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January 2, 2009
HP-1337
Treasury Releases Emergency Economic Stabilization Report
Washington - Treasury today released the attached report, required by section
102 of the Emergency Economic Stabilization Act. As required by section 102(a),
Treasury established the Asset Guarantee Program to provide guarantees for
assets held by systemically significant financial institutions that face a high risk of
losing market confidence due in large part to a portfolio of distressed or illiquid
assets.
This program would be utilized as needed to improve market confidence in a
systemically significant institution and in financial markets broadly and it is not
anticipated that the program will be made widely available.
-30REPORTS
*
Report
http://www.treas.gov/press/releases/hpl337.htm
8/3/2010
Report to Congress Pursuant to Section 102 of the
Emergency Economic Stabilization Act
12/31/2008
This report fulfills the requirement under section 102 o f the Emergency Economic
Stabilization Act (EESA) for the Treasury Department to report to Congress within 90
days of the passage of the bill on the insurance program established under Section 102(a).
Asset Guarantee Program
Treasury is exploring use of the Asset Guarantee Program to address the guarantee
provisions of the agreement with Citigroup announced on November 23, 2008. Under
the agreement, the Treasury Department will assume the second-loss position after
Citigroup on a selected group of mortgage-related assets.
As required by section 102(a), Treasury established the Asset Guarantee Program (AGP).
This program provides guarantees for assets held by systemically significant financial
institutions that face a high risk of losing market confidence due in large part to a
portfolio of distressed or illiquid assets. This program will be applied with extreme
discretion in order to improve market confidence in the systemically significant
institution and in financial markets broadly. It is not anticipated that the program will be
made widely available.
Under the AGP, Treasury would assume a loss position with specified attachment and
detachment points on certain assets held by the qualifying financial institution; the set of
insured assets would be selected by the Treasury and its agents in consultation with the
financial institution receiving the guarantee. In accordance with section 102(a), assets to
be guaranteed must have been originated before March 14, 2008.
Treasury would collect a premium, deliverable in a form deemed appropriate by the
Treasury Secretary. As required by the statute, an actuarial analysis would be used to
ensure that the expected value of the premium is no less than the expected value of the
losses to TARP from the guarantee. The United States government would also provide a
set of portfolio management guidelines to which the institution must adhere for the
guaranteed portfolio.
Treasury would determine the eligibility of participants and the allocation of resources on
a case-by-case basis. The program would be used for systemically significant
institutions, and could be used in coordination with other programs. Treasury may, on a
case-by-case basis, use this program in coordination with a broader guarantee involving
one or more other agencies of the United States government.
1
Justification
The objective of this program is to foster financial market stability and thereby to
strengthen the economy and protect American jobs, savings, and retirement security. In
an environment of high volatility and severe financial market strains, the loss of
confidence in a financial institution could result in significant market disruptions that
threaten the financial strength of similarly situated financial institutions and thus impair
broader financial markets and pose a threat to the overall economy. The resulting
financial strains could threaten the viability of otherwise financially sound businesses,
institutions, and municipalities, resulting in adverse spillovers on employment, output,
and incomes.
Determination o f Eligible Institutions
In determining whether to use the program for an institution, Treasury may consider,
among other things:
1. The extent to which destabilization of the institution could threaten the viability of
creditors and counterparties exposed to the institution, whether directly or
indirectly;
2. The extent to which an institution is at risk of a loss of confidence and the degree
to which that stress is caused by a distressed or illiquid portfolio of assets;
3. The number and size of financial institutions that are similarly situated, or that
would be likely to be affected by destabilization of the institution being
considered for the program;
4. Whether the institution is sufficiently important to the nation’s financial and
economic system that a loss of confidence in the firm’s financial position could
potentially cause major disruptions to credit markets or payments and settlement
systems, destabilize asset prices, significantly increase uncertainty, or lead to
similar losses of confidence or financial market stability that could materially
weaken overall economic performance;
5. The extent to which the institution has access to alternative sources o f capital and
liquidity, whether from the private sector or from other sources of government
funds.
In making these judgments, Treasury will obtain and consider information from a variety
of sources, and will take into account recommendations received from the institution’s
primary regulator, if applicable, or from other regulatory bodies and private parties that
could provide insight into the potential consequences if confidence in a particular
institution deteriorated.
2
TARP Accounting and Treasury ’s Loss Position
Treasury generally achieves a greater impact per TARP dollar absorbed by taking an
early loss position over a narrow interval of losses rather than a late loss position over a
larger range of losses.
Treasury’s purchasing authority under TARP is reduced by the total value o f the
guaranteed asset less the cash premium received, where the premium is equal to the
expected loss on the guaranteed asset. If the Treasury collects a non-cash premium - for
example, preferred shares - the TARP purchasing authority is reduced by the entire value
of the guarantee until the preferred shares are sold and converted to cash.
These accounting rules imply that if guarantees for two assets of different values have the
same expected loss, the larger asset will be more TARP-intensive to insure. For example,
suppose Treasury has the choice between guaranteeing two different assets, one of which
is worth $50 and has a 10 percent chance o f losing all of its value and the other of which
is worth $10 and has a 50 percent chance of losing all of its value. For the sake of
simplicity, the premium in this example will be paid in cash. If the premium received
equals the expected value of the losses to TARP from the guarantee (thereby meeting the
statutory requirement), Treasury would collect a $5 premium for guaranteeing either
asset. However, the TARP purchasing authority would be reduced by $45 for the
guarantee on the first asset (the $50 covered minus the $5 premium) and just $5 for the
guarantee on the second asset (the $10 covered minus the $5 premium). Although the net
expected payouts of the two guarantees are equal, the second guarantee is more valuable
per dollar of TARP absorbed: covering the first asset uses $9 o f TARP per $1 of
expected loss, whereas the second asset uses only $1 of TARP per $1 of expected loss.
Because of this feature of TARP accounting under Section 102 o f the EES A, Treasury in
using the AGP will generally take a relatively early loss position over a narrow range of
losses to provide the greatest protection per TARP dollar absorbed.
Other Potential Asset Guarantee Programs
Treasury is reviewing options for the development o f other programs to insure troubled
assets pursuant to the legislation. Two design considerations will be important factors for
any potential program developed under Section 102:
(1) Accounting under the TARP purchasing authority: The TARP purchasing authority
is reduced dollar-for-dollar by the amount guaranteed less the premiums received; the
expected net payout from the program is not considered for this purpose. This means
that insuring an asset under section 102 has almost an equivalent impact on the TARP
purchasing authority as purchasing the same asset (Section 102.C.4).
(2) Adverse selection: Information on the credit risk underlying a particular asset,
notably complex assets such as mortgage backed securities, can often be understood
only through intensive research—and even then, the risk will ultimately depend on
outcomes such as future home price appreciation that can be forecast only
3
imperfectly. If an insurance program were to offer a set premium for a specific asset
class - even one that is narrowly defined - it could well be the case that only the
holders of assets for whom the premium was either appropriate or underpriced would
buy insurance. By construction, the credit risk associated with the securities that
would actually be insured at any given premium would be higher than the premium
would cover. Individually pricing the assets - a resource-intensive endeavor - is the
only way of achieving an expected net payout of zero. In practice, this means that
setting the pricing of the insurance premiums will inevitably require particular
assumptions and judgments; the ex-post financial outcome involved with the
guarantees could deviate substantially from the ex-ante actuarial analysis— for better
or for worse.
To assist in the consideration of programs under Section 102, the Treasury issued Federal
Register Notice (Docket # TREAS-DO-2008-0018 posted 10/16/2008). Treasury asked
for comment on programs consistent with Section 102 of the Emergency Economic
Stabilization Act of 2008 (EESA). Treasury particularly invited comments on the
appropriate structure for such a program, and whether the program should offer insurance
against losses for both individual whole loans and individual mortgage backed securities
(MBS), as well as the payout and triggering event, estimation o f losses, and setting the
appropriate premium. A summary of the comments received is attached next as an
Appendix to this report.
4
Appendix: Summary of Responses to Request for Comments
Treasury received 85 responses to the Request for Comments from a wide variety of
respondents, including individuals, academics, financial institutions, municipalities, and
trade groups. Many submissions chose to urge the eligibility of the represented group to
EESA-related programs rather than to outline an insurance program structure.
The responses to the Request for Comments largely envisioned a standard insurance
program, in which the Treasury would offer a guarantee on some portion of the principal
and payments from a security in return for a premium. The respondents recognized the
difficulty associated with setting prices for these premiums, but argued that in order to
avoid adverse selection, premiums for the securities must be priced either individually or
on pools of homogeneous assets. Several respondents commented that a guarantee
program could offer greater flexibility than asset purchase programs in structuring timelimited or partial support (by incorporating loss-sharing, for example).
Respondents expressed differing view along two important dimensions o f the program:
the assets that should be eligible and the share of the assets that should be insured.
Proposed structure of guarantee
Most respondents focused on guarantees of existing individual loans or MBS. In
guaranteeing whole loans, Treasury would receive insurance premiums and pay the insured
(the owner of the mortgage loan) for a realized loss relative to principal and future interest
payments due on the mortgage loan. Factors that would affect the premium include the
degree of loss coverage (co-pay), the size of the deductible, and loan characteristics.
In guarantees of pools of existing loans owned by financial institutions, Treasury could, in
exchange for a premium, purchase any loan that reaches a certain level of delinquency at a
predetermined price. Alternatively, Treasury could offer to share loss on a loan, once the
institution carried the loan through appropriate workout adjustment including foreclosure.
Other proposed structures included:
•
Limiting participation in the insurance program to institutions that successfully
execute a private capital raise.
•
Conditioning participation on foreclosure mitigation efforts.
•
Guaranteeing securitizations of whole loans or MBS
o
In return for a fee, Treasury would purchase existing loans or MBS pools, issue
securities backed by these assets, and guarantee principal and interest on
securities if an institution that issued the loans in the pool defaults.
5
o
This could be made operational through an SPV set up to purchase and hold the
assets and issue short- and medium-term obligations against them, with Treasury
guaranteeing the performance of the SPV securities.
o
This securitization and pool guarantee could be applied to shorter-term securities
that are also troubled due to market seizure, for example asset backed commercial
paper (ABCP).
o
There is a question of whether this satisfies the statute, which states that the
guarantee must apply to assets originated before March 14th, 2008. The
guaranteed assets, in this case, would be payments from a securitized pool issued
through the SPV, not the assets underlying these pools.
•
Guaranteeing severe loss for insurance entities holding portfolio credit risk. For
example, rather than guaranteeing individual assets, the program could compensate
holders of MBS or mortgage loans for losses in excess of a threshold in exchange for
a fee.
•
Issuing derivatives correlated with the performance of an existing index of mortgagerelated credit. For example, the Treasury could sell put options on the ABX index, or
link payout to an existing house appreciation index such as the Case-Shiller index.
This structure allows institutions to hedge their exposure to aggregate risk associated
with the assets in their portfolios but not asset-specific risk.
o
For the institutions’ capital position to be improved by this program the
derivatives must qualify as “highly effective” hedges - their performance
must be highly correlated with the performance of the hedged assets.
Eligible assets
Respondents generally commented that the guarantee should be offered where it may be
more efficient than asset purchase under Sec. 101. Respondents suggested that
performing but illiquid assets ^ su c h as senior tranches of non-agency residential and
commercial MBS, performing whole mortgage loans, ABS (credit card, auto loans, and
student loans), auction rate securities (ARS), and municipal bonds - would be most
suitable for such a program.
The assets that received the most attention were whole residential loans and residential
MBS.
Determining risk and pricing premiums
Respondents uniformly agreed that - no matter which assets are insured in this program pricing is a monumental task that will almost certainly have to be contracted out.
Respondents suggested that Treasury use the methods and models standard in the
industry to determine risk. No feasible alternative to individually pricing the assets was
offered.
6
Payout
Most respondents suggested paying out 100 percent o f principal and expected interest, or
some portion thereof. Arguments in favor of each were as follows:
100 percent of principal and expected interest: The higher the guarantee the government
provides, the more liquidity and confidence will be restored to the market. Most
respondents favoring this structure argued that the 100 percent guarantee should be
applied to the current value of the asset, on an expected cash-flow basis, rather than the
original value of the asset.
A portion of the principal and expected interest: Guaranteeing less than 100 percent
ensures that the participating institutions share in the loss, thus incentivizing them to
pursue all their loss-mitigation options. Institutions holding whole loans and MBS with
deductibles or other loss-sharing mechanisms would be far more likely to attempt to
restructure those loans.
Respondents suggested either guaranteeing a fixed percentage of the original value of the
asset, regardless of the current expected cash-flows, or guaranteeing a fixed percentage of
the current value of the asset, as measured on an expected cash-flow basis.
Several respondents suggested that the level of guarantee should reflect the broad risk
characteristics of the asset class. For example, a higher level of coverage should be
available for senior tranches of MBS than for junior tranches, and residential mortgages
should be insured at a higher level than incomplete residential development projects.
Setting premiums
Premiums should reflect the risk of default and total losses for the insured assets.
Respondents agreed that premiums will vary for different classes of assets to reflect the
risk and total credit loss associated with that asset class. The majority of respondents
recommend pricing the premiums either on an asset-by-asset basis or on a homogeneous
pool of assets and periodically re-evaluating the assets and premiums as the program
continues.
The premiums can either be paid up front as a lump sum or periodically. Respondents
cited the flexibility o f periodic payments as a desirable feature; the premium can be
adjusted based on long term performance, actual loss, and improvements.
Market value of the guarantee
Respondents argued that making the guarantee transferable is essential to establishing
liquidity to the market this guarantee program is targeting. The guarantee should be
attached to the asset and transferred to the asset’s new owner when the asset is sold.
7
Administrative issues
Management of the program, including premium setting, determination o f institution and
asset eligibility, and extensive monitoring o f guaranteed institutions and assets will be
complex and resource-intensive. Most proposals recommend Treasury seek outside
expertise in accounting, insurance, pricing, and administration.
8
January 2, 2009
HP-1338
Treasury Releases Guidelines for Targeted Investment Program
Washington - Treasury today released the program description for the Targeted
Investment Program under which the Citigroup investment that was announced on
Nov. 23 was made. This program description is required by Section 101(d) of the
Emergency Economic Stabilization Act. Other EESA program descriptions are
posted at: http://www.treasury.qov/initiatives/eesa/program-descriptions/.
Guidelines for Targeted Investment Program
The United States Department of the Treasury will determine eligibility of
participants and allocation of resources under the Emergency Economic
Stabilization Act (EESA) pursuant to the Targeted Investment Program. Financial
Institutions (as defined in EESA) will be considered for participation in the Targeted
Investment Program on a case-by-case basis. There is no deadline for participation
in this program.
\
Justification
The objective of this program is to foster financial market stability and thereby to
strengthen the economy and protect American jobs, savings, and retirement
security. In an environment of high volatility and severe financial market strains, the
loss of confidence in a financial institution could result in significant market
disruptions that threaten the financial strength of similarly situated financial
institutions and thus impair broader financial markets and pose a threat to the
overall economy. The resulting financial strains could threaten the viability of
otherwise financially sound businesses, institutions, and municipalities, resulting in
adverse spillovers on employment, output, and incomes.
Eligibility Considerations
In determining whether an institution is eligible for participation, Treasury may
consider, among other things:
1.
2.
3.
4.
5.
The extent to which destabilization of the institution could threaten the
viability of creditors and counterparties exposed to the institution, whether
directly or indirectly;
The extent to which an institution is at risk of a loss of confidence and the
degree to which that stress is caused by a distressed or illiquid portfolio of
assets;
The number and size of financial institutions that are similarly situated, or
that would be likely to be affected by destabilization of the institution being
considered for the program;
Whether the institution is sufficiently important to the nation's financial and
economic system that a loss of confidence in the firm's financial position
could potentially cause major disruptions to credit markets or payments and
settlement systems, destabilize asset prices, significantly increase
uncertainty, or lead to similar losses of confidence or financial market
stability that could materially weaken overall economic performance; and
The extent to which the institution has access to alternative sources of
capital and liquidity, whether from the private sector or from other sources of
government funds.
http://www.treas.gov/press/releases/hp 1338 .htm
8/3/2010
In making these judgments, Treasury will obtain and consider information from a
variety of sources, and will take into account recommendations received from the
institution's primary regulator, if applicable, or from other regulatory bodies and
private parties that could provide insight into the potential consequences if
confidence in a particular institution deteriorated.
Form, Terms, and Conditions of Treasury Investment
Treasury will determine the form, terms, and conditions of any investment made
pursuant to this program on a case-by-case basis in accordance with the
considerations mandated in EESA. Treasury may invest in any financial instrument,
including debt, equity, or warrants, that the Secretary of the Treasury determines to
be a troubled asset, after consultation with the Chairman of the Board of Governors
of the Federal Reserve System and notice to Congress. Treasury will require any
institution participating in this program to provide Treasury with warrants or
alternative consideration, as necessary, to minimize the long-term costs and
maximize the benefits to the taxpayers in accordance with EESA. Treasury will also
require any institution participating in the program to adhere to rigorous executive
compensation standards. In addition, Treasury will consider other measures,
including limitations on the institution's expenditures, or other corporate governance
requirements, to protect the taxpayers' interests.
These program guidelines are being published in accordance with the requirements
of Section 101 (d) of EESA.
\
-30-
http://www.treas.gov/press/releases/hp 1338 .htm
8/3/2010
January 5, 2009
2009-1-5-16-30-47-912
U.S, International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $78,199 million as of the end of that week, compared to $76,272 million as of the end of the
prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
[Z
December 19, 2008
A. Official reserve assets (in US millions unless otherwise specified) '
Euro
Yen
|(1) Foreign currency reserves (in convertible foreign currencies)
|(a) Securities
9,483
jof which: issuer headquartered in reporting country but located abroad
|(b) total currency and deposits with:
Total
li
(78,199
1114,417
|23,900
II
|o
II
|(i) other national central banks, BIS and IMF
11,058
|18,141
||7,083
|ii) banks headquartered in the reporting country
|o
I
li
|of which: located abroad
li
|(iii) banks headquartered outside the reporting country
II
G ü
|of which: located in the reporting country
S k
|(2) IMF reserve position 2
7,626
(3) SDRs 2
9,369
(4) gold (including gold deposits and, if appropriate, gold swapped) ^
11,041
--volume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
8,122
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
8,122
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
-lo a n s not included in official reserve assets
-financial derivatives not included in official reserve assets
-g o ld not included in official reserve assets
-o th e r
............Il
II
li. Predetermined short-term net drains on foreign currency assets (nominal value)
li
ii
ii
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200915163047912.htm
8/3/2010
-outflow s (-)
||Principal
-in flow s {+)
llPrincipal
|| Interest
||lnterest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-537,402
-247,397
-290,005
(b) Long positions (+)
3. Other (specify)
-outflow s related to repos (-)
-in flow s related to reverse repos (+)
-tra d e credit (-)
-tra d e credit (+)
r - o th e r accounts payable (-)
| -o th e r accounts receivable (+)
ill. Contingent short-term net drains on foreign currency assets (nominal value)
II
i
ii
Maturity breakdown (residual maturity, where
applicable)
1
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
(ii) Written calls
[(b) Long positions
http://www.treas.gov/press/releases/200915163047912.htm
8/3/2010
|(i) Bought calls
|(ii) Written puis
Il
II
II
I
__________ ll__________ i__________ y__________ i
PRO MEMORIA: In-the-money options -
II
II
il
II
II
il
II
II
il
II
II
II
II
II
II
II
II
i
II
II
|(1) At current exchange rate
|(a) Short position
|(b) Long position
|(2)
. - ..J
I
I
+5 % (depreciation of 5%)
a) Short position
||(b) Long position
|{3) - 5 % (appreciation of 5%)
|(a) Short position
1
|(b) Long position
1
|(4) +10 % (depreciation of 10%)
■
1
|(5) -1 0 % (appreciation of 10%)
|(a) Short position
|(b) Long position
K6) Other (specify)
|(a) Short position
il
1
1
..
ii
|(a) Short position
|(b) Long position
ii
I
I
1
1
1
II
1
il
I
1__________
---------------- ii
i
ii
i
ii
ii
ii
i__________ i__________ «__________ ii__________
|(b) Long position
ii
1
i
i
i
1
IV. Memo items
— ---------------------------------------------------------------------------------'----------------------------------------------------------------(1) To be reported with standard periodicity and timeliness:
1
I
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
--nondeiiverabie forwards
-s h o rt positions
-lo n g positions
l-o th e r instruments
|(c) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
8,284
-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
-borrow ed or acquired but not included in Section I
8,284
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
-sw aps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions (+)
l
|i----------------------------------------------------------------------------------------- 1I
¡¡--aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
http://www.treas.gov/press/releases/200915163047912.htm
8/3/2010
|(i) bought puts
«
|(ii) written calls
Il
il
1
1
1
h
1
[(b) long positions
|(i) bought calls
|(ii) written puts
1(2) To be disciosed less frequently:
(a) currency composition of reserves (by groups of currencies)
78,199
--currencies in SDR basket
78,199
^--currencies not in SDR basket
--by individual currencies (optional)
Notes:
1/ Includes holdings of the Treasury’s Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/200915163047912.htm
8/3/2010
January 5, 2009
2009-1-5-16-35-26-983
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $76,272 million as of the end of that week, compared to $74,292 million as of the end of the
prior week.
i. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
December 12, 2008
A. Official reserve assets (in US millions unless otherwise specified)
4
Euro
Yen
Total
H
|(1) Foreign currency reserves (In convertible foreign currencies)
9,046
|(a) Securities
1176,272
|| 14,112
|of which: issuer headquartered in reporting country but located abroad
||23,158
□
|(b) total currency and deposits with:
c
m
||6,943
||17,576
|ii) banks headquartered in the reporting country
10,633
II
llo
|of which: located abroad
II
llo
|(iii) banks headquartered outside the reporting country
II
ll°
|of which: located in the reporting country
O
(2) IMF reserve position
II
HO
7,487
(3) SDRs 2
9,199
o
(4) gold {including gold deposits and, if appropriate, gold swapped) u
11,041
l-volume in millions of fine troy ounces
261.499
|(5) other reserve assets (specify)
7,811
|(i) other national central banks, BIS and IMF
|—financial derivatives
l-loans to nonbank nonresidents
l-other (foreign currency assets invested through reverse repurchase
(agreements)
7,811
|B. Other foreign currency assets (specify)
l-securities not included in official reserve assets
|—deposits not included in official reserve assets
|~loans not included in official reserve assets
|—
-financial derivatives not included in official reserve assets
|—gold not included in official reserve assets
| -other
II
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
I
II
~1
II
Maturity breakdown (residual maturity)
■
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
| 1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200915163526983 .htm
8/3/2010
--outflows (-)
||Principal
|| Interest
-in flow s (+)
||Principal
||lnterest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
-566,051
(a) Short positions ( - ) ^
-261,149
-304,902
(b) Long positions (+)
| 3. Other (specify)
| --outflows related to repos (-)
| -in flow s related to reverse repos (+)
| -tra d e credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominal value)
II
jl
il
-
il
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS ( + )
-IM F ( + )
(b) with banks and other financial institutions
headquartered in the reporting country ( + )
(c) with banks and other financial institutions
headquartered outside the reporting country ( + )
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS ( - )
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
¡ ( c ) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
(ii) Written calls
(b) Long positions
http://www.treas.gov/press/releases/200915163526983.htm
8/3/2010
l(i) Bought calls
|(ii) Written puts
I
ii
PRO MEMORIA: In-the-money options |(1 ) At current exchange rate
ii
|(a) Short position
II
|(b) Long position
II
II
|{2) + 5 % (depreciation of 5%)
|(a) Short position
II
|(b) Long position
|(3) - 5 % (appreciation of 5%)
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
ii
II
II .....
