nov. 12 designed to encourage banks and thrifts to lend to creditworthy borrowers. The guidelines do not mandate new requirements but say it is "essential that banking organizations provide credit in a manner consistent with prudent lending practices and continue to ensure that they consider new lending opportunities on the basis of realistic asset valuations."
The Hope Now coalition — including Fannie Mae, Freddie Mac, the Treasury Department, and the Federal Housing Finance Agency — announced standards Nov. 11 designed to streamline loan modifications. Under the plan, Fannie and Freddie would agree to modifications from servicers by reducing borrowers' mortgage-debt-to-income ratio to 38% on loans with a loan-to-value ratio of at least 90%.
Servicers could use their discretion to alter the interest rate, loan terms, or principal. Income verification would have to be documented, and the loans would be reamortized over 40 years.
The Treasury Department and the Fed announced Nov. 10 that the government was restructuring its financial support to American International Group Inc. The Treasury said it will buy $40 billion of newly issued AIG preferred shares under the Troubled Asset Relief Program.
The Fed also authorized the New York Fed to establish two new lending facilities for AIG. The first will let it buy up to $22.5 billion of residential mortgage-backed securities from AIG's securities portfolio. The second will let it buy up to $30 billion of AIG's collateralized debt obligations.
The Fed on Nov. 10 approved bank holding company applications for both American Express Co. and its travel subsidiary American Express Travel Related Services Co. Inc.
Bank Failures I
Federal regulators closed Franklin Bank, a $5.1 billion state-chartered thrift in Houston, and Security Pacific Bank, a $561.1 million-asset bank in Los Angeles, on Nov. 7. The FDIC estimated the two failures could cost up to $1.8 billion to resolve.
Prosperity Bank in El Campo, Tex., is assuming all of Franklin's $3.7 billion in deposits for a 1.7% premium, according to the FDIC.
Security Pacific's $450.1 million in deposits are to be assumed by Pacific Western Bank, also in Los Angeles.
The Fed — in a bid to attract more funding from banks that otherwise would lend to each other at lower rates — on Nov. 5 said it would begin paying higher interest rates on reserves that financial institutions hold at the central bank.
Bank Failures II
Regulators on Oct. 31 closed $287 million-asset Freedom Bank in Bradenton, Fla., and sold all of its $254 million in deposits to a subsidiary of Fifth Third Bancorp of Cincinnati.
Bank Failures III
Regulators on Oct. 24 closed $354.1 million-asset Alpha Bank and Trust in Alpharetta, Ga., and sold its insured deposits to $1 billion-asset Stearns Bank in St. Cloud, Minn.
Money Market Mutual FundsThe Fed said Oct. 21 that it would provide liquidity until April 30 to money market mutual funds that hold unsecured commercial paper. The central bank had previously announced a program for asset-backed commercial paper.
Deposit CapThe Fed on Oct. 21 issued an opinion that Wells Fargo & Co.'s purchase of Wachovia Corp. would not violate the 10% deposit cap.
The Fed on Oct. 20 completed a rule amending the definition of a "higher-priced" mortgage under the Home Mortgage Disclosure Act.
The bank and thrift regulators said Oct. 17 that they would let institutions apply certain tax changes in the broad Treasury rescue legislation to their third-quarter 2008 capital calculations.
The bill's tax measures gave relief to institutions suffering losses from the impact on holdings of Fannie Mae and Freddie Mac preferred stock triggered by the government takeover of the two GSEs.
The Fed issued guidance Oct. 16 to enhance consolidated bank holding company supervision in response to an evolving market. The guidance describes how the Fed staff assesses the operations of a bank holding company or U.S. arm of a foreign company through monitoring and other measures.
The Fed announced Oct. 14 details of its plan to buy unlimited amounts of commercial paper. The central bank said the new facility would start making purchases Oct. 27 and continue buying paper through April 30. It also laid out how the commercial paper would be priced.
The Treasury Department unveiled a program Oct. 14 to invest $250 billion from the $700 billion rescue fund authorized by Congress to provide capital to the banking industry. Nine large U.S. banking companies agreed to participate and issue an aggregate $125 billion of preferred stock to the government.
Bank Failures IV
Regulators on Oct. 10 closed two institutions: $98 million-asset Main Street Bank in Northville, Mich., and $39 million-asset Meridian Bank in Eldred, Ill. Main Street's $86 million in deposits were sold to $1.5 billion-asset Monroe Bank and Trust in Monroe, Mich. Meridian's $37 million in deposits were sold to $212 million-asset National Bank in Hillsboro, Ill.
Actions Expected Soon
Treasury Secretary Henry Paulson said Nov. 12 that he is considering expanding capital injections beyond the banking industry. He declined to give details, but sources have speculated that insurance and auto companies could soon get money under the Troubled Asset Relief Program.