II
II
II
«
|(b) Long position
h
II
II
Il
II
II
il
Il
il
ll
II
■ P
Il
il
il
Il
l
I
1
i
i
1
I
ii
II
II
|(b) Long position
ii
ii
ll
ii
ii
ii
Il
li
ii
¡(a) Short position
h
|(b) Long position
3Ë
II
II
..... i
i
i
1
ii
|(a) Short position
|f(6) Other (specify)
1
i
l
1
l
ii
II
II
II
II
|(5) -1 0 % (appreciation of 10%)
i
1
ii
Il
ii
3 1
|(a) Short position
ll
II
IV. Memo items
i--------------------------------------------------------------------------------------------------------------------------------------------------------- il
l
|(1) To be reported with standard periodicity and timeiiness:
¡(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
--nondeliverable forwards
-s h o rt positions
-lo n g positions
-o th e r instruments
(c) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
7,967
-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
¡-borrowed or acquired and included in Section I
¡[- borrowed or acquired but not included in Section I
7,967
|(e) financial derivative assets (net, marked to market)
¡-forwards
¡-futures
¡-swaps
¡-options
[-other
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
l|(b) long positions (+)
¡¡-aqqreqate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ll
http://www.treas.gov/press/releases/200915163526983.htm
I
I
• 8/3/2010
|(a) short positions_________________
|(l) bought puts
_______
|(ii) written calls
|(b) long positions
l(i) bought calls
,|(H) written puts
(2) To be disclosed less frequently:
(a) currency composition of reserves (by groups of currencies)
[76,272
--currencies in SDR basket
[76,272
|2--currencies not in SDR basket
I—by individuai currencies (optional)
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http ://www.treas.gov/press/releases/200915163 526983 .htm
8/3/2010
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January 5, 2009
hp1339
Treasury Provides TARP Funds to Local Banks
Washington- The U.S. Treasury Department announced details this week of a $15
billion investment in 7 banks made through its Capital Purchase Program.
Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief
Program, to help to stabilize and strengthen the U.S. financial system. Treasury
allocated $250 billion under TARP's Capital Purchase Program to invest in U.S.
financial institutions. To date, the Department has made $177.5 billion of
investments, receiving preferred stock and warrants from participating institutions.
Investments have ranged from as small as $1.5 million to as large as $25 billion,
financing community banking and Community Development Financial Institutions in
41 states and Puerto Rico.
Institutions that sell shares to the government must comply with restrictions on
executive compensation during the period that Treasury holds equity issued
through this program and agree to limitations on dividends and stock repurchases.
Information about Treasury's Troubled Asset Relief Program can be found at
http://www.treas.gov/initiatives/eesa/.
Following are the transaction details:
-30REPORTS
Treasury announced the following transaction details today (PDF)
http://www.treas.gov/press/releases/hpl339.htm
8/3/2010
Seller
Date
2/
City
Name of Institution
State
Price Paid
$1,350,000,000
12/31/2008
SunTrust Banks, Inc.
Atlanta
GA
12/31/2008
The PNC Financial Services Group Inc.
Pittsburgh
PA
$7,579,200,000
12/31/2008
Fifth Third Bancorp
Cincinnati
OH
$3,408,000,000
12/31/2008
Hampton Roads Bankshares, Inc.
Norfolk
VA
$80,347,000
12/31/2008
CIT Group Inc.
New York
NY
$2,330,000,000
12/31/2008
West Bancorporation, Inc.
West Des Moines
IA
12/31/2008
First Banks, Inc.
Clayton
MO
$36,000,000
$295,400,000
January 6, 2009
IRP-01062009
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $78,334 million as of the end of that week, compared to $78,199 million as of the end of the
prior week.
i. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
December 26, 2008
A. Official reserve assets (in US millions unless otherwise specified) ^
Euro
Yen
(1) Foreign currency reserves (in convertible foreign currencies)
Total
~||78,334
(a) Securities
9,630
of which: issuer headquartered in reporting country but located abroad
||14,254
||23,884
II
llo
||6,977
||18,189
II
II
II
II
llo
llo
llo
llo
(b) total currency and deposits with:
(i) other national central banks, BIS and IMF
11,212
ii) banks headquartered in the reporting country
of which: located abroad
(iii) banks headquartered outside the reporting country
of which: located in the reporting country
(2) IMF reserve position 2
7,622
(3) SDRs 2
9,365
(4) gold (including gold deposits and, if appropriate, gold swapped) ^
11,041
--volume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
8,234
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
8,234
¡B. Other foreign currency assets (specify)
l-securities not included in official reserve assets
|—deposits not included in official reserve assets
|~ioans not included in official reserve assets
|—financial derivatives not included in official reserve assets
|-gold not included in official reserve assets
| -o th e r
...
II
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
II
II
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/irpO 1062009.htm
8/3/2010
--outflows (-)
||Principal
|| Interest
-in flow s (+)
||Principal
|| Interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-552,728
-278,253
-274,475
! (b) Long positions (+)
f 3. Other (specify)
| --outflows related to repos (-)
| -in flow s related to reverse repos (+)
| -tra d e credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominal value)
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
(ii) Written calls
(b) Long positions
http://www.treas.gov/press/releases/irp01062009.htm
8/3/2010
SV. Memo items
1
1(1 ) To be reported with standard periodicity and timeliness:
|(a) short-term domestic currency debt indexed to the exchange rate
l(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
¡currency)
¡--nondeliverable forwards
| -s h o rt positions .
| -lo n g positions
¡-other instruments
|(c) pledged assets
¡-included in reserve assets
¡-included in other foreign currency assets
d) securities lent and on repo
8,364
-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
—borrowed or acquired but not included in Section I
8,364
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
-sw aps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions (+)
-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
I--------------------------------------------------------------------------------------------------------------------------------------------------------- Il
http://www.treas.gov/press/releases/irp01062009.htm
I
8/3/2010
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42,2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/irp01062009.htm
8/3/2010
January 6, 2009
HP-1340
Assistant Secretary Swagel to Hold Monthly Economic Briefing
Assistant Secretary for Economic Policy Phillip Swagel will hold a media briefing
Friday to review economic indicators from the last month and discuss the state of
the U.S. economy. The event is open to the media:
Who
Assistant Secretary for Economic Policy Phillip Swagel
What
Monthly Economic Briefing
When
Friday, January 9 ,11:00 a.m. EST
Where
Treasury Department
Media Room (4121)
1500 Pennsylvania Avenue, NW
Washington, D.C.
Note
Media without Treasury press credentials should contact Frances Anderson at
(202) 622-2960, or Frances.Anderson@do.treas.qov with the following information:
full name, Social Security number, and date of birth.
=30=
http://wVw.treas.gov/press/releases/hp 1340.htm
8/3/2010
January 6, 2009
HP-1341
Treasury Targets Hizballah Construction Company
Washington, DC-The U.S. Department of the Treasury today designated the Waad
Project, a Hizballah-run construction firm, under Executive Order 13224 (E.O.
13224), which targets terrorists and those providing support to terrorists or acts of
terrorism.
"The Waad Project is another example of Hizballah's use of deceptive tactics to
support its military and terrorist apparatus," said Under Secretary for Terrorism and
Financial Intelligence Stuart Levey.
Hizballah established the Waad Project, in part, because Jihad al-Bina-Hizballah's
main construction company-had difficulty receiving funds from donors following its
designation under E.O. 13224 by the Treasury Department on February 20, 2007.
Hizballah Secretary General Hasan Nasrallah publicly endorsed the Waad Project
in May 2007.
Hizballah has used the Waad Project to rebuild its command headquarters in
Beirut's southern suburbs, which was destroyed in the summer 2006 conflict with
Israel. The Waad Project has built Hizballah's underground weapons storage
facilities and parts of the group's military infrastructure in Lebanon. Additionally, the
Waad Project's website has provided telephone numbers for those wishing to
donate aid to Hizballah, Jihad al-Bina, and the Hizballah-controlled Martyrs
Association, an organization named as a Specially Designated Global Terrorist in
July 2007 for providing financial support to Hizballah.
The Waad Project has tried to hide its affiliation with Hizballah, just as Jihad al-Bina
used deceptive means to seek funding projects from international development
organizations. Additionally, the general manager of the Waad Project has stated
that donors to the Waad Project have wished to remain anonymous because
Hizballah is a terrorist organization and they preferred not to be identified due to the
risks of dealings with a terrorist group.
Under E.O. 13224, any assets held by the Waad Project under U.S. jurisdiction are
frozen and U.S. persons are prohibited from engaging in any transactions with the
Waad Project.
-30Identifier Information
WAAD PROJECT
AKAs:
Wa'id Company
Wa'ed Organization
Waad Waed
Wa'd Project
Al-Waad Al-Sadiq
Waad Company
Waad for Rebuilding the Southern Suburb
'Mashura Waad Laadat Al-Aamar
Waad Project for Reconstruction
Wa'ad As Sadiq
http://www.treas.gov/press/releases/hp 1341 .htm
8/3/2010
Telephone No. 1
009613679153
Telephone No. 2
009613380223
Telephone No. 3
03889402
Telephone No. 4
03669916
Location No. 1
Harat Hurayk, Lebanon
Location No. 2
Beirut, Lebanon
-30-
http://www.treas.gov/press/releases/hpl 341 .htm
8/3/2010
lo view o r p rin t the HL)h content on this page, download the tree Adobe® Acrobat® Header®.
January 6, 2009
HP-1342
Treasury Releases Congressional Report on
Emergency Economic Stabilization Act
Washington, DC - The Treasury Department today released the attached report,
required by section 105(a) of the Emergency Economic Stabilization Act. The first in
the series of reports was delivered on December 5, 2008.
-30REPORTS
*
Report
http://www.treas.gov/press/releases/hp 1342.htm
8/3/2010
UNITED STATES DEPARTMENT OF THE TREASURY
SECTION 105(a) TROUBLED ASSET RELIEF PROGRAM
REPORT TO CONGRESS
FOR THE PERIOD
DECEMBER 1, 2008 TO DECEMBER 31, 2008
I. OVERVIEW
The current financial crisis is one o f the most serious and challenging in recent history. In
response, Treasury has acted quickly and creatively to implement several programs under the
Troubled Asset Relief Program (TARP) with the following three critical objectives: one, to
stabilize financial markets and reduce systemic risk; two, to support the housing market by
avoiding preventable foreclosures and supporting mortgage finance; and three, to protect
taxpayers. While there is no single action the Federal Government can take to end the financial
market turmoil and the economic downturn, Treasury has focused on developing the most
effective combination of tools to further stabilize the financial system and speed the process of
economic recovery.
During this reporting period, Treasury continued to make significant investments in United
States financial institutions through the Capital Purchase Program (CPP). These investments
have improved the capitalization of these institutions, which is essential to improving the flow of
credit to businesses and consumers and boosting the confidence of depositors, investors, and
counterparties alike. With higher capital levels and restored confidence, banks can continue to
play their vital role as lenders in our communities, a necessary requisite for economic recovery
and a return to prosperity. As of December 31, 2008, Treasury has invested $177.5 billion in
United States financial institutions through the CPP, providing support to small and large
financial institutions, as well as Community Development Financial Institutions, in over 40 states
and Puerto Rico. Treasury has committed an additional $10 billion with a deferred settlement
date.
In December, Treasury also moved swiftly and thoughtfully to support auto makers and auto
financing companies through the newly established Automotive Industry Financing Program
(AIFP). On December 29, Treasury agreed to loan up to $1 billion to General Motors (GM) to
assist the company in supporting the reorganization as a bank holding company o f GMAC LLC
(GMAC), a financing company that supports GM. Treasury also invested $5 billion directly in
GMAC pursuant to its reorganization as a bank holding company. On December 31, 2008,
Treasury loaned an additional $4 billion to GM and committed to an additional loan of $5.4
billion in January 2009, with an additional loan of $4 billion possible in February. Under each of
these arrangements, the company has agreed to rigorous restrictions on executive privileges and
compensation and other terms designed to protect the taxpayer. These steps will facilitate the
restructuring of the domestic auto industry and prevent disorderly bankruptcies during a time of
economic difficulty.
Treasury also made a significant investment in Citigroup on December 31, 2008, purchasing $20
billion in preferred stock and warrants. Treasury announced its plans to make this investment in
November 2008. The investment is part of a new Targeted Investment Program (TIP), which is
designed to preserve confidence in financial institutions and foster financial market stability,
thereby strengthening the economy, protecting American jobs, savings, and retirement security.
Treasury will consider financial institutions for participation in the TIP on a case-by-case basis,
based on criteria in the TIP program guidelines.
In addition to making these investments, Treasury transmitted a report to Congress on an
insurance program, known as the Asset Guarantee Program, as required by section 102 of the
Emergency Economic Stabilization Act o f 2008 (EESA). This program provides guarantees for
assets held by systemically significant financial institutions that face a high risk of losing market
confidence due in large part to a portfolio of distressed or illiquid assets. This program will be
applied with extreme discretion in order to improve market confidence in the systemically
significant institution and in financial markets broadly. Treasury does not anticipate making the
program widely available.
At the same time that TARP programs are being designed and executed, Treasury is continuing
to build the Office of Financial Stability, focusing on hiring a highly-qualified staff,
implementing a comprehensive process for monitoring contractors, and establishing a strong
compliance program. Treasury also has robust controls in place to ensure that the use of TARP
funds under section 115 of the EESA does not exceed the current limit of $350 billion. Treasury
has made significant progress since the TARP was launched in October, and many challenges lie
ahead. We will continue to remain vigilant, ready to respond and to manage unpredictable
events as they occur, with economic recovery as the first priority.
II. REPORTING REQUIREMENTS
This is Treasury’s second Section 105(a) Troubled Asset Relief Program Report to Congress
(TARP Report) required by EESA. Treasury transmitted its first TARP Report to Congress on
December 5, 2008, covering activities through November 30, 2008. This TARP Report covers
the next 30-day period, as well as activities occurring on December 31, 2008, and addresses the
following three areas required by EESA section 105(a):
•
•
•
An overview of actions taken by the Secretary, including the considerations required by
section 103 and the efforts under section 109.
The actual obligation and expenditure of the funds provided for administrative expenses
by section 118.
A detailed financial statement with respect to the exercise of authority, including:
1. all agreements made or renewed;
2. all insurance contracts entered into pursuant to section 102;
3. all transactions occurring during the initial 60-day period, including the types of
parties involved;
4. the nature of the assets purchased;
5. all projected costs and liabilities;
6. operating expenses, including compensation for financial agents;
7. the valuation or pricing method used for each transaction; and
8. a description of the vehicles established to exercise such authority.
2
III. INDIVIDUAL PROGRAMS AND INITIATIVES
The Capital Purchase Program
Under the voluntary Capital Purchase Program (CPP), the Treasury is purchasing senior
preferred shares from qualified financial institutions. In accordance with the considerations of
the EES A, a broad spectrum of institutions is eligible for the program: U.S. controlled banks,
savings associations, and certain bank and savings and loan holding companies. To protect the
interests of the taxpayer, only viable institutions are accepted into the program. A
recommendation on acceptance is received from the institution’s primary federal regulator or, in
some cases, from a council o f representatives from each federal regulator. The Treasury is
responsible for final approval.
The minimum subscription amount is 1 percent of the institution’s risk-weighted assets; the
maximum subscription amount is 3 percent of risk-weighted assets (up to a maximum of $25
billion). Standardized terms have been developed for institutions that are organized as publicly
traded and privately held institutions; terms applicable to S corporations and mutual
organizations are still under consideration. The standardized terms impose restrictions on
executive compensation and corporate governance and include provisions (such as the issuance
of warrants) that will enable the taxpayer to benefit from the future appreciation of the firm.
Between December 1, 2008 and December 31, 2008, Treasury purchased $26.1 billion in senior
preferred shares from 162 financial institutions under the CPP. Since the launch of the CPP in
October 2008 through December 31, 2008, Treasury has invested a total of $177.5 billion in
senior preferred shares in 214 financial institutions in over 40 states and Puerto Rico, and
committed to purchase another $10 billion from an additional institution with a deferred
settlement date.
Complete details about the Capital Purchase Program are available on the Treasury
website at: http://www.treas.gov/initiatives/eesa/.
The Automotive Industry Financing Program
The objective of the Automotive Industry Financing Program (AIFP) is to prevent a significant
disruption of the American automotive industry, which would pose a systemic risk to financial
market stability and have a negative effect on the economy of the United States. The program
requires participating institutions to implement plans that will achieve long-term viability.
Participating institutions must also adhere to rigorous executive compensation standards and
other measures to protect the taxpayer’s interests, including limits on the institution’s
expenditures and other corporate governance requirements. Guidelines for the AIFP are
published on Treasury’s website.
On December 19, 2008, Treasury announced a plan to make emergency loans available from the
TARP to General Motors Corporation (GM) and Chrysler LLC (Chrysler) to assist the domestic
auto industry in becoming financially viable. This step was taken to stave off a disorderly
bankruptcy of one or more auto companies and prevent significant disruption to the already
fragile economy. Treasury will carry out these transactions under the newly established AIFP.
3
Treasury closed on its agreement with GM on December 31, 2008, and its agreement with
Chrysler on January 2. Under the GM agreement, Treasury will provide GM with up to a total of
$13.4 billion in short-term financing from the TARP. Treasury funded $4 billion of this loan
immediately, and committed to fund an additional $5.4 billon on January 16, 2009. Treasury
will provide an additional $4 billion on February 17, 2009, subject to GM meeting certain
conditions and funds being available to Treasury to purchase troubled assets under section 115(a)
of the EESA. To protect taxpayers, the agreement requires GM to use these funds to become
financially viable and includes other binding terms. The Chrysler agreement is outside the
reporting period and will be discussed in the next report under section 105(a) of EESA.
On December 29, 2008, Treasury also purchased $5 billion of senior preferred equity with an 8%
annual distribution right from GMAC LLC (GMAC) through the AIFP. Under the agreement,
GMAC issued warrants to Treasury in the form of additional preferred equity in an amount equal
to 5% of the preferred stock purchase; these warrants were exercised at closing of the investment
transaction for additional preferred equity with a 9% annual distribution right. Additionally,
Treasury agreed to lend up to $1 billion of TARP funds to GM so that GM can participate in a
rights offering by GMAC in support of GMAC’s reorganization as a bank holding company.
The loan will be secured by collateral including certain GMAC equity interests owned by GM
and those being acquired by GM in the rights offering, and it will be exchangeable at any time, at
Treasury's option, for the GMAC equity interests being acquired by GM in the rights offering.
The ultimate level of funding under this facility will depend upon the level o f current investor
participation in GMAC’s rights offering. Under these agreements, both GMAC and GM must
comply with enhanced restrictions on executive compensation.
The Targeted Investment Program
The Targeted Investment Program (TIP) is designed to prevent a loss o f confidence in financial
institutions that could result in significant market disruptions, threatening the financial strength
of similarly situated financial institutions, impairing broader financial markets, and undermining
the overall economy. Institutions will be considered for this program on a case-by-case basis,
based on a number of factors described in the program guidelines. These factors include the
threats posed by destabilization of the institution, the risks caused by a loss of confidence in the
institution, and the institution’s importance to the nation’s economy. Program guidelines for the
TIP were published on Treasury’s web site on January 2, as required by section 101(d) of the
EESA.
Treasury completed the first transaction under the TIP on December 31, 2008, when it invested
$20 billion in Citigroup perpetual preferred stock and warrants. Under the agreement with
Citigroup, Treasury will receive an 8% annual dividend, payable quarterly. As part of this
agreement, Citigroup must implement rigorous executive compensation standards and other
restrictions on corporate expenditures. The transaction represents Treasury’s second investment
in Citigroup; in October 2008, Treasury also invested $25 billion in the company through the
CPP.
4
The Asset Guarantee Program
On December 31, 2008, Treasury transmitted to Congress a report that describes the Asset
Guarantee Program (AGP) established under section 102 o f the EES A. This program provides
guarantees for assets held by systemically significant financial institutions that face a risk of
losing market confidence due in large part to a portfolio of distressed or illiquid assets. The AGP
will be applied with extreme discretion in order to improve market confidence in the
systemically significant institution and in financial markets broadly. Treasury does not
anticipate that the program will be made widely available, and notes that the EESA requires that
premiums under section 102 be set to ensure that taxpayers are fully protected
Treasury is exploring use of the AGP to address the guarantee provisions o f the non-binding
agreement with Citigroup Inc. announced on November 23, 2008, and described in Treasury’s
105(a) Report to Congress dated December 5, 2008.
The insurance program report to Congress is available on Treasury’s website.
Other Initiatives:
Term Asset-Backed Securities Loan Facility
The Treasury will provide $20 billion from the TARP to support the Federal Reserve’s $200
billion Term Asset-Backed Securities Loan Facility (TALF). This facility will help market
participants meet the credit needs of households and small businesses by supporting the issuance
of asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans,
and loans guaranteed by the Small Business Administration. The TALF is expected to begin
operation early in 2009.
Credit market stresses led to a steep decline in the issuance of ABS for these types of loans in the
third quarter of 2008, and the market essentially came to a halt in October. At the same time,
higher risk premiums drove interest rate spreads on AAA-rated tranches of ABS to levels well
outside the range of historical experience. The purpose o f the TALF is to increase credit
availability by stimulating the issuance of consumer and small business ABS at more normal
interest rate spreads.
On December 19, 2008, the Federal Reserve released revised terms and conditions and questions
and answers detailing operational aspects o f the TALF. Under the revised terms and conditions,
the Federal Reserve will lend on a non-recourse basis to holders of certain AAA-rated ABS fully
secured by newly and recently originated consumer and small business loans. TALF loans will
have a term of three years and will be fully secured by eligible collateral. Haircuts (a percentage
reduction used for collateral valuation) will be determined based on the riskiness of each type of
eligible collateral and the maturity of the eligible collateral pledged to the Federal Reserve. The
haircuts will provide additional protection to taxpayers by protecting the Federal Government
from loss. Treasury will provide $20 billion o f credit protection to the Federal Reserve in
connection with the TALF. The sponsor of the eligible ABS must agree to comply with the same
executive compensation restrictions required for participants in the CPP.
5
IV. T ARP ADMINISTRATIVE EXPENSES
United States Department of Treasury
Office of Financial Stability
Report of Administrative Obligations and Expenditures
1 For PerlbdiEndiri^M
' ' . : December 31,2008
PERSONNEL SERVICES
NON-PERSONNEL
SERVICES
Budget
Object Class
1100 & 1200
2100
2200
2300
2400
2500
2600
3100
m
Budget Object Class Title
PERSONNEL COMPENSATION & BENEFITS
PERSONNEL SERVICES Total:!
Expenditures
Obligations
$713,928
$713,928
$713,928 I
$713,928 ____ j
6,725
__ 12,993
For Period Ending
January 31,2009
Projected
Obligations
I
Projected
Expenditures
$1,193,000
$1,193,000
___ 17,000
$1,193,000
$1,193.000
__ 12,000
526.553,000
$6,526,000
TRAVEL & TRANSPORTATION OF PERSONS
TRANSPORTATION OF THINGS____________________
............ 8T642 _________ 738,000 _________ 153,000
__________ 87,642
RENTS, COMMUNICATIONS, UTILITIES & MISC CHARGES
______ 7,227 ___________ 7,227 ___________ 8,000 ___________ 8,000
PRINTING & REPRODUCTION_______ ______________
24,417,000
4,730,497
3,040,209
4,980,000
OTHER SERVICES
4,964
4,784
130,000
130,000
SUPPLIES AND MATERIALS
20,844
20,844
50,000
50,000
EQUIPMENT
NON-PERSONNEL SERVlGES Total:
$4,864,167
$3,167431
$25,360,000
$5.333,000
......... _............................................................................... ...........
GRAND TOTAL:
55,578,095
$3,881.359
Notes: The statutorily required reporting date results in OFS estimating amounts prior to the Department of Treasur/s accounting records closing on January 6, 2008.
The December 31, 2008 period ending obligation amount is smaller than the November 30, 2008 period ending amount due to a recategorization of
detailee salaries from BOC 2500 to 1100 & 1200 and BOC 2500 programmatic operating obligations that were shown as BOC 2500 administrative obligations.
6
V. DETAILED FINANCIAL STATEMENTS
U.S. Treasury Department
Office of Financial Stability
Troubled Asset Relief Program
Agreements Under TARP [Section 105(a)(3)(A)]
For Period Ending December 31, 2008
Date
Approved
or Renewed
Type of
Transaction
10/10/2008
BPA
10/11/2008
BPA
10/14/2008 Financial Agent
10/16/2008
BPA
10/18/2008
BPA
10/23/2008
IAA
10/29/2008
BPA
10/29/2008
BPA
10/31/2008
Contract
11/7/2008
BPA
11/14/2008
IAA
12/3/2008
IAA
12/5/2008 Procurement
12/5/2008
IAA
12/10/2008
BPA
12/18/2008
BPA
Vendor
Simpson, Thacher & Bartlett
EnnisKnupp
Bank of New York Mellon
PricewaterhouseCoopers
Ernst & Young
GSA - Turner Consulting
Hughes Hubbard & Reed
Squire Sanders & Dempsey
Lindholm & Associates*
Thacher Proffitt & Wood
Securities and Exchange Commission
Trade and Tax Bureau - Treasury
Washington Post
Department of Housing and Urban Development
Thacher Proffitt & Wood
Kirkland and Elllis, LLP
Small or Women-, or Minority-Owned Small Business
Office of Financial Stability
Troubled Asset Relief Program
Description of Vehicles Established [Section 105(a)(3((F)]
For Period Ending December 31, 2008
Date________
Vehicle
________________________Description
None
7
Purpose
Legal Services
Investment and Advisory Services
Custodian and Cash Mangement
Internal Control Services
Accounting Services
Archiving Services
Legal Services
Legal Services
Human Resources Services
Legal Services
Detailees
IT Services
Vacancy Announcement
Detailees
Legal Services
Legal Services
VI. TRANSACTIONS REPORT - CAPITAL PURCHASE PROGRAM
U.S. Treasury Department
Office o f Financial Stability
Troubled Asset Relief Program
Transactions Report
For Period Ending December 3 1,2008
CAPITAL PURCHASE PROGRAM
Seller
Pricing
Date
1/
Name of Institution
City
State
Transaction Type
Description
Price Paid
Mechanism
1 0 /2 8/2008 Bank o f America Corporation
Charlotte
NC
Purchase
Preferred Stock w /W a rra n ts
1 0 /28/2008 Bank o f New York M ellon Corporation
New York
NY
Purchase
Preferred Stock w /W arrants
$15,000,000,000 Par
1 0 /28/2008 Citigroup Inc.
New York
NY
Purchase
Preferred Stock w /W a rra n ts
$25,000,000,000 Par
10/28/2008 The Goldman Sachs Group, Inc.
New York
NY
Purchase
Preferred Stock w /W arrants
$10,000,000,000 Par
$3,000,000,000 Par
1 0 /28/2008 JPMorgan Chase & Co.
New York
NY
Purchase
Preferred Stock w /W arrants
$25,000,000,000 Par
10/28/2008 Morgan Stanley
New York
NY
Purchase
Preferred Stock w /W arrants
$10,000,000,000 Par
10/28/2008 State Street Corporation
Boston
MA
Purchase
Preferred Stock w /W arrants
10/28/2008 W ells Fargo & Company
San Francisco
CA
Purchase
Preferred Stock w /W arrants
$25,000,000,000
$2,000,000,000 Par
Par
10/28/2008 M e rrill Lynch & Co., Inc.
New York
NY
Purchase
Preferred Stock w /W arrants
$10,000,000,000 Par
1 1 /14/2008 Bank o f Commerce Holdings
Redding
CA
Purchase
Preferred Stock w /W arrants
$17,000,000
Par
1 1 /14/2008 1st FS Corporation
Hendersonville
NC
Purchase
Preferred Stock w /W arrants
$16,369,000
Par
1 1 /14/2008 UCBH Holdings, Inc.
San Francisco
CA
Purchase
Preferred Stock w /W arrants
$298,737,000 Par
1 1 /14/2008 Northern Trust Corporation
Chicago
IL
Purchase
Preferred Stock w /W arrants
$1,576,000,000 Par
1 1 /14/2008 SunTrust Banks, Inc.
Preferred Stock w /W arrants
$3,500,000,000
Par
$9,000,000
Par
Atlanta
GA
Purchase
1 1 /14/2008 Broadway Financial Corporation
Los Angeles
CA
Purchase
Preferred Stock w /W arrants
1 1 /14/2008 W ashington Federal Inc.
Seattle
WA
Purchase
Preferred Stock w /W arrants
1 1 /14/2008 BB&T Corp.
Winston-Salem
NC
Purchase
Preferred Stock w /W arrants
1 1 /14/2008 Provident Bancshares Corp.
Baltimore
MD
Purchase
Preferred Stock w /W a rra n ts
1 1 /14/2008 Umpqua Holdings Corp.
Portland
OR
Purchase
Preferred Stock w /W a rra n ts
$214,181,000 Par
1 1 /14/2008 Comerica Inc.
Dallas
TX
Purchase
Preferred Stock w /W a rra n ts
$2,250,000,000 Par
1 1 /14/2008 Regions Financial Corp.
$3,133,640,000
Par
$151,500,000 Par
AL
Purchase
Preferred Stock w /W a rra n ts
$3,500,000,000 Par
1 1 /1 4/2008 Capital One Financial Corporation
McLean
VA
Purchase
Preferred Stock w /W a rra n ts
$3,555,199,000 Par
1 1 /14/2008 First Horizon National Corporation
M emphis
TN
Purchase
Preferred Stock w /W a rra n ts
1 1 /14/2008 Huntington Bancshares
Columbus
OH
Purchase
Preferred Stock w /W a rra n ts
$1,398,071,000 Par
Cleveland
1 1 /14/2008 KeyCorp
Birmingham
$200,000,000 Par
$866,540,000
Par
OH
Purchase
Preferred Stock w /W a rra n ts
$2,500,000,000
Par
1 1 /14/2008 Valley National Bancorp
Wayne
NJ
Purchase
Preferred Stock w /W a rra n ts
$300,000,000
Par
1 1 /14/2008 Zions Bancorporation
Salt Lake City
UT
Purchase
Preferred Stock w /W a rra n ts
$1,400,000,000 Par
1 1 /14/2008 Marshall & llsley Corporation
Milwaukee
Wl
Purchase
Preferred Stock w /W a rra n ts
$1,715,000,000 Par
1 1 /14/2008 U.S. Bancorp
Minneapolis
MN
Purchase
Preferred Stock w /W a rra n ts
$6,599,000,000
Par
1 1 /14/2008 TCF Financial C orporation
Wayzata
MN
Purchase
Preferred Stock w /W a rra n ts
$361,172,000
Par
Preferred Stock w /W a rra n ts
$184,011,000 Par
1 1 /21/2008 First Niagara Financial Group
Lockport
NY
1 1 /21/2008 HF Financial Corp.
Sioux Falls
SD
Purchase
Preferred Stock w /W a rra n ts
1 1 /21/2008 Centerstate Banks o f Florida Inc.
Davenport
FL
Purchase
Preferred Stock w /W arrants
$27,875,000 Par
1 1 /21/2008 City National Corporation
Beverly Hills
CA
Purchase
Preferred Stock w /W a rra n ts
$400,000,000 Par
1 1 /21/2008 First C om m unity Bankshares Inc.
Bluefield
VA
Purchase
Preferred Stock w /W a rra n ts
1 1 /21/2008 W estern Alliance Bancorporation
Las Vegas
NV
Purchase
Preferred Stock w /W a rra n ts
$140,000,000
Par
Purchase
Preferred Stock w /W a rra n ts
$400,000,000
Par
Preferred Stock w /W a rra n ts
$180,634,000 Par
1 1 /21/2008 W ebster Financial Corporation
W aterbury
CT
11 /2 1/2008 Pacific Capital Bancorp
Santa Barbara
CA
Purchase
Purchase
$25,000,000 Par
$41,500,000 Par
1 1 /21/2008 Heritage Commerce Corp.
San Jose
CA
Purchase
Preferred Stock w /W a rra n ts
1 1 /21/2008 Am eris Bancorp
M o u ltrie
GA
Purchase
Preferred Stock w /W a rra n ts
$52,000,000 Par
1 1 /21/2008 P orter Bancorp Inc.
Louisville
KY
Purchase
Preferred Stock w /W a rra n ts
$35,000,000
Par
1 1 /21/2008 Banner Corporation
W alla Walla
WA
Purchase
Preferred Stock w /W a rra n ts
$124,000,000
Par
Par
1 1 /21/2008 Cascade Financial Corporation
Everett
WA
Purchase
$40,000,000 Par
Preferred Stock w /W a rra n ts
$38,970,000
1 1 /21/2008 Columbia Banking System, Inc.
Tacoma
WA
Purchase
Preferred Stock w /W arrants
$76,898,000 Par
1 1 /21/2008 Heritage Financial Corporation
Olympia
WA
Purchase
Preferred Stock w /W a rra n ts
$24,000,000 Par
1 1 /21/2008 First PacTrust Bancorp, Inc.
Chula Vista
CA
Purchase
Preferred Stock w /W a rra n ts
$19,300,000
1 1 /2 1/2008 Severn Bancorp, Inc.
Annapolis
MD
Purchase
Preferred Stock w /W arrants
$23,393,000
Par
1 1 /21/2008 Boston Private Financial Holdings, Inc.
Boston
MA
Purchase
Preferred Stock w /W a rra n ts
$154,000,000
Par
Par
1 1 /21/2008 Associated Banc-Corp
Green Bay
Preferred Stock w /W a rra n ts
$525,000,000
Par
1 1 /21/2008 Trustm ark Corporation
Jackson
MS
Purchase
Preferred Stock w /W a rra n ts
$215,000,000
Par
1 1 /21/2008 First C om m unity Corporation
Lexington
SC
Purchase
Preferred Stock w /W arrants
Wl
Purchase
1 1 /21/2008 Taylor Capital Group
Rosemont
IL
Purchase
Preferred Stock w /W arrants
1 1 /21/2008 Nara Bancorp, Inc.
Los Angeles
CA
Purchase
Preferred Stock w /W arrants
12/5/2008 M idw est Banc Holdings, Inc.
Melrose Park
IL
$11,350,000 Par
$104,823,000
Par
$67,000,000 Par
Purchase
Preferred Stock w /W arrants
$84,784,000
Par
12 /5/2008 MB Financial Inc.
Chicago
IL
Purchase
Preferred Stock w /W a rra n ts
$196,000,000
Par
12/5/2008 First M idw est Bancorp, Inc.
Itasca
IL
Purchase
Preferred Stock w /W a rra n ts
$193,000,000
12/5/2008 United C om m unity Banks, Inc.
Blairsville
GA
Purchase
Preferred Stock w /W arrants
$180,000,000
Par
12/5/2008 Wesbanco Bank Inc.
W heeling
WV
Purchase
Preferred Stock w /W arrants
$75,000,000
Par
1 2 /5/2008 Encore Bancshares Inc.
Par
Houston
TX
Purchase
Preferred Stock w /W arrants
$34,000,000
Par
1 2 /5/2008 M anhattan Bancorp
El Segundo
CA
Purchase
Preferred Stock w /W arrants
$1,700,000
Par
12/5/2008 Iberiabank Corporation
Lafayette
LA
Purchase
Preferred Stock w /W arrants
$90,000,000 Par
1 2 /5/2008 Eagle Bancorp, Inc.
Bethesda
MD
Purchase
Preferred Stock w /W arrants
$38,235,000 Par
1 2 /5/2008 Sandy Spring Bancorp, Inc.
Olney
MD
Purchase
Preferred Stock w /W arrants
$83,094,000 Par
1 2 /5/2008 Coastal Banking Company, Inc.
Fernandina Beach
FL
Purchase
Preferred Stock w /W arrants
$9,950,000
Par
12 /5/2008 East W est Bancorp
Pasadena
CA
Purchase
Preferred Stock w /W a rra n ts
$306,546,000
Par
Greenville
SC
Purchase
Preferred Stock w /W arrants
$347,000,000 Par
Springfield
MO
Purchase
Preferred Stock w /W arrants
$58,000,000 Par
12 /5/2008 South Financial Group, Inc.
12 /5/2008 G reat Southern Bancorp
8
12/5/2008 Cathay General Bancorp
12/5/2008 Southern Community Financial Corp.
12/5/2008 CVB Financial Corp
12/5/2008 First Defiance Financial Corp.
12/5/2008 First Financial Holdings Inc
12/5/2008 Superior Bancorp Inc.
Defiance
Charleston
Birmingham
12/5/2008 Southwest Bancorp, Inc
12/5/2008 Popular, Inc
12/5/2008 Blue Valley Ban Corp
San Juan
Overland Park
12/5/2008 Central Federal Corporation
12/5/2008 Bank o f Marin Bancorp
Fairlawn
Novato
12/5/2008 Bank o f North Carolina
12/5/2008 Central Bancorp, Inc.
12/5/2008 Southern Missouri Bancorp, Inc
12/5/2008 State Bancorp, Inc.
12/5/2008 TIB Financial Corp
12/5/2008 Unity Bancorp, Inc.
12/5/2008 Old Line Bancshares, Inc
Thomasvilie
Somerville
Poplar Bluff
12/5/2008 FPB Bancorp, Inc
12/5/2008 Sterling Financial Corporation
12/5/2008 Oak Valley Bancorp
12/12/2008 Old National Bancorp
12/12/2008 Capital Bank Corporation
12/12/2008 Pacific International Bancorp
12/12/2008 SVB Financial Group
12/12/2008 LNB Bancorp Inc.
12/12/2008
12/12/2008
12/12/2008
12/12/2008
Wilmington Trust Corporation
Susquehanna Bancshares, Inc
Signature Bank
HopFed Bancorp
12/12/2008 Citizens Republic Bancorp, Inc.
12/12/2008 Indiana Community Bancorp
12/12/2008 Bank o f the Ozarks, Inc
12/12/2008
12/12/2008
12/12/2008
12/12/2008
12/12/2008
12/12/2008
Center Financial Corporation
NewBridge Bancorp
Sterling Bancshares, Inc.
The Bancorp, Inc.
TowneBank
Wilshire Bancorp, Inc.
12/12/2008 Valley Financial Corporation
12/12/2008 Independent Bank Corporation
12/12/2008 Pinnacle Financial Partners, Inc.
12/12/2008 First Litchfield Financial Corporation
12/12/2008 National Penn Bancshares, Inc
12/12/2008 Northeast Bancorp
12/12/2008 Citizens South Banking Corporation
12/12/2008 Virginia Commerce Bancorp
12/12/2008 Fidelity Bancorp, Inc
12/12/2008 LSB Corporation
12/19/2008 Intermountain Community Bancorp
12/19/2008 Community West Bancshares
12/19/2008 Synovus Financial Corp.
12/19/2008 Tennessee Commerce Bancorp, Inc
12/19/2008 Community Bankers Trust Corporation
12/19/2008 BancTrust Financial Group, Inc.
12/19/2008 Enterprise Financial Services Corp.
12/19/2008 Mid Penn Bancorp, Inc.
12/19/2008 Summit State Bank
12/19/2008 VIST Financial Corp.
12/19/2008 Wainwright Bank & Trust Company
12/19/2008 Whitney Holding Corporation
12/19/2008 The Connecticut Bank and Trust Company
12/19/2008
12/19/2008
12/19/2008
12/19/2008
12/19/2008
12/19/2008
12/19/2008
12/19/2008
CoBiz Financial Inc
Santa Lucia Bancorp
Seacoast Banking Corporation o f Florida
Horizon Bancorp
Fidelity Southern Corporation
Community Financial Corporation
Berkshire Hills Bancorp, Inc.
First California Financial Group, Inc
12/19/2008 AmeriServ Financial, Inc
12/19/2008 Security Federal Corporation
12/19/2008 Wintrust Financial Corporation
12/19/2008 Flushing Financial Corporation
12/19/2008 Monarch Financial Holdings, Inc.
12/19/2008 StellarOne Corporation
12/19/2008 Union Bankshares Corporation
12/19/2008 Tidelands Bancshares, Inc
12/19/2008 Bancorp Rhode Island, Inc.
12/19/2008 Hawthorn Bancshares, Inc
12/19/2008 The Elmira Savings Bank, FSB
12/19/2008 Alliance Financial Corporation
12/19/2008 Heartland Financial USA, Inc
2/
2/
2/
3/
2/
2/
2/
2/
2/
2/
2/
Los Angeles
Winston-Salem
Ontario
12/19/2008
12/19/200!
12/19/200!
12/19/200!
Citizens First Corporation
FFW Corporation
Plains Capital Corporation
Tri-County Financial Corporation
12/19/200! OneUnited Bank
12/19/200Î Patriot Bancshares, Inc.
12/19/200! Pacific City Finacial Corporation
12/19/200! Marquette National Corporation
12/19/200! Exchange Bank
12/19/200! Monadnock Bancorp, Inc
12/19/200! Bridgeview Bancorp, Inc.
12/19/200Î Fidelity Financial Corporation
Stillwater
Jericho
Naples
Clinton
Bowie
Port St. Lucie
Spokane
Oakdale
Evansville
Raliegh
Seattle
Santa Clara
Lorain
Wilmington
Lrtitz
New York
Hopkinsville
Flint
Columbus
Little Rock
Los Angeles
Greensboro
Houston
Wilmington
Portsmouth
Los Angeles
Roanoke
Ionia
Nashville
Litchfield
Boyertown
Lewiston
Gastonia
Arlington
Pittsburgh
North Andover
Sandpoint
Goieta
Columbus
Franklin
Glen Allen
Mobile
St. Louis
Millersburg
Santa Rosa
Wyomissing
Boston
New Orleans
Hartford
Denver
Atascadero
Stuart
Michigan City
Atlanta
Staunton
Pittsfield
Westlake Village
Johnstown
Aiken
Lake Forest
Lake Success
Chesapeake
Charlottesville
Bowling Green
Mt. Pleasant
Providence
Lee's Summit
Elmira
Syracuse
CA
NC
CA
Purchase
Purchase
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Purchase
OH
SC
Purchase
Purchase
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/W arrants
$258,000,000 Par
$42,750,000 Par
$130,000,000 Par
$37,000,000 Par
$65,000,000 Par
AL
OK
Purchase
Purchase
Preferred Stock w/Warrants
Preferred Stock w/W arrants
$69,000,000 Par
$70,000,000 Par
PR
KS
OH
Purchase
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
$935,000,000 Par
$21,750,000 Par
$7,225,000 Par
CA
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Preferred Stock w/Warrants
$28,000,000 Par
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
NC
MA
MO
NY
FL
NJ
MD
FL
WA
CA
IN
NC
WA
CA
OH
DE
PA
NY
KY
Ml
IN
AR
CA
NC
TX
DE
VA
CA
VA
Ml
TN
CT
PA
ME
NC
VA
PA
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Purchase
Purchase
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/Warrants
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Purchase
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
MA
ID
CA
Purchase
Purchase
GA
TN
VA
AL
MO
Purchase
Purchase
Purchase
Purchase
Purchase
PA
CA
PA
Purchase
Purchase
Purchase
MA
LA
CT
CO
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
CA
FL
IN
GA
VA
MA
CA
PA
SC
IL
NY
VA
VA
VA
SC
RI
MO
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
$31,260,000 Par
$10,000,000 Par
$9,550,000 Par
$36,842,000 Par
$37,000,000 Par
$20,649,000 Par
$7,000,000 Par
$5,800,000 Par
$303,000,000 Par
$13,500,000 Par
$100,000,000 Par
$41,279,000 Par
$6,500,000 Par
$235,000,000 Par
$25,223,000 Par
$330,000,000 Par
$300,000,000 Par
$120,000,000 Par
$18,400,000 Par
$300,000,000 Par
$21,500,000
$75,000,000
$55,000,000
$52,372,000
Par
Par
Par
Par
$125,198,000 Par
$45,220,000 Par
$76,458,000
$62,158,000
$16,019,000
$72,000,000
$95,000,000
$10,000,000
$150,000,000
$4,227,000
Par
Par
Par
Par
Par
Par
Par
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
$7,000,000
$15,000,000
$27,000,000
$15,600,000
$967,870,000
Par
Par
Par
Par
Par
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
$30,000,000
$17,680,000
$50,000,000
$35,000,000
$10,000,000
$8,500,000
$25,000,000
$22,000,000
Par
Par
Par
Par
Par
Par
Par
Par
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Par
$20,500,000 Par
$71,000,000 Par
$300,000,000 Par
$5,448,000 Par
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
$64,450,000
$4,000,000
$50,000,000
$25,000,000
$48,200,000
$12,643,000
$40,000,000
$25,000,000
Par
Par
Par
Par
Par
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
$21,000,000
$18,000,000
$250,000,000
$70,000,000
$14,700,000
$30,000,000
$59,000,000
$14,448,000
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/W arrants
Preferred Stock w/W arrants
$30,000,000
$30,255,000
$9,090,000
$26,918,000
$81,698,000
Par
Par
Par
Par
$8,779,000
$7,289,000
$87,631,000
$15,540,000
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Dubuque
Bowling Green
NY
NY
IA
KY
Wabash
Dallas
Waldorf
IN
TX
MD
Purchase
Purchase
Purchase
Purchase
Purchase
Boston
Houston
MA
TX
CA
IL
Purchase
Purchase
Purchase
Purchase
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
CA
NH
IL
Purchase
Purchase
Purchase
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
$38,000,000 Par
KS
Purchase
Preferred Stock w / Exercised Warrants
$36,282,000 Par
Los Angeles
Chicago
Santa Rosa
Peterborough
Bridgeview
Wichita
Purchase
Purchase
9
Preferred Stock w/W arrants
Preferred Stock w/W arrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock
$12,063,000 Par
$26,038,000 Par
$16,200,000 Par
$35,500,000 Par
$43,000,000 Par
$1,834,000 Par
2/
2/
2/
2/
2/
2/
2/
2/
2/
3/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
I2/
12/19/200* Bridgeview Bancorp, Inc.
12/19/200* Fidelity Financial Corporation
12/19/200* Patapsco Bancorp, Inc.
12/19/200* NCAL Bancorp
12/19/200* FCB Bancorp, Inc.
12/23/2008 First Financial Bancorp
12/23/2008 Bridge Capital Holdings
12/23/2008 International Bancshares Corporation
12/23/2008 First Sound Bank
12/23/2008 M8iT Bank Corporation
12/23/2008 Emclaire Financial Corp.
12/23/2008 Park National Corporation
12/23/2008 Green Bankshares, Inc.
12/23/2008 Cecil Bancorp, Inc.
12/23/2008 Financial Institutions, Inc.
12/23/2008 Fulton Financial Corporation
12/23/2008 United Bancorporation of Alabama, Inc.
12/23/2008 MutualFirst Financial, Inc.
12/23/2008 BCSB Bancorp, Inc.
12/23/2008 HMN Financial, Inc.
12/23/2008 First Community Bank Corporation o f America
12/23/2008 Sterling Bancorp
12/23/2008 Intervest Bancshares Corporation
12/23/2008 Peoples Bancorp of North Carolina, Inc.
12/23/2008 Parkvale Financial Corporation
12/23/2008 Timberland Bancorp, Inc.
12/23/2008 1st Constitution Bancorp
12/23/2008 Central Jersey Bancorp
12/23/200* Western Illinois Bancshares Inc.
12 /23/200f Saigon National Bank
12 /23/200* Capital Pacific Bancorp
12 /23/200* Uwharrie Capital Corp
12/23/2008 Mission Valley Bancorp
12 /23/2008 The Little Bank, Incorporated
12 /23/2008 Pacific Commerce Bank
12 /23/2008 Citizens Community Bank
12 /2 3/2008 Seacoast Commerce Bank
12 /23/200S TCNB Financial Corp.
12 /2 3/2008 Leader Bancorp, Inc.
12 /23/2008 Nicolet Bankshares, Inc.
12 /23/2008 Magna Bank
12 /23/2008 Western Community Bancshares, Inc.
12/23/2008 Community Investors Bancorp, Inc.
12 /23/2008 Capital Bancorp, Inc.
12 /23/2008 Cache Valley Banking Company
12 /2 3/2008 Citizens Bancorp
12 /23/200S Tennessee Valley Financial Holdings, Inc.
12 /23/2008 Pacific Coast Bankers' Bancshares
12/31/2008 SunTrust Banks, Inc.
12/31/2008 The PNC Financial Services Group Inc.
12/31/2008 Fifth Third Bancorp
12/31/2008 Hampton Roads Bankshares, Inc.
12/31/2008 CIT Group Inc.
12/31/2008 West Bancorporation, Inc.
12 /3 1/2008 First Banks, Inc.
Bridgeview
Wichita
Dundalk
Los Angeles
Louisville
Cincinnati
San Jose
Laredo
Seattle
Buffalo
Emlenton
Newark
Greeneville
Elkton
Warsaw
Lancaster
Atmore
Muncie
Baltimore
Rochester
Pinellas Park
New York
New York
Newton
Monroeville
Hoquiam
Cranbury
Oakhurst
Monmouth
Westminster
Portland
Albemarle
Sun Valley
Kinston
Los Angeles
South Hill
Chula Vista
Dayton
Arlington
Green Bay
Memphis
Palm Desert
Bucyrus
Rockville
Logan
Nevada City
Oak Ridge
San Francisco
Atlanta
Pittsburgh
Cincinnati
Norfolk
New York
West Des Moines
Clayton
IL
KS
MD
CA
KY
OH
CA
TX
WA
NY
PA
OH
TN
MD
NY
PA
AL
IN
MD
MN
FL
NY
NY
NC
PA
WA
NJ
NJ
IL
CA
OR
NC
CA
NC
CA
VA
CA
OH
MA
Wl
TN
CA
OH
MD
UT
CA
TN
CA
GA
PA
OH
VA
NY
IA
MO
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Exercised Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Warrants
Preferred Stock w / Exercised Warrants
TOTAL
1/ Settlement deferred pending merger.
21 Privately-held qualified financial institution; Treasury received a warrant to purchase additional shares of preferred stock, which it exercised immediately.
3/ To promote community development financial institutions (CDFIs), Treasury did not require warrants as part of its investment.
10
$38,000,000
$36,282,000
$6,000,000
$10,000,000
$9,294,000
$80,000,000
$23,864,000
$216,000,000
$7,400,000
$600,000,000
$7,500,000
$100,000,000
$72,278,000
$11,560,000
$37,515,000
$376,500,000
$10,300,000
$32,382,000
$10,800,000
$26,000,000
$10,685,000
$42,000,000
$25,000,000
$25,054,000
$31,762,000
$16,641,000
$12,000,000
$11,300,000
$6,855,000
$1,549,000
$4,000,000
$10,000,000
$5,500,000
$7,500,000
$4,060,000
$3,000,000
$1,800,000
$2,000,000
$5,830,000
$14,964,000
$13,795,000
$7,290,000
$2,600,000
$4,700,000
$4,767,000
$10,400,000
$3,000,000
$11,600,000
$1,350,000,000
$7,579,200,000
$3,408,000,000
$80,347,000
$2,330,000,000
$36,000,000
295,400,000
$187,539,500,000
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
VII. TRANSACTION REPORT - SYSTEMICALLY SIGNIFICANT FAILING
INSTITUTIONS
SYSTEMICALLY SIGNIFICANT FAILING INSTITUTIONS
Seller
Pricing
Date
1 1 /2 5 /2008 AIG
Name o f Institution
City
New York
State
NY
T ransaction Type
Purchase
11
Description
Preferred Stock w / W arrants
Price Paid
Mechanism
$40,000,000,000 Par
V ili. TRANSACTION REPORT - AUTOMOTIVE INDUSTRY FINANCING
PROGRAM
AUTOMOTIVE INDUSTRY FINANCING PROGRAM
Seller
Pricing
Date
State
City
Name of Institution
Description
Transaction Type
Amount
Mechanism
Liquidation
12/29/2008 GMAC LLC
Detroit
Ml
Purchase
Preferred Stock w / Exercised W arrants
$5,000,000,000 Preference
1/
12/29/200! General M otors Corporation
Detroit
Ml
Purchase
Debt Obligation
$1,000,000,000 N/A
2/
12/31/2008 General M otors Corporation
Detroit
Ml
Purchase
Debt Obligation w / Warrants
TOTAL
$9,400,000,000 N/A
$15,400,000,000
Treasury com m itted to lend General M otors Corporation up to $1,000,000,000. The ultim ate level o f funding w ill depend upon the level o f current investor participation in
GMAC LLC's rights offering. Once determined, the Am ount w ill be updated to reflect the final funding level.
2 / The A m ount includes $4,000,000,000 funded on December 31, 2008, and $5,400,000,000 to be funded on January 16,2009; it does not include an additional loan o f $4,000,000,000,
which is contingent on Treasury's authority under section 115(a) o f EESA.
12
IX. TRANSACTION REPORT - TARGETED INVESTMENT PROGRAM
TARGETED INVESTMENT PROGRAM
Seller
Pricing
Date
1 2 /3 1/20008
Name o f Institution
Citigroup
City
New York
State
NY
Transaction Type
Purchase
13
Description
Preferred Stock w / W arrants
Price Paid
Mechanism
$20,000,000,000 Par
X. PROJECTED COSTS AND LIABILITIES
U.S. Treasury Department
O ffice o f Financial S tability
Troubled Asset Relief Program
Projected Costs and Liabilities [Section 105(a)(3((E)]
For Period Ending December 31, 2008
Type of Expense/Liability_____________ Amount
None
U.S. Treasury Department
O ffice o f Financial S tability
Troubled Asset Relief Program
Program m atic Operating Expenses [Section 105(a)(3)(F)]
For Period Ending December 31, 2008
________ Type of Expense_____________________ Amount____________
Compensation for financial agents
and legal firms
$7,757,662
U.S. Treasury Department
Office of Financial Stability
Troubled Asset Relief Program
Insurance Contracts [Section 105(a)(3((B)]
For Period Ending December 31, 2008
Name
Amount
None
Notes: Treasury interprets this reporting requirement as applicable to costs and
liabilities related to insurance contracts entered into under the provisions
o f section 102 o f the EESA. No such contracts have been entered into to date.
14
January 6, 2009
HP-1343
Treasury Announces Results o f High School
Financial Literacy Challenge
W ashington- The Treasury Department today announced the results of the fall
National Financial Literacy Challenge, a web-based contest open to high school
students across the country. At the recommendation of the President's Advisory
Council on Financial Literacy, the Department administered the test from November
3 to December 12 to identify and recognize high school students demonstrating
knowledge of important personal finance concepts.
The first National Challenge was held in May 2008 and attracted 46,000 students.
Due to a positive response from teachers, parents, and students, over 75,000
students participated in the voluntary exam this round.
"We're pleased with the quick growth of the National Challenge and hope it
continues, but there is additional work left to do. The 'challenge' to parents,
teachers, school administrators and policy makers across the country is to get
effective personal finance education into every classroom, for every student. We
owe it to the members of the next generation to properly equip them for the financial
choices and challenges they will face," said Deputy Assistant Secretary for
Financial Education Dan lannicola, Jr.
Students who scored in the top 25th percentile received certificates of recognition
and 362 students earned the National Financial Literacy Award medal for
demonstrating exceptional levels of financial literacy with perfect or near-perfect
scores. In addition to the certificates and medals, each student who obtained a
perfect score received a college scholarship from the Charles Schwab Foundation,
with an additional financial contribution going to each winning student's school.
Laura Levine, member of the President's Advisory Council and Executive Director
of the Jump$tart Coalition for Personal Finance said, "We're proud of the students
who excelled on the Challenge and the parents and teachers who taught them
about money. The reason the President's Advisory Council recommended
implementing the Challenge was to raise awareness of the good work by students
and teachers in the field of personal finance and to encourage other schools to
follow that example."
The Challenge's 35 questions are correlated to the National Standards in K-12
Personal Finance Education published by the Jump$tart Coalition for Personal
Finance in 2007. The questions were developed in consultation with economists,
Junior Achievement USA, the National Council on Economic Education, the
National Endowment for Financial Education and the Jump$tart Coalition for
Personal Financial Literacy.
-30-
http://www.treas.gov/press/releases/hp 1343 .htm
8/3/2010
/ o view o r p rin t the H U t content on this page, download the tree Adobe® Acrobat® Header®.
January 6, 2009
HP-1344
Treasury Releases Statement on
Treasury Markets Practice Group Proposal
Washington, DC - Acting Assistant Secretary for Financial Markets Karthik
Ramanathan released the following statement today on the recent initiatives to
further enhance liquidity in the U.S. Treasury market:
"Treasury supports private-sector initiatives, such as the measures announced by
the Treasury Markets Practice Group this week, to further enhance the depth and
liquidity of the United States Treasury market.
"We commend the TMPG members for their efforts as well as those of the
Securities Industry and Financial Markets Association and the Depository Trust and
Clearing Corporation in working to implement these protocols in a timely manner.
'The practical measures recommended by the TMPG should serve to minimize
episodes of chronic fails, promote overall market liquidity, and enhance the
efficiency and operational integrity of the Treasury marketplace."
TPMG's statement can be found at: http://www.newyorkfed.org/tmpq/pr090105c.pdf
-30-
http://www.treas.gov/press/releases/hp 1344.htm
8/3/2010
January 7, 2009
HP-1345
Remarks by Treasury Secretary Henry M. Paulson, Jr.
on The Role of the GSEs in Supporting the Housing Recovery
before the Economic Club of Washington
Washington - Good afternoon. Thank you, David and thanks to the Washington
Economic Club for this opportunity to provide my thoughts on long-term reform of
the housing Government Sponsored Enterprises, the GSEs, Fannie Mae and
Freddie Mac.
Debate over the role and function of these entities has raged for years. Congress
established Fannie and Freddie decades ago to meet a public policy goal - to
increase the funding available for home mortgage financing. The GSEs achieve this
through providing liquidity to the secondary market for a limited range of home
mortgages, either through credit guarantees on mortgage-backed securities (MBS)
or by directly investing in mortgages and mortgage-related securities through their
retained mortgage portfolios. To further this mission, their congressional charters
grant the GSEs several benefits which together created a perception that the GSEs
were backed by the U.S. government, even though this was not the case. This
"implicit" government guarantee provided the GSEs with a funding advantage over
other mortgage market participants.
The inherent conflict in this structure is obvious - the GSEs served both a public
mission and private shareholders - they received public support but operated for
private shareholder gain. While policymakers of every ideological stripe have
acknowledged the risks created by this conflict, entrenched debate, often with little
recognition of market realities, prevented reform. Over time, the GSEs' advantages
enabled them to grow at a phenomenal pace, so that today they have $5.4 trillion in
obligations outstanding, held by investors in the U.S. and around the world. As a
comparison, that is almost 40 percent the size of the entire $14 trillion U.S.
economy. The systemic risk posed by such size was heightened by the fact that
investors assumed that GSE securities were backed by the U.S. government and
therefore virtually risk-free, despite repeated statements by consecutive U.S.
administrations to the contrary. These debt-holders would be the largest, but not the
only, conduits of systemic impact should either GSE fail. Derivative counterparties,
for example, would also be overwhelmed by a default of either GSE.
For some time market participants had questioned whether the GSEs were
adequately capitalized for the risk they were taking, and therefore able to withstand
losses without triggering a systemic event. Policymakers acknowledged that the
GSE regulator did not have the authorities to address these risks, yet they could not
reach consensus to improve it, and instead left a clearly inadequate regulatory
structure in place. When I came to Washington, I saw an opportunity to improve the
regulatory structure, even if it wouldn't be perfect. I set to work in the fall of 2006 to
broker progress in the House, and we did begin to solve some of the seemingly
intractable differences.
Even as Washington debated GSE oversight, there was little debate over the extent
to which government should subsidize homeownership, and whether such
government support was contributing to a housing bubble. The U.S. government
has many policies that subsidize homeownership —it would be oversimplifying and
wrong to blame Fannie and Freddie for the bubble, but they clearly are part of the
public policy bias that contributed to it.
In sum, the GSE reform debate was largely frozen in place, or moving at glacial
http://www.treas.gov/press/releases/hp 1345.htm
8/3/2010
speed. Then suddenly, the unprecedented housing correction shifted the ground
under that debate and forced action.
Today I will review the actions we have taken and their effect, and address two
issues before us. First, in the short-term, how do we use the GSEs to mitigate the
current credit crisis and housing downturn? Second, given the temporary nature of
their current status, how might we address the appropriate long-term structure?
Prelude to Recent Actions Regarding Fannie Mae and Freddie Mac
As we progressed through the current housing market downturn, investors fled
mortgages that carried any credit risk. But because the GSEs take the credit risk on
the mortgages they guarantee and because investors believed there was implicit
government backing, the conforming loan market continued to function relatively
well. As a result, the GSE share of new mortgage business rose from 46 percent in
the second quarter of 2007 to 84 percent in the second quarter of 2008. Without the
GSEs to finance mortgages, it was very clear that mortgage finance would
essentially dry up.
However, as the extraordinary housing correction deepened, weaknesses in these
entities became apparent. In July 2008, investors lost confidence as they became
increasingly uncertain about Fannie and Freddie's capital position. The GSEs'
already depressed stock prices plummeted further. Shareholder losses did not pose
a public policy concern, but the share price drop further weakened confidence
among the holders of the $5.4 trillion of GSE debt and MBS. Investors at home and
abroad were reducing purchases and even selling from their holdings of GSE debt.
The consequences of either GSE failing would be catastrophic. We couldn't wait for
a failure; we had to act preemptively to shore up confidence in these enterprises.
In July, I requested that Congress quickly complete work on long-sought GSE
regulatory reform and also provide Treasury with expanded authority to support
Fannie, Freddie and the Federal Home Loan Banks. Congress did so - giving us
enormous temporary authorities to inject capital if the GSEs asked for it, and to
create a back up liquidity facility for GSE debt.
Immediately after passage of the legislation, in coordination with the Federal
Reserve, the newly-constituted GSE regulator, FHFA, and our advisor Morgan
Stanley, we began a comprehensive financial review of the GSEs. At the same
time, mortgage market conditions continued to deteriorate. Negative earnings
announcements by Fannie and Freddie in August reflected those worsening
conditions, and further roiled markets. Neither company appeared to have any
reasonable prospect of raising private capital to allay those concerns in the
foreseeable future, and our examination found capital to be inadequate - in terms
of both the quality of capital and the embedded losses stemming from worsening
mortgage market conditions.
Confidence in the GSE model was largely shattered. It was clear to me that simply
injecting even a great deal of equity into their business model would not create the
market confidence necessary to fund these enterprises going forward and to bolster
confidence in the $5.4 trillion of extant GSE obligations, which posed the greatest
systemic risk. Market fragility and the GSEs' deteriorating balance sheets required
that we take responsibility for the GSE structural ambiguities that U.S. policymakers
had let fester for decades. If we had asked Congress for, and received, the power
to explicitly guarantee the GSEs' obligations, we would have done so. But without
that authority, we had to be creative and find a way to effectively guarantee the
GSEs' obligations.
We had to stabilize the situation immediately. We knew that markets were
exceptionally fragile and would be further threatened in September when we
expected that a number of large financial institutions, including Lehman Brothers,
would post disappointing earnings. Chairman Bemanke, FHFA Director Lockhart
and I met almost daily, over a 10 day period, to work toward a comprehensive
action plan. As I made clear at the time, we sought a temporary solution that would
achieve three goals: (1) stabilize markets, (2) promote mortgage availability, and (3)
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protect the taxpayer.
In comprehensive action taken on September 7th, FHFA placed Fannie and
Freddie into conservatorship, enabling Treasury to take creative steps to support
their obligations. We moved quickly to do what was necessary. Our actions would
have been impossible to implement were it not for the GSE reform legislation that
gave FHFA the expanded power to make qualitative and quantitative judgments
about capital and also gave Treasury the financial authorities necessary to make
conservatorship a stabilizing, as opposed to a destabilizing, event. We devised
Preferred Stock Purchase Agreements to effectively guarantee the GSEs'
obligations by ensuring Fannie and Freddie would maintain a positive net worth.
This commitment ensures that they can fulfill their financial obligations, even after
the temporary authorities expire in December 2009. Additionally, Treasury
established a new secured lending credit facility intended to serve as an ultimate
liquidity backstop. To further support the availability of mortgage financing, Treasury
initiated a program to purchase GSE MBS and has purchased over $50 billion thus
far.
We took these actions first, to avert the financial market meltdown that would ensue
from the collapse of these institutions and, second, to allow the GSEs to continue,
in the midst of overall market stress, to perform their essential role of providing
mortgage finance. This conservatorship, with the explicit backing of the federal
government, is temporary and must be resolved for the long-term. In the meantime,
the GSEs must serve the taxpayers' interest by assisting in turning the corner on
the housing correction, which is critical to return normalcy to the capital markets
and resume U.S. economic growth. The GSEs can facilitate progress through the
housing correction by keeping mortgage rates low and by mitigating foreclosures.
Keeping Mortgage Rates Low
Lower mortgage rates enable more potential homebuyers to return to the market
and help put a floor under home prices. Initially, following our September actions,
mortgage rates did fall. Market turmoil subsequently increased and mortgage rates
rose, but not nearly as much as the cost of other forms of credit. Still, neither the
taxpayers nor the economy were getting the full benefit of the agreements put in
place to effectively guarantee GSE debt. We could have gone back to Congress to
ask for authority to directly guarantee GSE debt, however this would have been
difficult to achieve. While a simple, direct government guarantee of GSE MBS might
have reduced rates further - given the extraordinary strains in today's markets it
probably would still have failed to produce all of the desired mortgage rate
reductions. Therefore, we examined other means of deploying our authorities that
could reduce mortgage rates.
We immediately noted that, given the effective government guarantee and the
spread between Treasury rates and those of the GSEs, the taxpayers would profit if
the government simply issued Treasuries to buy GSE securities. And in fact, we
have funded the purchase of GSE securities with the issuance of Treasury bonds.
But to make an impact on mortgage rates, such an initiative would have to be very
large and those Treasury issuances would count against the debt limit.
On November 25, the Federal Reserve announced a new program to purchase up
to $100 billion in GSE debt securities and $500 billion in GSE MBS. This Federal
Reserve program had a significant impact. The 30-year fixed rate has fallen from an
average of 6.04 percent the week before the policy was announced to a record low
5.10 percent last week, accomplishing a vitally important step in addressing this
housing correction - lower mortgage rates that may bring additional credit-worthy
buyers into the housing market.
Foreclosure Mitigation Efforts
While the GSEs are in this temporary form, we have also worked to increase their
impact on foreclosure mitigation. In November, FHFA, the GSEs, Treasury and the
HOPE NOW Alliance announced a major streamlined loan modification program
(SMP) to move struggling homeowners into affordable mortgages. The new
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protocol relies heavily on the "IndyMac model" developed by the FDIC and creates
sustainable monthly mortgage payments by targeting a benchmark ratio of housing
payments to monthly gross income. Together with the IndyMac/FDIC protocol, the
SMP creates a powerful new model that should help ensure that no borrower who
wants to stay in their home and can make a reasonable monthly payment will fall
into foreclosure.
The SMP will directly and immediately apply to the 50 percent of homeowners with
loans serviced under the GSEs' auspices. Fannie and Freddie announced that they
would suspend foreclosure sales and cease evictions of owner-occupied homes
until January 9th to allow time for implementation of the modification program. The
timing of this initiative is especially important as prime loans now account for almost
50 percent of new delinquencies, and delinquencies are increasingly the result of
overall economic factors rather than the loan features and underwriting practices
associated with Alt-A and subprime products.
And the impact of the SMP will go much further. The vast majority of servicing
contracts for non-GSE mortgages reference the GSEs' practices, and we therefore
expect the SMP to be widely adopted and quickly move hundreds of thousands of
struggling borrowers into sustainable, affordable mortgages. Further, this
streamlined protocol frees up servicing industry resources that can be redirected to
providing case-by-case assistance to more difficult cases that fall outside the SMP
protocol.
Impact of Temporary Authorities to Stabilize the GSEs
Given the authority granted by Congress last summer, we have gone about as far
as we can to avert systemic risk and to use the GSEs to speed progress through
the housing correction that lies at the heart of our economic downturn. Although the
effective guarantee of GSE debt and MBS has brought some degree of
stabilization, it is not the most efficient way to remove the ambiguity inherent in the
GSE structure, even temporarily.
To the extent that the Congress and the next Administration wish to use the GSEs
as a tool to further reduce mortgage rates, they could, under existing authorities,
make large purchases of mortgages made at a target rate of, say, 4 percent although very large volumes of Treasury issuances would be required for such a
program to be effective. A targeted program such as one that purchases only new
mortgages made for home purchases, as opposed to refinancing, for a one year
period would require less but still substantial funding. Separately, the next
Administration could pursue legislative authority to directly guarantee GSE debt for
the remainder of the conservatorship period.
Long-Term Policy Recommendations
The GSEs are playing a necessary role supporting the mortgage availability which
is essential to eventually turning the corner on the housing correction, reducing the
stress in our capital markets and returning to growth in our economy. This must
continue to be our first priority. But we will make a grave error if we don't use this
period to decide what role government in general, and these entities in particular,
should play in the housing market.
The public debate over the long-term structure of the GSEs is dramatically changed
today - no one any longer doubts the systemic risk these entities posed. It is clear
to all conservatorship is a temporary form, and that returning the GSEs to their pre
conservatorship form is not an option.
The debate about the future of Fannie and Freddie requires answering the much
larger and more important question of the federal government's role in the
mortgage market and in housing policy, generally. Given the bubble we have
experienced, policymakers must ask what amount of homeownership subsidies are
appropriate. Numerous long-standing indirect subsidies already exist, including the
mortgage interest deduction, subsidized FHA mortgages, and the variety of other
HUD programs that expand homeownership opportunities.
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Is that enough? Or should government also reduce mortgage rates for a larger
group of homebuyers? Policymakers must decide if the GSE subsidy is a public
policy priority. If the GSEs are to play a role, then, the debate is clearly framed:
Government support needs to be either explicit or non-existent, and structured to
resolve the conflict between public and private purposes. Any middle ground is a
recipe for another crisis. Although there are strong differences of opinion over the
government's role in supporting housing, under any course policymakers choose,
there are structures and choices that can resolve the long-term conflict of purposes
issues.
And it is clear that to protect against systemic risk in the future, the GSEs should be
constituted with a portfolio no larger than what is minimally necessary for
warehousing purposes. Without portfolios of significant size, the enterprises'
management of interest rate risk would remain a vital function for the safety and
soundness of the enterprises, but would no longer present the same potential
systemic risk.
As a public policy tool to expand homeownership, the GSEs, like FHA-Ginnie Mae,
reduce mortgage rates for borrowers by taking on the credit risk that mortgage
investors would otherwise bear and guaranteeing that mortgage investors will be
paid in full should the mortgage borrower default. As Congress considers the future
role and structure of the GSEs, it must consider how much credit risk the Federal
government should take.
Addressing Credit Risk
In today's stressed mortgage market, between FHA-Ginnie Mae, Fannie Mae, and
Freddie Mac, almost all new mortgage market originations have federal government
credit support. This is not sustainable over the long-run. It will lead to inefficiency,
less innovation and higher costs. It also contradicts basic U.S. market principles.
We must have some degree of private sector involvement in the evaluation of credit
risk if we are going to have a mortgage market that allocates resources with
efficiency.
In the mortgage market of the future, I clearly see a role for the FHA and Ginnie
Mae for first-time and low income homebuyers. Beyond the explicit guarantee
provided to FHA and Ginnie Mae policymakers must decide how much to further
subsidize mortgage credit risk, if at all, and must decide the role of private capital in
any subsidy plan. Depending on the degree of subsidy policymakers choose, there
are a variety of options for structures to replace the GSEs, including:
(1) Expanded FHA/Ginnie Mae. Some advocate that beyond the current credit crisis
the U.S. government's long-term policy should make the implicit, explicit. Explicitly
guaranteeing Fannie and Freddie's obligations would essentially nationalize this
significant portion of the U.S. housing finance market. Under this model, the GSEs
could become a government entity, or their functions could be absorbed by
FHA/Ginnie Mae . In either case, the GSEs would no longer have private
shareholders. The size of the eligible population of homebuyers would determine
how large a share of mortgage credit exposure the government would own.
I view the permanent nationalization of the GSEs, essentially expanding the role of
FHA and Ginnie Mae, as a less-than optimal model. While it offers the perceived
advantage of explicit government support, it eliminates the necessary private sector
evaluations of credit risk and the private market stimulus to innovation.
(2) Partial Guarantee. A hybrid of this would be to create a Ginnie Mae-like entity
for non-FHA mortgages, structured as a partial guarantee mechanism. The new
entity could operate on a similar basis as Ginnie Mae, but provide only partial
guarantees for MBS. Investors would then have a floor under potential MBS losses,
but would still evaluate the credit risk associated with individual issuers. While such
a hybrid program would clearly define the extent of the government's guarantee,
developing risk sharing parameters compatible with profit incentives would be as
problematic, and potentially as inefficient, as in the current GSE structure.
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(3) Privatization. A third alternative would be to remove all direct or indirect
government support, completely privatizing these companies while breaking them
up to minimize systemic risk. As appealing as this alternative sounds, it is difficult to
envision a sound, practical, private sector mortgage insurance business of any
significant size that does not require large amounts of capital, and consequently
generates only a modest return on capital. The recent problems encountered by
monoline insurers, which ventured into guaranteeing mortgage product as well as
the experience of the GSEs, underscores this point. Moreover, a break up scenario
does not look particularly promising, as reverse economies of scale would take
hold. It is also worth noting that a regional mortgage insurer would lack diversity as
a risk mitigant. Perhaps a consortium of banks would find it advantageous to own a
national mortgage insurer to wrap their product, or some other good private sector
business model may emerge. But I am skeptical that the "break it up and privatize
it" option will prove to be a robust or even viable model of any substantial scale,
without some sort of government support or protection. However, should
policymakers choose to scale back public policy bias toward homeownership, we
will eventually find out what business model the free market would support.
(4) Housing Utility. Finally, given traditional U.S. public policy support for
marshalling private capital to expand homeownership, establishing a public utility
like mortgage credit guarantor could be the best way to resolve the inherent conflict
between public purpose and private gain. Under a utility model, Congress would
replace Fannie Mae and Freddie Mac with one or two private sector entities. The
entities would purchase and securitize mortgages with a credit guarantee backed
by the federal government, and would not have investment portfolios. These entities
would be privately-owned, but governed by a rate setting commission that would
establish a targeted rate of return, thereby addressing the inherent conflicts
between private ownership and public purpose that are unresolved in the current
GSE structure. This commission would also approve mortgage product and
underwriting innovations to continually improve the availability of mortgage finance
for a population to be defined by the Congress. In this model, continued safety and
soundness regulation would be essential.
Need to Support Vibrant Private Market
If we are to maintain a private-sector secondary mortgage market - which I believe
serves the taxpayer and the homebuyer equally well - then we must enhance the
ability of depository institutions to fund mortgages, either as competitors to a newlyestablished government structure or as a substitute for government funding. One
way to do this is for the government to receive some compensation for its
guarantee. The current GSE Preferred Stock Purchase Agreements take a small
step in this direction, in that as of 2010 the GSEs must pay the government a fee
for the taxpayer backstop on their guarantees. Of course, if this rate perfectly
reflected the risk versus the cost of the guarantee, there would be no subsidy to
mortgage availability. It is obviously inherently difficult to reach an exactly correct
price, yet a long-term fee-like structure in exchange for explicit government backing
would help to reduce advantages over private institutions. Over time, another
approach might be to offer other financial institutions the opportunity to pay a fee for
government backing on securitized, conforming loans, a structural transformation
that would lower entry barriers, and increase competition and innovation in housing
finance.
Covered bonds are another private sector alternative worth exploring. The FDIC
has made regulatory changes to support the emergence of covered bonds, which
could provide enhanced opportunities for depository institutions to fund and
manage mortgage credit risk. There is strong interest in developing a U.S. covered
bond market, but we will have to work through the credit crisis before a new market
is likely to take hold. Some have advocated dedicated covered bond legislation,
which could be helpful to establishing this market, and should be considered in the
context of broader housing finance reforms.
Additionally, the President's Working Group on Financial Markets has
recommended extensive reforms in the mortgage securitization process by
investors, ratings agencies, underwriters and regulators, especially with respect to
mortgage origination oversight. When these reforms are in place, we expect private
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label securitization to return with greater oversight and market discipline.
Conclusion
My thoughts today are intended to inform the necessary debate over the future
structure of the housing GSEs. By allowing the GSE structural ambiguities to persist
for too long, U.S. policymakers have created an untenable situation. Today, Fannie
Mae and Freddie Mac are in a temporary form that, while stable, cannot efficiently
serve their Congressionally-chartered mission and protect the taxpayers'
investment over the long-term. We took the right actions to meet a specific need at
a specific time.
The GSEs are critical to getting us through this current period, and this is our first
priority. More may need to be done to clarify and simplify their structure and to
increase their effectiveness in curbing further housing price correction. But we
cannot look only at this short-term need; policymakers must resolve the question of
long-term structure because the pre-conservatorship model has been disproven.
The first step must be for policymakers to decide - in light of the recent housing
bubble and the severe financial and economic penalty it has imposed on our nation
- the role government should play in supporting home ownership. We cannot allow
a repeat of the devastation this housing correction has wreaked on families and
communities across the United States. Once that decision is made, the GSEs
should be restructured to meet that public policy choic'e and satisfy three objectives:
First, there must be no ambiguity as to government backing. It must be explicit or
non-existent. Second, there must be a clear means of managing the conflict
between public support and private profit. Third, there must be strong regulatory
oversight of the resulting institutions.
As I have outlined, whatever role the U.S. government chooses to play in
subsidizing mortgage finance, there is a structure that can meet the objectives. With
the knowledge of recent experience, we have a responsibility to begin work now on
a long-term GSE structure which avoids the dangerous mix of policy and market
distortions created by the former flawed GSE model. Thank you.
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January 8, 2009
HP-1346
Treasury Releases Fourth Tranche Report
Washington, DC - The Treasury Department today released the fourth Tranche
Report to Congress, as required by section 105(b) of the Emergency Economic
Stabilization Act. All Tranche Reports can be found at:
http://www.treasury.gov/initiatives/eesa/tranche-reports.shtml.
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January 8, 2009
HP-1347
Interim Assistant Secretary for Financial Stability
Neel Kashkari Remarks at Brookings Institution
Washington - Good afternoon. Thank you, Martin, for that kind introduction. I
would also like to thank the Brookings Institution for hosting us today. I will provide
a comprehensive update on the Treasury Department's progress in implementing
the Troubled Asset Relief Program (TARP), and then spend some time taking
questions from the audience and having a discussion.
We are in an unprecedented period and market events are moving rapidly and
unpredictably. We at Treasury have responded quickly to adapt to events on the
ground. Throughout the crisis, we have always acted with the following critical
objectives in mind: one, to stabilize financial markets and reduce systemic risk; two,
to support the housing market by avoiding preventable foreclosures and supporting
mortgage finance; and three, to protect taxpayers. The authorities and flexibility
granted to us by Congress have been essential to developing the programs
necessary to meet these objectives.
A program as large and complex as the TARP would normally take many months or
years to establish. But, we did not have the luxury of first building the operation,
then designing our programs and then executing them. Given the severity of the
financial crisis, we had to build the Office of Financial Stability, design our
programs, and execute them - all at the same time. We have made remarkable
progress since the President signed the law only 97 days ago.
Today, I will brief you about five areas. First, I will give an update on execution of
the programs Treasury has implemented under the TARP. Second, I will review the
progress we've made in building the Office of Financial Stability. Third, I will provide
an update on our efforts to meet the highest standards for compliance and
oversight. Fourth, I will review the thorough reporting requirements we continue to
meet. Finally, I will update you on some of the measurements we look at to judge if
our programs are working.
Update on TARP Programs
I will begin with the Capital Purchase Program (CPP). On October 14, Secretary
Paulson announced that we would allocate $250 billion of the financial rescue
package for a voluntary capital purchase program for healthy, viable banks of all
sizes. The CPP was designed to first stabilize the financial system by increasing the
capital in our banks, and then to restore confidence so credit could flow to our
consumers and businesses.
People often ask: why are we investing in healthy banks? Shouldn't the TARP be
used for failing banks? Healthy banks are in the best position to support their
communities by extending credit. A dollar invested in a healthy bank is far more
likely to be used to promote lending to creditworthy borrowers than a dollar invested
in a failing bank, which would more likely use it to stay afloat.
It has been 86 days since Secretary Paulson announced the Capital Purchase
Program. We started from scratch, recruited and built a world class team, designed
the program details, hired necessary outside vendors, and implemented a complex,
but efficient processing model. In that time, we have invested $178 billion in 214
institutions in 41 states across the country, as well as Puerto Rico.
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There is a huge demand for the program: the number of applications under-review
at the regulators is in the thousands, representing every state in the country, and
hundreds more have already been pre-approved by Treasury. We are pleased with
the large number of banks that have applied. The regulators are working diligently
to get through their review and forward recommended applications to us as quickly
as they can. We expect their review to continue over the next few months.
We continue to process applications quickly but carefully to ensure our program
guidelines and goals are met. Our investment committee meets virtually every day
to review applications as soon as they are sent to us by the regulators and we close
transactions often within days of approval. In fact, we find that institutions need
more time to complete their legal requirements than Treasury needs to execute the
investments.
Our work will not let up until the last application has been reviewed and processed.
Completing investments in more than 200 institutions across the nation in less than
90 days is a feat that I believe is unmatched in the public or private sectors. This
progress is remarkable not only in its speed and quality, but also in its scope. We
have reviewed applications from every state in the nation and touched almost every
banking market with applications from small and large banks alike, including
Community Development Financial Institutions. The largest investment under the
CPP has been $25 billion and the smallest less than $2 million, with applications for
upcoming investments of a few hundred thousand dollars.
Automotive Industry Financing Program
Next, I will discuss Treasury's actions under TARP to support the auto sector. While
the TARP was designed to stabilize the financial sector, the legislation provided
sufficiently broad authority to act to stabilize the domestic automotive industry.
Absent congressional action, no other authority existed within the federal
government to stave off a disorderly bankruptcy of one or more auto companies.
Treasury was forced to act to prevent a significant disruption of the automotive
industry that would pose a systemic risk to financial markets and negatively affect
the real economy.
Last week, Treasury began funding transactions under this program. We funded our
full commitment of a $4 billion loan to Chrysler, and we funded the first $4 billion of
a $13.4 billion commitment to GM - the last $4 billion of which depends on future
congressional action. The terms of these loans require the companies to move
quickly to develop plans demonstrating long-term viability, and they also include
significant taxpayer protection provisions.
Because the finance companies serve as the lifeblood of the automakers, we knew
that our program would need to address the short-term needs of the auto finance
companies as well. Last week, we funded a $5 billion investment in GMAC. We also
committed to an additional $1 billion loan to GM to be used to participate in a rights
offering at GMAC as part of its recapitalization in becoming a bank holding
company.
These financings were designed to use our limited remaining resources to address
the participating companies' short-term needs while providing them enough time to
begin the hard work with all stakeholders that will be necessary to achieve viability.
Term Asset-Backed Securities Lending Facility
Support of the consumer finance sector is a high priority for Treasury because of its
fundamental role in fueling economic growth. Like other forms of credit, affordable
consumer credit depends on ready access to a liquid and affordable secondary
market - in this case, the asset-backed credit market.
The Federal Reserve is setting-up a $200 billion program to support consumer
finance securitization markets, specifically credit cards, auto loans, student loans
and small business loans. Linder the TARP, Treasury will provide $20 billion in this
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facility, which will enable a broad range of institutions to step up their lending and
enable borrowers to have access to lower-cost consumer finance and small
business loans. The facility may be expanded over time and eligible asset classes
may be expanded later to include other assets, such as commercial mortgagebacked securities, non-agency residential mortgage-backed securities or other
asset classes. Treasury and the Federal Reserve continue to make progress in
establishing this facility, which we expect to become operational in February.
Asset Guarantee Program
We established the Asset Guarantee Program under section 102 of the EESA. This
program provides guarantees for assets held by systemically significant financial
institutions that face a risk of losing market confidence due in large part to a
portfolio of distressed or illiquid assets. Treasury is exploring use of this program to
address the $5 billion guarantee provisions of our recent agreement with Citigroup.
Targeted Investment Program
As part of our recent $20 billion investment in Citigroup, Treasury also established
the Targeted Investment Program, the objective of which is to foster financial
market stability. In an environment of high volatility and severe financial market
strains, the loss of confidence in a major financial institution could result in
significant market disruptions that threaten the financial strength of similar
institutions. This investment in Citigroup includes important restrictions on executive
compensation and corporate expenses as well as provisions to protect the
taxpayers.
Building the Office o f Financial Stability
Let me now turn to our work to establish the Office of Financial Stability. I
mentioned that a program as large and complex as the TARP would normally take
many months or years to establish. Given the severity of the financial crisis, we had
to build the Office of Financial Stability, design our programs, and execute them - all
at the same time.
Recruiting excellent people was the first and most important part of successfully
establishing the office. We started by tapping the very best, seasoned, financial
veterans from across the government and private sector to help launch the
program. We were successful in quickly recruiting outstanding interim leaders for
key positions in the office. In each case, the interim official was charged with: one,
setting up the office; two, hiring permanent staff; three, operationalizing our
programs; and, four, identifying their permanent successor. That process has
worked extremely well.
Today we have almost 90 dedicated TARP staff, including full-time employees we
have hired since the law was signed and experienced detailees we have recruited
from across the government. In many cases, those detailees are choosing to
become permanent members of the TARP team. This does not include the
numerous main Treasury employees who are spending most of their time on TARP.
We also have a robust pipeline of outstanding new people joining the team each
week.
We have worked very hard to ensure the transition to the next Administration is
smooth. The only political position within in the TARP is the Assistant Secretary
position. Almost all of the remaining positions are being filled by people who are
planning to remain with the program after the transition. The next Administration will
inherit an Office of Financial Stability that is fully-staffed and executing extremely
well. We have worked very hard to make sure there would be continuity so the
program does not slow down. As I previously mentioned, we have many
applications to process for the CPP over the next several months. We have made
sure the team is in place to see that work through. We have also worked closely
with the GSA to acquire dedicated space for the entire team. We moved in this past
Monday and we expect the Special Inspector General will move to the same space
in the next few weeks.
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For a sense of the execution challenges this team has already successfully faced,
consider that last week alone, our team closed $48 billion of transactions. We
signed and funded over $15 billion in our Capital Purchase Program, a $20 billion
investment in Citigroup, and a total of $13 billion to GMAC, GM and Chrysler.
Compliance and Oversight
I will now turn to oversight. Congressional committees of jurisdiction are the
traditional bodies of oversight and Treasury has participated in five Congressional
hearings on the TARP since the EESA was passed. In addition, the Congress
established four additional avenues of oversight: one, the Financial Stability
Oversight Board; two, the Special Inspector General; three, the Government
Accountability Office; and four, the Congressional Oversight Panel. I will briefly
review Treasury's interaction with each body.
First, we moved immediately to establish the Financial Stability Oversight Board,
which is chaired by Federal Reserve Chairman Bernanke. The law requires the
Board to meet once a month, but it has met multiple times since the law was
signed, with numerous staff calls between meetings. We have also posted the
bylaws and minutes of the Board meetings on Treasury's website.
Second, the law also requires appointment of a Senate-confirmed Special Inspector
General to oversee the program. We welcome the Senate's confirmation of Neil
Barofsky as the Special Inspector General. I meet weekly with the Inspector
General and our staffs meet regularly.
Third, the law calls for the Government Accountability Office to establish a physical
presence at Treasury to monitor the program. Treasury provided workspace for our
auditors within days of the President signing the law. I have participated in multiple
briefings with the GAO and our respective staffs are meeting almost daily for
program updates and to review contracts.
Finally, the law called for the establishment of a Congressional Oversight Panel to
review the TARP. That Oversight Panel was recently formed and we had our first
meeting on Friday, November 21 and our second meeting on Thursday, December
18. The Congressional Oversight Panel posed a number of questions to Treasury
and we provided a detail response which we published on our website on
December 31.
Reporting and Transparency
Next, I will discuss reporting requirements and transparency. Reporting results to
Congress and the American people is a critical responsibility of the TARP. People
need to see what we are doing, understand why we are doing it, and know the
effects of our actions. The law defined numerous reporting requirements for the
TARP, which I will briefly review here. Treasury has met all of our reporting
requirements on time, and will continue to do so. All of our reports are posted on
the Treasury website.
*
First, the law requires Treasury to publish a Transaction Report within two
business days of completing each TARP transaction. We have published
eleven transaction reports so far.
* Second, the law requires Treasury to publish a Tranche Report to Congress
within seven days of each $50 billion commitment that is made. To date,
Treasury has published four Tranche Reports, including one this week.
* Finally, the law requires Treasury to provide a detailed report on the overall
program within 60 days of the first exercise of the TARP purchase authority
and then monthly thereafter. We have published two such reports so far, the
most recent this week.
Measuring Results
Finally, I will address the important issue of measuring the results of our programs.
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People often ask: how do we know our programs are working? The most important
evidence that our strategy is working is that we have stemmed a series of financial
institution failures. The financial system is fundamentally more stable than it was
when Congress passed the legislation. While it is difficult to isolate one program's
effects given policymakers' numerous actions, one indicator that points to reduced
risk of default among financial institutions is the average credit default swap spread
for the eight largest U.S. banks, which has declined by about 275 basis points since
before Congress passed the EESA. Another key indicator of perceived risk is the
spread between LIBOR and OIS: 1-month and 3-month LIBOR-OIS spreads have
declined about 202 and 147 basis points, respectively, since the law was signed
and about 312 and 242 basis points, respectively, from their peak levels before the
CPP was announced.
People also ask: when will we see banks making new loans? It is important to note
that almost $75 of the $250 billion CPP has yet to be received by the banks.
Treasury is executing at a rapid speed, but it will take some time to review and fund
all the remaining applications. This capital needs to get into the system before it can
have the desired effect. In addition, we are still at a point of low confidence - both
due to the financial crisis and the economic downturn. As long as confidence
remains low, banks will remain cautious about extending credit, and consumers and
businesses will remain cautious about taking on new loans. As confidence returns,
Treasury expects to see more credit extended.
People have then asked: how will you track lending activity? Treasury has been
working with the banking regulators to design a program to measure the lending
activities of banks that have received TARP capital. We plan to use quarterly call
report data to study changes in the balance sheets and intermediation activities of
institutions we have invested in and compare their activities to a comparable set of
institutions that have not received TARP capital investments. Because call report
data is infrequent, we also plan to augment that analysis with a selection of data we
plan to collect monthly from the largest banks we have invested in for a more
frequent snapshot.
The increased lending that is vital to our economy will not materialize as fast as any
of us would like, but it will happen much faster as a result of deploying resources
from the TARP to stabilize the system and increase capital in our banks.
Conclusions
While we have made significant progress, we recognize challenges lie ahead. As
Secretary Paulson has said, there is no single action the federal government can
take to end the financial market turmoil and the economic downturn, but the
authorities Congress provided last fall dramatically expanded the tools available to
address the needs of our system. We are confident that we are pursuing the right
strategy to stabilize the financial system and support the flow of credit to our
economy. We have worked around the clock to build the Office of Financial
Stability, design our programs, and execute them and will hand the next
Administration a program that is staffed and fully operational. Thank you and I
would be happy to take your questions.
-30-
www.treas.gov/press/releases/hp 1347.htm
8/3/2010
PRESS ROOM
January 9, 2009
2009-1-9-13-42-45-12516
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S,
reserve assets totaled $78,006 million as of the end of that week, compared to $78,334 million as of the end of the
prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
1
1
January 2, 2009
A
¡A. Official reserve assets (in US millions unless otherwise specified) 1
Euro
Yen
|(1) Foreign currency reserves (In convertible foreign currencies)
|(a) Securities
9,565
||l 4,187
|of which: issuer headquartered in reporting country but located abroad
Total
3 ? 8 ,0 0 6
||23,752
II
ll°
|(b) total currency and deposits with:
(i) other national central banks, BIS and IMF
11,125
||6,941
||l 8.066
of which: located abroad
ii
II
(iii) banks headquartered outside the reporting country
ii
no
llo
no
no
ii) banks headquartered in the reporting country
n
of which: located in the reporting country
(2) IMF reserve position ^
7,662
(3) SDRs 2
9,315
(4) gold (including gold deposits and, if appropriate, gold swapped) ^
11,041
-volum e in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
8,169
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
8,169
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
-lo a n s not included in official reserve assets
-financial derivatives not included in official reserve assets
|—gold not included in official reserve assets
| -o th e r
II
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
I
II
n
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/20091913424512516.htm
8/3/2010
-outflow s (-)
||Principal
-in flow s (+)
||Principal
¡¡Interest
Interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-544,474
-150,695
-393,779
(b) Long positions (+)
! 3. Other (specify)
|[ -outflow s related to repos (-)
| -in flow s related to reverse repos (+)
| -tra d e credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominal value)
Il
I
II
Maturity breakdown (residual maturity, where
applicable)
f
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
¡1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt failing due within 1
year
!(b1 Other contingent liabilities
?.. Foreign currency securities issued with embedded
¡options (puttable bonds)
¡3. Undrawn, unconditional credit lines provided by:
1(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b)w ith banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
¡-other national monetary authorities (-)
|—BIS (-)
1—IMF (-)
1(b) banks and other financial institutions headquartered
jin reporting country (- )
'c) banks and other financial institutions headquartered
¡outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
1
(ii) Written calls
1
(b) Long positions
1
http://www.treas.gov/press/releases/20091913424512516.htm
8/3/2010
j(i) Bought calls
|(ii) Written puts
II
II
ll
Il
1
II
ii
Il
1
il
i
II
II
II
II
II
II
Il
il
Il
Il
1
i
1
1
II
Il
Il
1
1
ll
ii
ii
II
II
Il
Il
Il
1
1
1
Il
Il
il
1
1
i
PRO MEMORIA: in-the-money options ¡H
|(1 ) At current exchange rate
ii
|(a) Short position
a
|(b) Long position
ii
ii
|(2) + 5 % (depreciation of 5%)
ll
II
ii
|(a) Short position
|(b) Long position
ii
|(3) 1 5 % (appreciation of 5%)
II
II
II
II
II
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
|(a) Short position
|(b) Long position
ii
II
IP
|(5) -1 0 % (appreciation of 10%)
ii
|(a) Short position
II
|(b) Long position
ii
¡(6) Other (specify)
ll
ii
II
II
ii
II
II
ll
II
¡(a) Short position
|(b) Long position
II
IV. Memo items
(1 ) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
-nondeliverable forwards
-s h o rt positions
-lo n g positions
-o th e r instruments
(c) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
8,335
-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
-borrow ed or acquired but not included in Section I
8,335
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
[-swaps
j-options
|--other
|(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
[which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions ('+)
l
-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
I
//w ww.treas.go v/press/releases/20091913424512516.htm
I
II
I
8/3/2010
|(a) short positions
|(i) bought puts
1
|(ii) written calls
1
|(b) long positions
1
|(i) bought calls
1
|(ii) written puts
1
(2) To be disclosed less frequently:
|(a) currency composition of reserves (by groups of currencies)
78,006
[--currencies in SDR basket
78,006
|2--currencies not in SDR basket
1
|—by individual currencies (optional)
1
1
1
i
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce,
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/20091913424512516.htm
8/3/2010
lo view o r print the FU h content on this page, download the tree Adobe® Acrobat® Header®.
January 9, 2009
HP-1348
Treasury Releases Sixth in a Series of Social Security Papers
Washington, DC - Treasury today released the sixth and final in a series of papers
on Social Security. Issue Brief No. 6 is entitled Social Security Reform: Work
Incentives.
REPORTS
*
Social Security Reform: Work incentives
http://www.treas.gov/press/releases/hpl348.htm
8/3/2010
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
ISSUE BRIEF N O . 6
WORK INCENTIVES
IN TR O D U C TIO N
T h is s ix th a n d fin a l T re a s u ry issu e b r ie f o n S o c ia l S e c u r ity re fo rm d is c u s s e s S o c ia l S e c u rity 's e f f e c t o n
w o r k in c e n tiv e s a n d th e im p lic a tio n s f o r re fo rm .
S o c ia l S e c u r ity d is c o u r a g e s w o r k e f f o r t in m u c h th e
s a m e w a y a s d o e s a n o r d in a r y t a x o n la b o r in c o m e .
A s w a s d e m o n s tr a te d in T re a s u ry 's firs t th re e
is s u e b rie fs , a n in d iv id u a l's life tim e c o n tr ib u tio n to S o c ia l S e c u r ity h a s t w o c o m p o n e n t s : th e d iff e r e n c e
b e t w e e n th e v a lu e o f life tim e ta x e s a n d life tim e b e n e fits — life tim e n e t ta x e s — a n d th e d iff e r e n c e b e t w e e n
g ro s s ta x e s a n d n e t t a x e s — e f f e c t iv e ly " f o r c e d s a v in g " th a t d e te r m in e s b e n e fit le v e ls .
F or c u rre n t a n d
fu tu re w o r k e r s , life tim e n e t ta x e s f in a n c e th e e x c e s s o f b e n e fits o v e r ta x e s th a t h a v e b e e n p a id o r a r e
p r o m is e d to e a r lie r g e n e r a tio n s , a n a m o u n t e s tim a te d to e x c e e d $ 1 3 . 6 tr illio n ; a n d b e n e fits a r e f in a n c e d
e n tir e ly b y f o r c e d s a v in g .
T h e n e t t a x c o m p o n e n t o f S o c ia l S e c u r ity c o n trib u tio n s d is c o u r a g e s w o r k e ffo r t
in th e s a m e w a y a s a n o r d in a r y t a x — w o r k e r s p a y m o re in ta x e s th a n th e y e x p e c t to r e c e iv e in life tim e
S o c ia l S e c u r ity b e n e fits , a n d th is e f f e c t iv e ly r e d u c e s th e re tu rn to w o r k .
T h e f o r c e d s a v in g c o m p o n e n t o f
S o c ia l S e c u r ity c o n trib u tio n s w o u ld b e e x p e c t e d to h a v e little e f f e c t o n w o r k e f f o r t p r o v id e d th a t w o r k e r s
u n d e r s ta n d th a t th is p a r t o f S o c ia l S e c u r ity ta x e s w ill b e re tu rn e d a s fu tu re b e n e fits , a n d p r o v id e d th e re is
a m e c h a n is m in p la c e to e n s u re th a t th e fo r c e d s a v in g s a r e tru ly s e t a s id e to h e lp p a y fu tu re b e n e fits (a s
o p p o s e d to g iv in g ris e to in c r e a s e d c u rre n t n o n - S o c ia l S e c u r ity g o v e r n m e n t s p e n d in g o r lo w e r n o n - S o c ia l
S e c u r ity ta x e s th a n w o u ld b e th e c a s e w ith o u t S o c ia l S e c u rity ).
T w o k e y g o a ls fo r S o c ia l S e c u r ity re fo rm a r e to ra is e m o re th a n $ 1 3 . 6 tr illio n in n e t ta x e s fro m c u rre n t
a n d fu tu re w o r k e r s f a ir ly a n d w ith a s little e f f e c t a s p o s s ib le o n w o r k in c e n tiv e s .
T h is n e t t a x w ill b e
a s s e s s e d u n d e r a n y p e r m a n e n t ly s o lv e n t S o c ia l S e c u r ity sy s te m , a n d w ill in v o lv e s o m e c o m b in a t io n o f
in c r e a s e d re v e n u e a n d lo w e r b e n e fits re la tiv e to w h a t is s c h e d u le d u n d e r c u rre n t la w .
W h e n d e s ig n in g
S o c ia l S e c u rity 's n e t ta x e s , m a in ta in in g w o r k in c e n tiv e s is im p o r ta n t b e c a u s e it is e c o n o m ic a lly w a s te fu l
fo r p e o p le to w o r k less in a n a t te m p t to a v o id S o c ia l S e c u rity 's n e t ta x e s — th e r e d u c e d w o r k e f f o r t results
in le ss e c o n o m ic a c tiv ity , h ig h e r n e t t a x ra te s, a n d n o le ss n e t ta x re v e n u e , a s in th e e n d $ 1 3 . 6 trillio n in
n e t ta x e s m u st b e a s s e s s e d .
S o c ia l S e c u r ity is s a id to b e " e ffic ie n t" to th e e x te n t th a t th e p r o g r a m d o e s
n o t d is c o u r a g e w o r k e ffo rt.
U n d e r ta k in g S o c ia l S e c u r ity re fo rm n e c e s s a r ily e n ta ils a s u b je c tiv e c h o ic e th a t b a la n c e s th e c o m p e t in g
g o a ls o f fa irn e s s a n d e ffic ie n c y .
M o s t p e o p le b e lie v e th a t fa irn e s s re q u ire s th a t th e ta x s tru c tu re b e
p r o g r e s s iv e in th e s e n s e th a t n e t t a x ra te s in c r e a s e w ith th e le v e l o f e a r n in g s f o r S o c ia l S e c u r ity re fo rm in v o lv e a p r o g r e s s iv e n e t ta x .
n e a r ly a ll p r o p o s a ls
B u t th e re is a t r a d e o f f b e t w e e n fa irn e s s a n d
e ffic ie n c y , b e c a u s e p ro g r e s s iv e n e t ta x s tru c tu re s a r e g e n e r a lly le ss e ff ic ie n t th a n p r o p o r t io n a l o r
re g re s s iv e n e t ta x s tru c tu re s — th e a d v e r s e im p a c t o n e f f ic ie n c y c o m e s a b o u t b e c a u s e a h ig h e r n e t ta x
ra te o n h ig h e r in c o m e s d is c o u r a g e s w o r k e ffe c t b y m o re th a n a n e t ta x ra te th a t is e q u a l a t a ll in c o m e
le v e ls .
T h e fo r c e d s a v in g c o m p o n e n t o f S o c ia l S e c u r ity c o n trib u tio n s a ls o a d v e r s e ly a ffe c ts w o r k e f f o r t if w o r k e r s
d o n o t u n d e r s ta n d (o r d o n o t b e lie v e ) th a t this p o r tio n o f th e ir c o n trib u tio n s w ill b e re tu rn e d to th e m a s
fu tu re b e n e fits .
A s d is c u s s e d in T re a s u ry 's th ird S o c ia l S e c u r ity b rie f, th e f o r c e d s a v in g s c o m p o n e n t o f
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
S o c ia l S e c u r ity w o u ld h a v e little o r n o im p a c t o n w o r k e f f o r t if w o r k e r s r e a liz e th a t th o s e c o n trib u tio n s
w ill b e re tu rn e d to th e m a s fu tu re b e n e fits .
H e n c e , S o c ia l S e c u r ity re fo rm w o u ld u s e fu lly m a k e S o c ia l
S e c u rity 's f o r c e d s a v in g m o re tra n s p a re n t to w o r k e r s — to m a k e c le a r to w o r k e r s th e r e la tio n s h ip b e t w e e n
t o d a y 's e a r n in g s a n d fu tu re b e n e fits .
E ven w ith su c h tra n s p a re n c y , S o c ia l S e c u rity 's f o r c e d s a v in g s c o u ld still d is c o u r a g e w o r k e f f o r t if n e a re rm S o c ia l S e c u rity re v e n u e s in e x c e s s o f b e n e fits p a id a r e n o t tru ly se t a s id e to b u ild u p th e re s o u rc e s
to p a y fu tu re b e n e fits , b u t in s te a d g iv e rise to m o re s p e n d in g o r lo w e r ta x e s in th e n o n - S o c ia l S e c u r ity
b u d g e t.
T h is c o u ld b e th e c a s e to d a y , fo r e x a m p le , to th e e x te n t th a t S o c ia l S e c u r ity s u rp lu s e s o b s c u r e
th e u n d e r ly in g fis c a l s itu a tio n a n d fa c ilit a t e in c r e a s e d s p e n d in g o r ta x cu ts in th e rest o f th e f e d e r a l
b u d g e t.
A s d is c u s s e d in T re a s u ry 's fo u rth S o c ia l S e c u rity B rie f, if th e s e n e a r-te rm s u rp lu s e s re su lt in
a d d it io n a l n e a r-te rm g o v e r n m e n t s p e n d in g , th e a d d it io n a l s p e n d in g m ust u ltim a te ly b e f in a n c e d w ith
e ith e r h ig h e r fu tu re n o n -S o c ia l S e c u rity ta x e s o r s m a lle r fu tu re n o n - S o c ia l S e c u r ity s p e n d in g .
W o r k e ff o r t
w o u ld b e d is c o u r a g e d to th e e x te n t th a t th e f in a n c e s o u rc e is h ig h e r fu tu re ta x e s .
A g iv e n le v e l o f p r o g r e s s iv ity c a n b e a c h ie v e d in m a n y d iffe re n t w a y s , a n d s o m e a r e b e tte r f o r w o r k
in c e n tiv e s th a n o th e rs .
A g o a l o f S o c ia l S e c u r ity re fo rm , th e re fo re , is to m a x im iz e w o r k in c e n tiv e s fo r th e
c h o s e n le v e l o f p ro g re s s iv ity .
•
In this r e g a r d , th is b r ie f m a k e s th e f o llo w in g k e y p o in ts :
T h e c u rre n t S o c ia l S e c u rity syste m im p o s e s n e t ta x ra te s o n e a r n in g s th a t v a r y b y a g e in a m a n n e r
th a t e n c o u r a g e s e a r ly re tire m e n t.
•
P o lic ie s th a t w o u ld r e c tify th is p r o b le m a r e d is c u s s e d .
S o c ia l S e c u rity 's n e t ta x ra te o n a n a d d it io n a l d o lla r o f e a r n in g s is g e n e r a lly s m a lle r th a n th e p a y r o ll
t a x ra te b e c a u s e b e n e fits g e n e r a lly a c c r u e a s p e o p le w o r k m o r e (th a t is, p a r t o f S o c ia l S e c u r ity
c o n trib u tio n s a r e f o r c e d s a v in g s ).
B e c a u s e th e S o c ia l S e c u r ity b e n e fit c o m p u t a t io n is c o m p le x ,
h o w e v e r, it is lik e ly th a t m a n y p e o p le u n d e re s tim a te th e e x te n t to w h ic h S o c ia l S e c u r ity b e n e fits
in c re a s e w ith w o r k e ffo rt.
S u c h a m is u n d e r s ta n d in g w o u ld n a tu r a lly le a d a w o r k e r to o v e r e s tim a te
S o c ia l S e c u rity 's n e t ta x ra te s a n d thu s c h o o s e to w o r k less th a n th e y w o u ld if th e y w e r e b e tte r
in fo rm e d .
W a y s to m a k e th e r e la tio n s h ip b e t w e e n w o r k a n d S o c ia l S e c u r ity b e n e fits m o re
tra n s p a re n t a r e d is c u s s e d .
•
M a n y p e o p le a p p e a r to in te rp re t th e e a r lie s t a g e th a t b e n e fits c a n b e c o lle c t e d
(th e " e a r ly
re tire m e n t a g e " , c u rre n tly 6 2 ) a s a n o ffic ia lly - s a n c t io n e d s u g g e s te d re tire m e n t a g e a n d a r e in flu e n c e d
b y th a t s u g g e s tio n .
T his is tru e d e s p ite th e f a c t th a t th e S o c ia l S e c u r ity n e t t a x s tru c tu re g iv e s n o
tru e e c o n o m ic in c e n tiv e fo r w o r k e r s w ith r e a s o n a b ly p r u d e n t n e st e g g s to re tire a t th a t s p e c if ic a g e .
In c re a s in g th e e a r ly re tire m e n t a g e w o u ld n o t a f f e c t th e re tire m e n t in c e n tiv e s o f th e s e w o r k e r s , b u t
w o u ld lik e ly e n c o u r a g e a d d it io n a l w o r k e ffo r t th ro u g h th e s u g g e s tio n e ffe c t.
•
In c re a s in g th e " n o r m a l re tire m e n t a g e " is e q u iv a le n t to a p r o p o r t io n a l r e d u c tio n in b e n e fits a n d
s h o u ld th e re fo re h a v e th e s a m e e f f e c t o n re tire m e n t in c e n tiv e s a s th e e q u iv a le n t b e n e fit cu t.
A s w ith
th e e a r ly re tire m e n t a g e , h o w e v e r , m a n y p e o p le s e e m to in te rp re t th e n o r m a l re tire m e n t a g e a s
a s u g g e s te d re tire m e n t a g e .
S u c h p e o p le 's re tire m e n t d e c is io n s w o u ld b e m o re re s p o n s iv e to a n
in c re a s e in th e n o rm a l re tire m e n t a g e th a n to th e e q u iv a le n t p r o p o r t io n a l b e n e fit cu t.
•
F or c o u p le s w ith o n e s p o u s e e a r n in g s u b s ta n tia lly m o re th a n th e o th e r s p o u s e , th e c u rre n t s p e c ia l
b e n e fits fo r s p o u s e s a n d s u rv iv o rs in c r e a s e w o r k in c e n tiv e s o f th e h ig h e a r n e r a n d r e d u c e w o r k
in c e n tiv e s o f th e lo w e a rn e r.
T h e n e t re su lt is p r o b a b ly le ss w o r k e f f o r t o n th e w h o le b e c a u s e th e
lo w e a r n e r te n d s to b e m o re s e n s itiv e to ta x e s th a n th e h ig h e a r n e r w h e n d e c id in g h o w m u c h to
w o rk .
A p o te n tia l r e m e d y f o r th is p r o b le m is d is c u s s e d .
T h e n e x t s e c tio n r e v ie w s h o w S o c ia l S e c u r ity a ffe c ts w o r k in c e n tiv e s ; la te r s e c tio n s d is c u s s p o lic y
im p lic a tio n s .
U . S . DEPARTME NT OF TH E TR E A S U RY
SOCIAL
SECURITYREFORM: WORK INCENTIVES * ISSUE BRIEF NO. 6
H O W S O C IAL SECURITY'S NET TAXES AFFECT W O R K INCENTIVES
T h e im p a c t o f S o c ia l S e c u rity 's n e t ta x e s o n w o r k e ff o r t w ill b e illu s tra te d w ith r e fe r e n c e to a n a v e r a g e
w o m a n ("J a n e ") b o r n in 1 9 9 0 w h o c o lle c ts b e n e fits a s a s in g le p e rs o n .
A s it is c e r ta in th a t S o c ia l
S e c u r ity w ill b e a p e r m a n e n t ly s o lv e n t s yste m e v e n tu a lly , m a k in g th e e x a m p le p la u s ib le re q u ire s a n
a s s u m p tio n o f h o w th e sy s te m w ill b e r e fo r m e d .
F or th is p u r p o s e , it is a s s u m e d th a t th e illu s tra tiv e re fo rm
a n a ly z e d in T re a s u ry 's th ird S o c ia l S e c u r ity b r ie f — P la n X — w ill b e p u t in p la c e .
P la n X r e d u c e s b e n e fits
p r o p o r t io n a t e ly fro m c u r r e n t- la w s c h e d u le d le v e ls s o th a t r e a l b e n e fits r e c e iv e d b y s u c c e s s iv e b irth
c o h o r ts re m a in a b o u t c o n s ta n t o n a v e r a g e b e t w e e n 2 0 0 8 a n d 2 0 3 6 , a n d sets b e n e fits a f t e r 2 0 3 6 s o
th a t th e y g r o w a s th e y w o u ld u n d e r c u rre n t la w e x c e p t fo r s m a ll a n n u a l p r o p o r t io n a t e r e d u c tio n s th a t
o ffs e t th e e f f e c t o f in c r e a s in g lo n g e v it y o n th e p re s e n t v a lu e o f b e n e fits r e c e iv e d .
e n d o r s e P la n X— it is u s e d o n ly fo r illu s tra tiv e p u rp o s e s .)
(T re a s u ry d o e s n o t
In a d d it io n , in te re s t ra te s , p ric e s , w a g e s , a n d
m o r ta lity a r e a s s u m e d to e v o lv e a s p r o je c te d in th e 2 0 0 5 T ru ste e s R e p o rt.
J a n e is a s s u m e d to b e a re p re s e n ta tiv e e a r n e r w ith m e d iu m e a r n in g s .
F ig u re 1 s h o w s th e a s s u m e d
tim e p r o file o f J a n e 's re a l w a g e s b y a g e a s s u m in g s h e d o e s n o t re tire u n til a g e 7 0 .
(A ls o s h o w n in th e
fig u r e a r e " in d e x e d r e a l w a g e s " th a t a r e u s e d to c o m p u t e b e n e fits , w h ic h a r e d is c u s s e d b e lo w . )
The
re a l e a r n in g s p r o file is a n in v e r te d U s h a p e : e a r n in g s s ta rt a t $ 2 1 , 0 0 0 a t a g e 21 a n d g r o w s t e a d ily
to $ 6 3 , 0 0 0 a t a g e 5 2 , a n d th e n c o m m e n c e a s t e a d y d e c lin e to $ 3 3 , 0 0 0 a t a g e 7 0 .
If J a n e re tire s
e a r lie r th a n a g e 7 0 , th e n h e r re a l w a g e p r o file is th e s a m e a s in F ig u re 1 e x c e p t it fa lls to z e r o s ta rtin g
th e y e a r a f te r s h e re tire s.
F o r th e s a k e o f th is illu s tra tio n , it w ill b e a s s u m e d th a t J a n e re tire s a n d b e g in s
c o lle c t in g S o c ia l S e c u r ity b e n e fits a t a g e 6 7 ; th e s o - c a lle d " n o r m a l re tire m e n t a g e " f o r th e 1 9 9 0 b irth
c o h o r t.
(T h e n o r m a l re tire m e n t a g e a n d p o s s ib le re v is io n s to it a r e d is c u s s e d b e lo w . )
In th a t c a s e , th e
e x p e c t e d p re s e n t v a lu e s a s o f a g e 21 o f J a n e 's p re -ta x w a g e s , h e r p a y r o ll ta x e s , a n d h e r re tire m e n t
b e n e fits a r e $ 1 , 1 4 0 , 2 9 0 , $ 1 2 0 , 6 8 4 , a n d $ 6 4 , 7 2 5 , re s p e c tiv e ly .
(B o th d is a b ilit y b e n e fits a n d ta x e s
a r e e x c lu d e d fro m th e c a lc u la tio n s ; c o n s e q u e n tly th e p a y r o ll ta x ra te u s e d h e re is 1 0 . 6 p e rc e n t.)
The net
v a lu e o f S o c ia l S e c u r ity to J a n e is, th e re fo re , th e d iff e r e n c e b e t w e e n th e v a lu e o f h e r b e n e fits a n d h e r
ta x e s , w h ic h is - $ 5 6 , 1 3 9 o r - 4 . 9 p e r c e n t o f h e r life tim e w a g e s .
T h a t is, J a n e 's life tim e n e t ta x ra te is 4 . 9
p e rc e n t, a n d S o c ia l S e c u r ity ra is e s a s m u c h n e t re v e n u e fro m J a n e a s w o u ld a 4 . 9 p e r c e n t t a x o n w a g e s
in e v e r y y e a r o f h e r w o r k in g life .
U . S, D EPARTME NT- OF 'TH E IR E A S U RY
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
Figure 1: Earnings and Indexed Earnings for Medium Earner,
1990 Birth Cohort
21
25
29
33
37
41 45
Age
49
53
57
61
65
69
T W O C H AN N ELS O F INFLUENCE O N W O R K EFFORT: LIFETIME W EALTH
EFFECT A N D M A R G IN A L W O R K REW ARD EFFECT
S o c ia l S e c u rity s n e t ta x a ffe c ts J a n e s w o r k e ff o r t th ro u g h t w o c h a n n e ls : b y r e d u c in g J a n e s life tim e
w e a lth , a n d b y re d u c in g b o th th e r e w a r d fo r w o r k in g a n a d d it io n a l h o u r in a g iv e n y e a r a n d th e
r e w a r d fo r w o r k in g a n a d d it io n a l y e a r b e f o r e re tirin g .
T h e r e w a r d f o r a n a d d it io n a l h o u r o f w o r k o r a n
a d d it io n a l y e a r o f w o r k is a m a r g in a l r e w a r d b e c a u s e it is th e r e w a r d fo r c h a n g in g w o r k e ffo rt, n o t th e
r e w a r d fo r a ll w o r k e ffo rt.
S o c ia l S e c u rity s first e ffe c t o n w o r k e f f o r t — th e life tim e w e a lt h e f f e c t — is s t r a ig h t f o r w a r d : S o c ia l S e c u r ity
re d u c e s J a n e 's life tim e w e a lt h b y $ 5 6 , 1 3 9 , th e e x p e c t e d d iff e r e n c e b e t w e e n th e v a lu e o f J a n e 's life tim e
ta x e s a n d h e r life tim e b e n e fits .
T h is c a u s e s J a n e to w o r k m o r e to m a k e u p fo r s o m e o f th e lo ss.
S o c ia l S e c u rity s s e c o n d e f fe c t o n w o r k e f f o r t — th e c h a n g e in th e r e w a r d f o r w o r k in g m o r e — c a u s e s
J a n e to w o r k less.
T h is e f fe c t c a n b e is o la te d b y im a g in in g th e c o m b in e d e f f e c t o n J a n e 's w o r k e f f o r t
o f S o c ia l S e c u rity a n d a n u n c o n d it io n a l $ 5 6 , 1 3 9 g if t su ch a s a n in h e r ita n c e .
u n c o n d it io n a l g ift to g e t h e r h a v e n o e f fe c t o n J a n e 's life tim e w e a lt h .
S o c ia l S e c u r ity a n d th e
T h e re is a n im p a c t, h o w e v e r , o n
J a n e s in c e n tiv e s to w o r k , b e c a u s e w o r k in g m o re c a u s e s J a n e 's life tim e p a y r o ll ta x e s to in c r e a s e b y m o re
th a n h e r life tim e b e n e fits in c r e a s e — th a t is, a d d it io n a l w o r k in c re a s e s S o c ia l S e c u r ity n e t life tim e ta x e s .
ic e , S o c ia l S e c u rity re d u c e s th e m a r g in a l r e w a r d s fo r w o r k , a n d th is c a u s e s J a n e 's w o r k e ff o r t to
d e c lin e .
T h e o r y a lo n e c a n n o t d e te r m in e w h ic h o f S o c ia l S e c u rity 's t w o e ffe c ts o n w o r k e f f o r t — th e life tim e w e a lt h
e f fe c t o r th e m a r g in a l- r e w a r d s - to - w o r k e f fe c t
is s tro n g e r.
O v e r a ll, it is p o s s ib le th a t S o c ia l S e c u r ity
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF.NO. 6
c a u s e s w o r k to in c r e a s e o r d e c r e a s e .
W h e n c h o o s in g a m o n g S o c ia l S e c u r ity re fo rm p la n s th a t a r e
p e r m a n e n t ly s o lv e n t, h o w e v e r , d iffe r e n c e s in w o r k in c e n tiv e s ste m e n tir e ly fro m d iffe r e n c e s in th e m a r g in a l
r e w a r d s to w o r k .
T h is is b e c a u s e th e w e a lt h e ffe c ts o f S o c ia l S e c u r ity re fo rm a r e th e s a m e f o r a n y
p la n th a t m a k e s th e s yste m s o lv e n t, a s a ll s u c h p la n s m ust c o lle c t a n e t ta x (th e d iff e r e n c e b e t w e e n th e
v a lu e o f ta x e s a n d th e v a lu e o f b e n e fits ) o f a b o u t $ 1 3 . 6 trillio n fro m c u rre n t a n d fu tu re w o r k e r s .
R e fo rm
p la n s th a t m a k e S o c ia l S e c u r ity p e r m a n e n t ly s o lv e n t e n ta il th e s a m e to ta l w e a lt h e f f e c t o n w o r k e ff o r t
a n d th e re fo r e d iff e r o n ly w ith r e g a r d to th e e x te n t to w h ic h th e y r e d u c e th e m a r g in a l r e w a r d s to w o r k .
F or this re a s o n , th e r e m a in d e r o f th is b r ie f fo c u s e s o n h o w S o c ia l S e c u r ity re fo rm a ffe c ts th e m a r g in a l
r e w a r d s to w o r k . 1
SO CIAL SECURITY'S EFFECT O N THE M ARGINAL REWARDS FOR ADDITIONAL W O RK
R e tu rn in g to th e e x a m p le o f J a n e a n d P la n X, a s o lv e n t S o c ia l S e c u r ity s yste m ra is e s a s m u c h re v e n u e
fro m J a n e a s w o u ld a 4 . 9 p e r c e n t ta x o n h e r w a g e s .
B ut S o c ia l S e c u rity 's e f f e c t o n J a n e 's m a r g in a l
r e w a r d s to w o r k is m u c h d iffe r e n t th a n th a t o f a 4 . 9 p e r c e n t t a x o n w a g e s b e c a u s e S o c ia l S e c u rity 's n e t
ta x e s h a v e a m u c h m o r e c o m p le x s tru c tu re th a n d o e s a s im p le p r o p o r t io n a l ta x .
S o c ia l S e c u rity 's n e t
ta x o n a g iv e n y e a r 's e a r n in g s is e q u a l to g ro s s p a y r o ll ta x e s le ss th e a c c r u a l o f S o c ia l S e c u r ity b e n e fits .
T h e p a y r o ll ta x c o m p o n e n t o f S o c ia l S e c u rity 's n e t ta x e s — 1 0 . 6 p e r c e n t o f t a x a b le e a r n in g s — is s im p le .
W h a t m a k e s S o c ia l S e c u rity 's n e t ta x s tru c tu re c o m p le x is th e a c c r u a l o f b e n e fits .
H O W BENEFITS ARE CALCULATED
A s d is c u s s e d in T re a s u ry 's th ird S o c ia l S e c u r ity b rie f, P la n X s im p ly re d u c e s fu tu re b e n e fits p r o p o r t io n a t e ly
fro m c u r r e n t- la w le v e ls , s o th a t J a n e 's in itia l b e n e fits u n d e r P la n X a r e d e t e r m in e d in th e s a m e th re e s te p s
a s th e y a r e u n d e r c u rre n t la w .
First, a s p e c ia l a v e r a g e o f J a n e 's t a x a b le w a g e s w h ile w o r k in g — c a lle d
a v e r a g e in d e x e d m o n th ly e a r n in g s o r A I M E — is c a lc u la t e d .
c o n v e r t th e A I M E to th e p r im a r y in s u ra n c e a m o u n t (P IA ).
S e c o n d , a p r o g r e s s iv e fo r m u la is u s e d to
A n d th ird , in itia l b e n e fits a r e d e t e r m in e d b y
a d ju s tin g th e P IA fo r re tire m e n t b e f o r e o r a f te r th e n o r m a l re tire m e n t a g e a n d a d ju s tin g fo r p r ic e in fla tio n
b e t w e e n a g e 6 2 a n d th e tim e J a n e b e g in s c o lle c t in g b e n e fits .
T h e A I M E is c o m p u t e d a s th e a v e r a g e o f th e h ig h e s t 3 5 y e a r s o f in d e x e d c o v e r e d e a r n in g s d iv id e d b y
12.
I n d e x e d c o v e r e d e a r n in g s p r io r to a g e 6 0 a r e a c t u a l e a r n in g s s c a le d u p in a c c o r d a n c e w ith th e
g r o w t h o f e c o n o m y - w id e a v e r a g e e a r n in g s b e t w e e n th e tim e th e w a g e s a r e e a r n e d a n d th e tim e th e
w o r k e r tu rn s 6 0 .
F o r e x a m p le , J a n e 's a g e - 4 0 r e a l e a r n in g s a r e $ 5 3 , 0 7 1
a n d e c o n o m y - w id e a v e r a g e
re a l e a r n in g s w h e n J a n e is a g e 6 0 a r e 2 4 p e r c e n t h ig h e r th a n w h e n s h e is a g e 4 0 ( 2 0 y e a r s g r o w t h a t
a n a s s u m e d 1.1 p e r c e n t a n n u a l ra te ), s o h e r a g e - 4 0 in d e x e d c o v e r e d e a r n in g s a r e $ 6 6 , 0 5 1
x 1 .2 4 ) .
($ 5 3 ,0 7 1
T h is a d ju s tm e n t s c a le s u p w a g e s fro m e a r ly in a p e rs o n 's life to w h a t th e p e rs o n 's e a r n in g s
m ig h t h a v e b e e n h a d th e le v e l o f w a g e s in th e o v e r a ll e c o n o m y b e e n a t th e le v e l th e y a r e a t a g e
60.
A f te r a g e 6 0 , e a r n in g s a r e n o t in d e x e d f o r th e p u r p o s e s o f th e A I M E c a lc u la t io n ; in th o s e y e a rs ,
in d e x e d e a r n in g s a r e e q u a l to a c t u a l e a r n in g s .
1
W hile Social Security's overall wealth effect on work effort is fixed in size, its timing is not. Social Security's wealth
effects on work effort will vary over time in accordance with how Social Security's reform burden is distributed across
generations. W hen comparing two permanently solvent reform plans, the one that puts a relatively large burden on
early birth cohorts will have a relatively larger wealth effect on work effort in the near term, and a relatively smaller
effect in the longer term.
U . S . DEPARTMENT OF THE TREASURY
SOCIAL SECURITYREFORM: WORK INCENI IVES • ISSUE BRIEF NO. 6
J a n e 's in d e x e d e a r n in g s a r e s h o w n in F ig u re 1.2
T h e h ig h e s t 3 5 y e a r s o f e a r n in g s o c c u r b e t w e e n
a n d in c lu d in g th e a g e s o f 2 7 a n d 6 1 , a n d th e A I M E c a lc u la t e d o v e r th o s e y e a r s is $ 5 , 2 1 4 ( $ 6 2 , 5 6 7
d iv id e d b y 12 ).
In th e s e c o n d s te p o f th e b e n e fit c a lc u la t io n , J a n e 's A I M E is u s e d to c o m p u t e h e r P IA u s in g th e fo r m u la
d e p ic t e d in F ig u re 2 th a t a p p lie s to th e 1 9 9 0 b irth c o h o r t o n ly .
T h e P IA fo r m u la is th e jo in in g o f th re e
lin e s w ith p r o g r e s s iv e ly s m a lle r s lo p e s :
•
F or A I M E b e t w e e n z e r o a n d $ 1 , 0 6 2 , th e P IA in c re a s e s b y 5 1 c e n ts f o r e a c h a d d it io n a l d o lla r o f
A IM E ;
•
F or A I M E b e t w e e n $ 1 , 0 6 2 a n d $ 6 , 4 0 0 , th e P IA in c re a s e s b y 18 c e n ts f o r e a c h a d d it io n a l d o lla r o f
A IM E ; a n d ,
•
For h ig h e r le v e ls o f A IM E , th e P IA in c re a s e s b y 8 c e n ts fo r e a c h a d d it io n a l d o lla r o f A IM E .
Figure 2: Plan X PIA Formula for the 1990 Birth Cohort
Age
T h e A I M E v a lu e s a t w h ic h th e s lo p e o f th e P IA fo r m u la c h a n g e s a r e c a lle d " b e n d p o in ts ."
(A s w ill
b e d is c u s s e d b e lo w w ith re fe re n c e to p o lic y , th e d e c lin in g s lo p e s o f th e s u c c e s s iv e s e g m e n ts o f th e
P IA fo r m u la c a u s e th e c u rre n t la w S o c ia l S e c u r ity p r o g r a m to b e p ro g re s s iv e .)
P la n X a p p lie s th e
s a m e b e n e fit fo r m u la a s u n d e r c u rre n t la w e x c e p t th a t e a c h m u ltip lic a tio n f a c t o r is 4 3 p e r c e n t s m a lle r,
re fle c tin g th e re fo rm s u n d e r P la n X th a t m a k e S o c ia l S e c u r ity f in a n c ia lly s u s ta in a b le .
2
To make this example simple while still explaining the essence of Social Security's benefit accruals, Figure 1 assumes
that there is no price inflation. It is possible to meaningfully include both real earnings and indexed earnings on the
same chart only when there is no price inflation after age 60. Price inflation prior to age 6 0 has no effect on real
benefits, while price inflation after age 6 0 reduces real benefits by about the amount that the value of a dollar falls
between ages 6 0 and 62. If annual inflation is 3 percent during that time, then the example overstates real benefits by
about 6 percent.
U. 5. DEPARTMENT OF THE TREASURY
6
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
T h e F ig u re 2 b e n e fit fo r m u la in d ic a te s th a t J a n e 's $ 5 , 2 1 4 A I M E tra n s la te s to a $ 1 , 3 3 0 P IA a n d th e la s t
d o lla r o f A I M E b o o s ts J a n e 's P IA b y $ 0 . 1 8 .
J a n e b e g in s to c o lle c t b e n e fits a t th e n o r m a l re tire m e n t
a g e ( a g e 6 7 fo r th e 1 9 9 0 b irth c o h o r t) , s o h e r a c t u a l b e n e fit e q u a ls th e P IA a d ju s te d fo r p r ic e in fla tio n
b e tw e e n a g e s 6 2 a n d 6 7
A s p r ic e in fla tio n is a s s u m e d z e r o in th is e x a m p le , b o th h e r r e a l a n d h e r
n o m in a l b e n e fit is $ 1 , 3 3 0 p e r m o n th .
A t th e tim e J a n e is a g e 2 1 , th e e x p e c t e d p re s e n t v a lu e o f a re a l
a n n u it y o f $ 1 , 3 3 0 p e r m o n th s ta rtin g a t a g e 6 7 is $ 6 4 , 7 2 5 .
I
M A R G IN A L REWARDS FOR A D D IT IO N A L E A R N IN G S W H ILE W O R K IN G
S o c ia l S e c u rity 's e f f e c t o n th e r e w a r d f o r w o r k in g m o re h o u rs in a p a r tic u la r y e a r is d e t e r m in e d b y th e
m a r g in a l n e t t a x ra te o n th e la s t d o lla r e a r n e d .
In th e c a s e o f a s im p le 4 . 9 p e r c e n t p r o p o r t io n a l t a x o n
e a r n in g s in a ll y e a rs , this m a r g in a l n e t t a x ra te is 4 . 9 p e r c e n t in a ll y e a r s .
In c o n tra s t, S o c ia l S e c u rity 's
m a r g in a l n e t t a x ra te o n J a n e 's la s t d o lla r e a r n e d h a s th e v e r y d iffe r e n t p r o file th a t is s h o w n in F ig u re
3.
T h is m a r g in a l n e t t a x ra te is 1 0 . 6 p e r c e n t — th e fu ll p a y r o ll ta x r a te — f o r a g e s 2 1 - 2 6 a n d 6 2 - 7 0 .
is b e c a u s e th o s e y e a r s ' e a r n in g s d o n o t c o u n t t o w a r d b e n e fits .
T his
O n ly th e 3 5 y e a r s fo r w h ic h in d e x e d
e a r n in g s a r e h ig h e s t c o u n t t o w a r d b e n e fits , a n d in th is c a s e th o s e e a r n in g s o c c u r fro m a g e 2 7 to 6 1 .
T h e m a r g in a l n e t t a x ra te o n th e la s t d o lla r e a r n e d d e c lin e s w ith a g e fo r th e y e a r s w ith e a r n in g s th a t
,
c o u n t t o w a r d b e n e fits ; r e la tiv e to th e life tim e n e t ta x ra te , th is m a r g in a l n e t ta x ra te is h ig h e r p r io r to a g e
4 9 a n d is lo w e r in la te r y e a rs .
If J a n e re tire s a t 6
7
th e n th e m a r g in a l n e t t a x ra te o n th e la s t d o lla r
e a r n e d a v e r a g e s 6 . 8 p e r c e n t o v e r h e r w o r k in g life , n e a r ly h a lf a g a in a s la r g e a s J a n e 's life tim e n e t ta x
ra te o f 4 . 9 p e rc e n t.
Figure 3: Marginal Net Tax Rate On Last Dollar Eaned Under Plan X
for Medium Female Earner, 1990 Birth Cohort
1
DEPAtTMElNT OF- THE TREASURY
7
SOCIAL SECURITYREFORM:. WORK INCENTIVES • ISSUE BRIEF NO. 6
T w o fe a tu re s o f F ig u re 3 d is c u s s e d b e lo w w ith r e fe re n c e to p o lic y a r e :
•
T h e p ro g re s s iv e n a tu re o f th e S o c ia l S e c u r ity b e n e fit fo r m u la results in J a n e 's m a r g in a l n e t t a x ra te o n
th e la s t d o lla r e a r n e d b e in g la r g e r o n a v e r a g e th a n h e r life tim e n e t t a x ra te .
•
A d o lla r e a r n e d e a r ly in life te n d s to re su lt in s m a lle r b e n e fit a c c r u a ls th a n a d o lla r e a r n e d la te in life ,
w h ic h e x p la in s w h y th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d te n d s to d e c lin e w ith a g e .
M A R G IN A L REWARDS FOR A D D IT IO N A L YEARS O F W O R K
S o c ia l S e c u rity a ffe c ts th e m a r g in a l r e w a r d f o r a n a d d it io n a l y e a r o f w o r k th r o u g h th e m a r g in a l n e t t a x
ra te o n e a r n in g s in th e la s t y e a r w o r k e d .
T his is th e a d d it io n a l n e t ta x th a t is p a id a s a re su lt o f w o r k in g
a n a d d it io n a l y e a r ( p a y r o ll ta x e s less b e n e fit a c c r u a ls ) d iv id e d b y th e a d d it io n a l w a g e s e a r n e d in th a t
y e a r. A s w ith th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d , th e m a r g in a l n e t ta x ra te o n th e la s t
y e a r o f w o r k is g e n e r a lly h ig h e r th a n it w o u ld b e u n d e r a p r o p o r t io n a l ta x o n e a r n in g s th a t g e n e r a te s
th e s a m e n e t ta x re v e n u e .
T h is is s h o w n in F ig u re 4 fo r th e c a s e o f J a n e .
Figure 4: Marginal Net Tax Rate On Last Year of Work Under Plan X,
Medium Female Earner, 1990 Birth Cohort
33
37
41
45
49
Age
53
57
61
65
69
R e la tiv e to th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d , S o c ia l S e c u rity 's m a r g in a l n e t t a x ra te
o n th e la s t y e a r o f e a r n in g s is h ig h e r b e t w e e n th e a g e s o f 5 6 a n d 61 a n d is th e s a m e in o t h e r y e a rs .
B e fo re a g e 5 6 , e a c h a d d it io n a l y e a r o f e a r n in g s c o u n ts fu lly t o w a r d b e n e fits b e c a u s e 3 5 y e a r s o f w o r k
h a v e n o t y e t b e e n c o m p le te d , w h ic h im p lie s th a t th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r o f e a r n in g s
is th e s a m e a s th e m a r g in a l n e t ta x ra te o n th e la s t y e a r o f e a r n in g s .
A f te r a g e 5 5 , h o w e v e r , e a c h
a d d it io n a l y e a r o f w o r k r e p la c e s th e e a r n in g s fro m a y e a r e a r lie r in life in th e b e n e fit c o m p u t a t io n ( w h ic h
o n ly use s th e t o p 3 5 y e a r s o f e a rn in g s ), a n d th e la s t y e a r s e a r n in g s b o o s t b e n e fits o n ly to th e e x te n t th a t
th e y c o n tr ib u te m o re to b e n e fits th a n d o e s th e y e a r th a t w a s d is p la c e d in th e b e n e fit c o m p u t a t io n .
F or
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
e x a m p le , a s o f a g e 5 5 th e h ig h e s t 3 5 y e a r s o f in d e x e d e a r n in g s a r e th e y e a r s b e t w e e n a n d in c lu d in g
a g e s 21 to 5 5 , a n d th e lo w e s t y e a r o f a n n u a l in d e x e d e a r n in g s ( $ 2 5 , 1 4 4 ) o c c u r s a t a g e 2 1 .
If a n
a d d it io n a l y e a r is w o r k e d , th e n in d e x e d e a r n in g s a t a g e 5 6 — $ 6 0 , 3 5 9 — d is p la c e th e a g e -2 1 e a r n in g s
in th e A I M E c o m p u ta tio n .
H e n c e , w o r k a t a g e 5 6 resu lts in $ 6 0 , 3 5 9 m o r e in d e x e d e a r n in g s , b u t o n ly
$ 3 5 , 2 1 5 o f th o s e e a r n in g s s e rv e to in c r e a s e th e A I M E ( a g e - 6 5 e a r n in g s o f $ 6 0 , 3 5 9 le ss th e a g e -2 1
e a r n in g s o f $ 2 5 , 1 4 4 th a t a r e r e p la c e d ) .
A s a result, th e m a r g in a l n e t t a x ra te o n a ll a g e - 5 6 e a r n in g s
( 6 . 6 p e rc e n t) e x c e e d s th e m a r g in a l n e t ta x ra te o n th e la st d o lla r o f a g e - 5 6 e a r n in g s ( 4 . 6 p e rc e n t).
P o lic ie s to r e d u c e la te -life m a r g in a l n e t t a x ra te s o n th e la s t y e a r o f w o r k a r e d is c u s s e d in th e n e x t s e c tio n .
POLICY ISSUES
T h e f o llo w in g s e c tio n s d is c u s s h o w s p e c if ic p o lic y c h a n g e s to th e S o c ia l S e c u r ity s y s te m a f f e c t w o r k
in c e n tiv e s a n d th e fa irn e s s o f th e syste m .
THE TRADEOFF BETWEEN W O R K INCENTIVES (EFFICIENCY) A N D PROGRESSIVE
If fa irn e s s re q u ire s a p r o g r e s s iv e n e t ta x s tru ctu re , a s m o s t p e o p le b e lie v e , th e n th e re is a t r a d e o f f
b e t w e e n S o c ia l S e c u rity 's fa irn e s s a n d its e ffic ie n c y .
T h is is tru e b e c a u s e p r o g r e s s iv e t a x s tru c tu re s a r e
g e n e r a lly le ss e ff ic ie n t th a n p r o p o r t io n a l o r re g re s s iv e t a x s tru ctu re s.
T h is s e c tio n d e m o n s tr a te s th is p o in t
w ith re fe r e n c e to J a n e .
F ig u re 2 s h o w s th e p r o g r e s s iv e n a tu re o f P la n X — th e P IA fo r m u la h a s a d im in is h in g s lo p e a s th e A I M E
in c re a s e s , w h ic h m e a n s th a t th e n e t t a x ra te in c re a s e s w ith th e A IM E .
F o r e x a m p le , if M a r y is e x a c t ly
lik e J a n e e x c e p t th a t s h e e a r n s t w ic e a s m u c h in e v e r y y e a r , th e n M a r y w o u ld h a v e a n A I M E t w ic e a s
la r g e a s J a n e 's b u t w o u ld h a v e a PIA o n ly 1 . 4 6 tim e s a s h ig h .
T h is m e a n s th a t M a r y p a y s t w ic e a s
m u c h ta x a s J a n e b u t o n ly re c e iv e s 4 6 p e r c e n t m o re b e n e fits ; a s a result, h e r life tim e n e t t a x r a te ( 6 . 5
:e n t) is h ig h e r th a n J a n e 's ( 4 . 9 p e rc e n t).
(In th is e x a m p le , b o th M a r y 's a n d J a n e 's e a r n in g s a r e b e lo w
m a x im u m t a x a b le e a r n in g s in a ll y e a rs .)
T h e p r o g r e s s iv ity o f th e P IA fo r m u la e x p la in s w h y J a n e 's m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d
te n d s to b e la r g e r th a n h e r life tim e n e t ta x ra te . J a n e 's life tim e n e t ta x ra te d e p e n d s o n h o w la r g e h e r
P IA is re la tiv e to h e r A I M E ; in F ig u re 2 , J a n e 's P IA is 2 6 p e r c e n t a s la r g e a s h e r A I M E .
B u t if J a n e e a r n s
m o r e s o a s to in c r e a s e h e r A IM E , h e r P IA in c re a s e s o n ly 1 8 p e r c e n t a s m u c h a s d o e s h e r A I M E (th e
s lo p e o f th e P IA fo r m u la a t J a n e 's A I M E a m o u n t).
B e c a u s e a d d it io n a l e a r n in g s in c r e a s e J a n e 's P IA le ss a t
th e m a r g in th a n th e y d o o n a v e r a g e , J a n e 's m a r g in a l n e t t a x ra te s o n th e la s t d o lla r e a r n e d a r e g r e a t e r
th a n h e r life tim e n e t t a x ra te .
If is p o s s ib le to fin d a fla tte r P IA fo r m u la th a t w o u ld in c r e a s e J a n e 's w o r k in c e n tiv e s w h ile ra is in g th e
s a m e a m o u n t o f n e t ta x re v e n u e fro m h e r— b u t th e re su lt w o u ld b e a le ss p r o g r e s s iv e s y s te m .
F or
e x a m p le , a fla t PIA fo r m u la th a t p re s e rv e s J a n e 's re a l b e n e fit a n d h e r life tim e n e t t a x ra te a t h e r c u rre n t
le v e l o f e a r n in g s w o u ld h a v e o n ly o n e lin e a r s e g m e n t w ith a s lo p e o f 0 . 2 6 , a s is s h o w n in F ig u re 5 .
R e la tiv e to P la n X, th e fla t P IA fo r m u la g iv e s le ss c r e d it f o r J a n e 's first $ 1 ,1 5 1 o f A I M E b u t m o re c r e d it f o r
th e la s t $ 4 , 6 0 3 o f A IM E , a n d o n a v e r a g e g iv e s th e s a m e a m o u n t o f c r e d it fo r e a c h d o lla r o f A IM E .
B u t b e c a u s e th e a m o u n t o f c r e d it g iv e n fo r a d d it io n a l A I M E is la r g e r a t th e m a r g in u n d e r th e fla t P IA
fo r m u la ( $ 0 . 2 6 ) th a n u n d e r P la n X ( $ 0 . 1 8 ) , th e m a r g in a l n e t t a x ra te s o n J a n e 's la s t d o lla r e a r n e d s h o w n
in F ig u re 6 a r e m u c h lo w e r .
In fa c t, th e a v e r a g e m a r g in a l n e t t a x r a te o n th e la s t d o lla r e a r n e d is a b o u t
e q u a l to J a n e 's life tim e n e t ta x ra te in th is c a s e . 3
3
In this case, a special weighted average of the marginal net tax rate on the last dollar earned is exactly equal to the
lifetime net tax rate. The weights in this average are the shares of the expected present value of lifetime earnings that
occur in each year.
U. 5. DEPARTMENT OF THE TREASURY
9
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
Figure 5: Plan X PIA Formula for the 1990 Birth Cohort Compared
to Proportional PIA Formula
0
1,151 2,301 3,452 4,602 5,753 6,904 8,054 9,205 10,35511,506
Age
Figure 6: Marginal Net Tax Rate on Last Dollar Earned
for Medium Female Earner, 1990 Birth Cohort
12.00
10.00
Plan X Progressive PIA Formula
8.00
6.00
4.00
Lifetime Net Tax Rate
if Retire at 67
2.00
/
Proportional PIA Formula
Yielding Jane Same Benefit
0.00
~i
21
25
29
33
37
41
45
Age
49
53
i i i i r
57
61
65
69
SOCIAL SECURITY REFORM: WORK INCENTIVES * ISSUE BRIEF NO. 6
T o th e e x te n t th a t J a n e w o r k s m o re w ith th e fla t P IA fo r m u la th a n w ith th e p r o g r e s s iv e fo r m u la , n e t ta x
re v e n u e w o u ld b e h ig h e r a n d th e f in a n c ia l sta tu s o f th e sy s te m w o u ld b e im p r o v e d . J a n e w o u ld b e
b e tte r o f f in th is s itu a tio n s in c e s h e h a s c h o s e n to w o r k m o re ; s h e c o u ld h a v e c h o s e n n o t to w o r k m o re
a n d h a v e b e e n n o w o r s e o f f th a n u n d e r th e p r o g r e s s iv e fo r m u la .
H e n c e , th e fla t P IA fo r m u la is m o r e
e ff ic ie n t th a n th e p r o g r e s s iv e fo rm u la .
W h il e a fla tte r P IA fo r m u la w o u ld in c r e a s e w o r k in c e n tiv e s , it w o u ld le s s e n th e d e g r e e o f re d is trib u tio n
w ith in S o c ia l S e c u r ity — th e t r a d e o f f n o te d a b o v e .
It m ig h t b e , f o r e x a m p le , th a t J a n e is a v e r a g e in th e
s e n s e th a t th e fla t b e n e fit fo r m u la in F ig u re 5 n o t o n ly ra is e s th e s a m e n e t t a x re v e n u e fro m h e r a s d o e s
P la n X, b u t it a ls o ra is e s th e s a m e to ta l n e t ta x re v e n u e a s d o e s P la n X.
In th a t c a s e , th e f la t P IA fo r m u la
w o u ld b e a s u s ta in a b le p o lic y th a t, re la tiv e to P la n X, ra is e s life tim e n e t ta x e s f o r w o r k e r s w ith A I M E
s m a lle r th a n J a n e s , a n d lo w e r s life tim e n e t ta x e s f o r w o r k e r s w ith A I M E h ig h e r th a n J a n e s .
T h is w o u ld
b e th e c a s e e v e n th o u g h w o r k in c e n tiv e s a r e im p r o v e d fo r th e a p p r o x im a t e ly 7 0 p e r c e n t o f w o r k e r s w ith
A I M E s a b o v e P la n X's first b e n d p o in t.4
T h is d is c u s s io n a ls o a p p lie s to th e m a r g in a l n e t t a x ra te o n th e la s t y e a r o f w o r k .
A s n o te d a b o v e ,
th is m a r g in a l n e t ta x ra te is th e s a m e a s th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d u p u n til 3 5
y e a r s o f w o r k h a v e b e e n c o m p le te d , a n d is h ig h e r in la te r y e a r s .
A fla tte r P IA fo r m u la w o u ld re su lt in
th is m a r g in a l n e t t a x ra te b e in g lo w e r in a ll y e a r s th a t c o u n t t o w a r d b e n e fits , b u t a t th e e x p e n s e o f le ss
p ro g re s s iv ity .
T o s u m m a riz e , th is d is c u s s io n s h o w s th a t th e r ig h t a m o u n t o f p r o g r e s s iv ity re q u ire s w e ig h in g th e
c o m p e t in g g o a ls o f a c h ie v in g fa irn e s s a n d m a in ta in in g w o r k in c e n tiv e s .
M A K E M A R G IN A L NET TAX RATES M O R E EQ U AL AT DIFFERENT AGES
T h e m a r g in a l n e t ta x ra te p r o file s s h o w n in F ig u re s 4 a n d 6 s ta n d c o n t r a r y to th e p r a c tic a l ru le o f th u m b
th a t a n e ff ic ie n t ta x s yste m s h o u ld e q u a liz e m a r g in a l ta x ra te s o n d iffe r e n t e c o n o m ic a c tiv itie s s o th a t
th e t a x c o d e d o e s n o t e n c o u r a g e o n e a c t iv it y o v e r a n o th e r.
S p e c if ic a lly , P la n X— lik e th e c u rre n t S o c ia l
S e c u r ity s y s te m — ta x e s w o r k e ff o r t a t d iffe r e n t a g e s d iffe re n tly .
T o s e e h o w m a r g in a l n e t ta x ra te s c o u ld b e e q u a liz e d fo r d iffe r e n t a g e s , it is u s e fu l to firs t u n d e r s ta n d
th e a g e p a tte r n o f th e m a r g in a l n e t t a x ra te u n d e r P la n X.
T h e P la n X b e n e fit fo r m u la ( a n d th e c u rre n t
la w fo r m u la ) is c lo s e to a sy s te m th a t c o m p u te s th e A I M E a s th e h y p o t h e tic a l a c c o u n t b a la n c e th a t
w o u ld o b t a in if p a y r o ll ta x e s in th e h ig h - 3 5 y e a r s w e r e in v e s te d a t a fix e d ra te o f re tu rn .
S p e c if ic a lly ,
th is p la n w o u ld re su lt in th e s a m e b e n e fit f o r e v e r y o n e a s u n d e r P la n X if th e ra te o f re tu rn c r e d it e d to th e
n o tio n a l a c c o u n t w a s e q u a l to th e a n n u a l ra te o f e c o n o m y - w id e w a g e g r o w t h th r o u g h a g e 6 0 a n d z e r o
th e re a fte r, if th e PIA b e n d p o in ts w e r e a ll m a d e la r g e r b y a f a c t o r o f 4 5 , a n d if th e P IA m u ltip lic a tio n
fa c to r s w e r e a ll m a d e s m a lle r b y a f a c t o r o f 1 / 4 5 .
p e r c e n t in a ll y e a rs .)
(This c a lc u la t io n a s s u m e s th e p a y r o ll ta x ra te is 1 0 . 6
T h e re v is e d A I M E in th is p la n w ill b e c a lle d th e " n o t io n a l a c c o u n t b a la n c e . "
In te rp re tin g th e P la n X b e n e fit fo r m u la th is w a y e x p la in s w h y th e m a r g in a l n e t ta x ra te s h a v e th e p a tte rn s
s h o w n in F ig u re s 4 a n d 6 .
T h e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d te n d s to fa ll w ith a g e fo r
y e a r s in c lu d e d in th e A I M E c a lc u la t io n b e c a u s e th e r e a l ( in fla tio n - a d ju s te d ) ra te o f re tu rn c r e d it e d to th e
n o tio n a l a c c o u n t is le ss th a n th e risk-fre e ra te o f re tu rn (a s s u m e d to b e 2 . 7 p e rc e n t).
4
P rio r to a g e 6 0 ,
For new benefit awards to 62-year-olds in 20 02 , about 3 0 percent had AIMEs below the current-law first bend point.
For those workers, the PIA increases $0.51 for each additional dollar of AIME under Plan X, and marginal net tax rates
are therefore smaller under Plan X than with the flat PIA formula.
■ U ; S .NAEPARTMENT OF THE TRE ASURY
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF-NO. 6
th e re a l re tu rn c r e d it e d to th e n o tio n a l a c c o u n t is 1.1 p e r c e n t— th e a n n u a l g r o w t h in re a l e c o n o m y - w id e
a v e r a g e w a g e s — w h ic h is s m a lle r th a n th e risk-fre e re tu rn o f 2 . 7 p e rc e n t.
A s a result, a r e a l d o lla r p a id
in to th e s yste m a t a g e 4 0 , fo r e x a m p le , c o u n ts 1.011 tim e s a s m u c h t o w a r d b e n e fits a s d o e s a re a l
d o lla r p a id in to th e syste m a t a g e 41 ( b e c a u s e a d o lla r in th e " n o t io n a l a c c o u n t" g r o w s 1.1 p e r c e n t p e r
y e a r - i.e., is m u ltip lie d b y 1 .0 1 1 ), w h ile th e v a lu e o f a r e a l d o lla r a t a g e 4 0 h a s a v a lu e 1 . 0 2 7 tim e s
th e v a lu e o f a re a l d o lla r a t a g e 41 ( b e c a u s e a d o lla r in v e s te d in a risk-fre e a s s e t g r o w s 2 . 7 p e r c e n t
p e r y e a r - i.e ., is m u ltip lie d b y 1 . 0 2 7 ) .
T h e p o r tio n o f a d o lla r p a id in to th e s yste m th a t is a n e t t a x is
th e re fo re la r g e r th e e a r lie r in life th e d o lla r is p a id in.
re a l re tu rn c r e d it e d to th e n o tio n a l a c c o u n t is z e r o . 5
w o r th th e s a m e a s $ 1 0 2 . 7 0 o f ta x e s p a id a t a g e 4 1
T his is e v e n m o re th e c a s e a f t e r a g e 6 0 w h e n th e
F or e x a m p le , $ 1 0 0 o f ta x e s p a id a t a g e 4 0 a r e
if th e r e a l risk-fre e r a te o f re tu rn is 2 . 7 p e rc e n t.
If
re a l e c o n o m y - w id e a v e r a g e w a g e s g r o w a t 1.1 p e r c e n t p e r y e a r , th e n o t io n a l a c c o u n t b a la n c e a t a g e
6 0 is in c r e a s e d b y $ 1 2 4 . 4 6 b y $ 1 0 0 o f ta x e s p a id a t a g e 4 0 ( $ 1 0 0 x 1 . 0 1 1 2 0 ) , a n d is in c r e a s e d
b y $ 1 2 6 . 4 3 b y $ 1 0 2 . 7 0 o f ta x e s p a id a t a g e 41
( $ 1 0 2 . 7 0 x 1 .0 1 1 1 9 ).
H e n c e , ta x e s p a id a t a g e 41
y ie ld a h ig h e r re tu rn in th e fo rm o f b e n e fits th a n ta x e s p a id a t a g e 4 0 .
T h e n o tio n a l a c c o u n t in te rp re ta tio n o f P la n X a ls o e x p la in s th e y e a r s f o r w h ic h m a r g in a l n e t ta x ra te s
a r e e q u a l to th e fu ll p a y r o ll ta x ra te o f 1 0 . 6 p e rc e n t.
T h o s e a r e y e a r s f o r w h ic h p a y r o ll ta x e s a r e n o t
c r e d ite d to th e n o tio n a l a c c o u n t.
T h e s e o b s e r v a tio n s in d ic a t e th a t th e o n ly w a y to m a k e S o c ia l S e c u rity 's m a r g in a l n e t ta x ra te s e q u a l a t
a ll a g e s is to b a s e b e n e fits e ffe c tiv e ly o n a n o tio n a l a c c o u n t b a la n c e th a t w o u ld o b t a in if a ll p a y r o ll
t a x e s — n o t just th o s e in th e h ig h - 3 5 y e a r s — w e r e in v e s te d a t th e ris k-fre e ra te o f re tu rn .
c o u ld b e d o n e w ith o u t c h a n g in g th e o v e r a ll le v e l o f b e n e fits .
In p r in c ip le th is
F o r e x a m p le , ja n e 's b e n e fits w o u ld b e
u n c h a n g e d in su c h a p la n if h e r n o tio n a l a c c o u n t b a la n c e w e r e e n te r e d in to a P IA fo r m u la lik e th e P la n
X fo r m u la e x c e p t th a t th e PIA b e n d p o in ts a r e la r g e r b y a f a c t o r o f 81 a n d th e P IA m u ltip lic a tio n fa c to r s
e s m a lle r b y a f a c t o r o f 1 / 8 1 .
In th a t c a s e , J a n e 's n o tio n a l a c c o u n t b a la n c e a t a g e 6 7 w o u ld b e
$ 4 2 1 , 4 4 0 , ( e q u a l to 81 tim e s h e r A IM E ) , a n d it c a n b e v e r ifie d th a t h e r b e n e fit is th e s a m e a s it is
u n d e r P la n X .6
U n d e r this p la n , J a n e 's m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d w o u ld b e th e s a m e in a ll
y e a r s — 6 . 6 p e r c e n t— a n d in e v e r y y e a r w o u ld e q u a l th e m a r g in a l n e t t a x ra te o n th e la s t y e a r o f
e a r n in g s .
T his p a tte rn is c o m p a r e d w ith th e P la n X p a tte rn s in F ig u re s 7 a n d 8 .
O n a v e r a g e , th e
n o tio n a l a c c o u n ts syste m results in th e s a m e m a r g in a l n e t ta x ra te s o n th e la s t d o lla r e a r n e d a s d o e s P la n
X, b u t th o s e ra te s a r e c o n s ta n t a c ro s s d iffe re n t a g e s ra th e r th a n v a r y in g a s u n d e r P la n X.
T h e n o tio n a l
a c c o u n ts s yste m results in m o d e s tly h ig h e r m a r g in a l n e t t a x ra te s o n th e la s t d o lla r e a r n e d b e t w e e n th e
a g e s o f 3 3 a n d 6 1 , a n d lo w e r ra te s )|n o th e r y e a r s (F ig u re 7 ) .
n o tio n a l a c c o u n t syste m is c le a r ly s u p e r io r to P la n X.
W it h r e g a r d to re tire m e n t in c e n tiv e s , th e
It results in s u b s ta n tia lly lo w e r m a r g in a l n e t t a x ra te s
o n th e la s t y e a r o f w o r k if th e la s t y e a r o f w o r k is a f te r a g e 5 6 — th e y e a r s th a t m o s t m a tte r fo r re tire m e n t,
in c e n tiv e s (F ig u re 8 ).
5
W ith regard to this feature, Plan X and current law are akin to {but not exactly like) a notional accounts system that pays
a return less than the risk-free return and allows the participant to keep the entire balance. Compared to earning a
risk-free return, a dollar invested at a below-market return is a worse deal for the participant the longer the period of time
the dollar is invested.
6
Under the revised benefit formula, Jane's benefit is:
(1/81| x [F x8 1xBEND]+ f 2x{81 xAIME] 8]xBEND2)]
where BEND, and BEND2 are the Plan X bend points and F and
Clearly, this expression reduces to the Plan X benefit:
F, x SEND, + f 2x[AIME-BEND2).
F2 are the Plan X multiplication factors.
U . S . D E P A RT ME N TO P THE TRE A.SURY
SOCIAL SECURITY-REFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
Figure 7: Marginal Net Tax Rate on Last Dollar Earned
for Medium Female Earner, 1990 Birth Cohort
Age
Figure 8: Marginal Net Tax Rate On Last Year of Work,
Medium Female Earner, 1990 Birth Cohort
33
37
41
45
&
49
Age
53
57
-V5 • DEPARTMENT O F . ! HE TREA$URY
13
61
65
69
SOCIAL SECURITYREFORM: WORK INCENTIVES ♦ ISSUE BRIEF NO. 6
In a d d it io n to b e in g m o re e ffic ie n t th a n P la n X, a c a s e c a n b e m a d e th a t th e n o tio n a l a c c o u n ts p la n is
a ls o fa ire r.
O t h e r th in g s th e s a m e , a p e rs o n 's life tim e n e t ta x e s u n d e r P la n X { a n d c u rre n t la w ) a r e h ig h e r
th e m o re th e p e rs o n w o r k s in e a r ly life re la tiv e to la te life .
T h e re w o u ld s e e m to b e n o re a s o n fo r S o c ia l
S e c u r ity to d is c r im in a te a m o n g p e o p le in this m a n n e r.
1AKE LATE-LIFE M A R G IN A L NET TAX RATES LOWER T H A N EARLIER
M A R G IN A L NET TAX RATES
T h e n o tio n th a t e q u a liz in g ta x ra te s o n a ll e c o n o m ic a c tiv itie s p r o m o te s e f f ic ie n c y is p r e m is e d o n th e
a s s u m p tio n th a t a ll e c o n o m ic a c tiv itie s a r e e q u a lly re s p o n s iv e to ta x e s .
A lte r n a tiv e ly , it m ig h t b e th a t th e
a g e o f re tire m e n t is m o re r e s p o n s iv e to ta x e s th a n is w o r k e f f o r t w h ile w o r k in g .
It th a t c a s e , it w o u ld b e
e f fic ie n t fo r S o c ia l S e c u rity 's m a r g in a l n e t ta x ra te s to b e lo w e r a t p o te n tia l re tire m e n t a g e s th a n a t e a r lie r
ages.
O n e p o lic y th a t w o u ld a c h ie v e this o b je c tiv e w o u ld s u p p le m e n t th e n o tio n a l a c c o u n ts d is c u s s e d in th e
p re v io u s s e c tio n w ith a p a y r o ll ta x ra te th a t v a r ie s w ith a g e .
S p e c ific a lly , s u p p o s e th e p a y r o ll t a x ra te
is r a is e d p r io r to th e n o r m a l re tire m e n t a g e a n d is lo w e r e d a ft e r th e n o r m a l re tire m e n t a g e in s u c h a
m a n n e r th a t th e p re s e n t v a lu e o f life tim e p a y r o ll ta x e s is u n c h a n g e d f o r th e a v e r a g e p e rs o n .
S k e w in g
th e p a y r o ll ta x ra te in this m a n n e r w o u ld ra is e m a r g in a l n e t t a x ra te s o n e a r n in g s p r io r to th e n o r m a l
re tire m e n t a g e a n d w o u ld lo w e r th e m o n la te r e a rn in g s .
A less e ffe c tiv e p o lic y fo r e n c o u r a g in g la te r re tire m e n t is to in c lu d e m o re y e a r s o f e a r n in g s in th e A I M E
c o m p u ta tio n .
W it h r e g a r d to P la n X, f o r e x a m p le , o n e p o s s ib le m o d if ic a tio n w o u ld b e to c o m p u t e
th e A lM E a s th e sum o f a ll in d e x e d e a r n in g s d iv id e d b y 3 5 x 12.
T h a t is, th e d e n o m in a t o r o f th e
A I M E c o m p u ta tio n (th e n u m b e r o f m o n th s in 3 5 y e a rs ) w o u ld b e th e s a m e a s it is u n d e r P la n X, b u t
th e n u m e ra to r o f th e c o m p u ta tio n w o u ld in c lu d e m o re in d e x e d e a r n in g s to th e e x te n t th a t a p e rs o n
h a s e a r n in g s in m o re th a n 3 5 y e a rs .
U n d e r this re fo rm , p e o p le w ith e a r n in g s in m o re th a n 3 5 y e a r s
o u ld s e e th e ir A I M E in c re a s e a n d th e ir b e n e fits in c r e a s e in re tire m e n t w h ile o th e r p e o p le w o u ld s e e n o
change
im p ly in g th a t th e p o lic y w o u ld n e e d to b e c o m b in e d w ith a d d it io n a l m e a s u re s to m a k e S o c ia l
S e c u rity s o lv e n t.
(R e c a ll th a t P la n X is a s s u m e d to m a k e S o c ia l S e c u r ity p e r m a n e n t ly s o lv e n t.)
H ence,
in o r d e r to fa ir ly a s s e s s this c h a n g e in th e A I M E fo rm u la , it w ill b e a s s u m e d th a t th e re fo rm is c o m b in e d
w ith a p r o p o r tio n a t e re d u c tio n in th e P IA m u ltip lic a tio n fa c to r s th a t m a k e s th e o v e r a ll re fo rm n e u tra l w ith
re s p e c t to th e a m o u n t o f to ta l life tim e n e t ta x e s le v ie d .
T his p la n w ill b e re fe rre d to a s ALLYEARS.
T o u n d e r s ta n d th e im p lic a tio n s o f ALLYEARS, s u p p o s e J a n e fro m th e p r e v io u s illu s tra tio n s is a n a v e r a g e
p e rs o n fo r w h o m ALLYEARS d o e s n o t c h a n g e life tim e n e t ta x e s .
T h e n ALLYEARS w o u ld re su it in a
m a r g in a l n e t t a x ra te o n b o th th e la s t d o lla r o f e a r n in g s a n d o n th e la s t y e a r o f e a r n in g s th a t a v e r a g e s
6 . 6 p e r c e n t o v e r J a n e s life tim e
th e s a m e a v e r a g e th a t o b ta in s u n d e r th e n o tio n a l a c c o u n ts sy s te m
d is c u s s e d in th e p re v io u s s e c tio n .
d iffe re n t,
B u t th e s h a p e o f th e m a r g in a l n e t ta x ra te p r o file b y a g e w o u ld b e
m a r g in a l n e t ta x ra te s w o u ld s t e a d ily d e c lin e w ith a g e u n d e r ALLYEARS ra th e r th a n s ta y in g
f la t a s th e y d o u n d e r th e n o tio n a l a c c o u n ts syste m .
T h e re a s o n m a r g in a l n e t t a x ra te s d e c lin e w ith a g e
u n d e r ALLYEARS is th e s a m e re a s o n m a r g in a l n e t ta x ra te s o n th e la s t d o lla r e a r n e d d e c lin e w ith a g e
u n d e r P la n X.
b o th p la n s a r e s im ila r to n o tio n a l a c c o u n ts syste m s th a t c r e d it th e a c c o u n t b a la n c e w ith a
ra te o f re tu rn less th a n th e risk-fre e re tu rn .
ALLYEARS, h o w e v e r, w o u ld b e a le ss e ffe c tiv e s tr a te g y fo r e n c o u r a g in g la te r re tire m e n t th a n th e n o tio n a l
a c c o u n ts syste m s u p p le m e n te d w ith a s k e w in g o f th e p a y r o ll ta x ra te .
T h e ALLYEARS s tr a te g y results in
..e c lm in g m a r g in a l n e t ta x ra te s th r o u g h o u t life ra th e r th a n just in la te w o r k in g life .
M o r e o v e r , u n d e r th e
r e a s o n a b le a s s u m p tio n th a t th e re s p o n s iv e n e s s o f w o r k e ff o r t to ta x e s d o e s n o t v a r y w ith a g e d u r in g
w o r k in g y e a rs , it w o u ld b e in e ffic ie n t fo r m a r g in a l n e t ta x ra te s to d e c lin e d u r in g e a r ly w o r k in g life .
U . S . D EPAR T.ME N I O F T H E T R E A $ U RY
SOCIALSECURITY-REFORM: ! WORK INCENTIVES • ISSUE BRIEF NO. 6
If w o r k e r s d o n o t u n d e r s ta n d th a t a la r g e s h a re o f th e ir c o n tr ib u tio n s to S o c ia l S e c u r ity w ill b e re tu rn e d in
th e fo rm o f b e n e fits d u r in g re tire m e n t, th e fo r c e d s a v in g c o m p o n e n t o f S o c ia l S e c u r ity d is c o u r a g e s w o r k
e f f o r t in m u c h th e s a m e w a y a s d o e s th e n e t ta x c o m p o n e n t (o r a s d o e s a r e g u la r t a x — w o r k e r s p a y in
b u t d o n o t r e a liz e th a t th e y r e c e iv e s o m e th in g fo r th is in th e fo rm o f a c c r u e d fu tu re b e n e fits ).
T his c o u ld
c o m e a b o u t b e c a u s e th e m a r g in a l n e t ta x ra te s in F ig u re s 4 a n d 6 a r e d iff ic u lt f o r w o r k e r s to e s tim a te .
T h e re is a risk, th e re fo re , th a t w o r k e r s fo c u s o n ly o n th e p a r t o f th e m a r g in a l n e t t a x ra te th a t is o b v io u s
a n d im m e d ia t e — th e 1 0 . 6 p e r c e n t p a y r o ll t a x — a n d d is c o u n t o r e n tir e ly ig n o r e th e b e n e fit a c c r u a ls .
In
th is c a s e , w o r k e r s w o u ld b e h a v e a s if th e m a r g in a l n e t ta x ra te o n th e la s t d o lla r e a r n e d a n d o n th e la s t
y e a r o f e a r n in g s is 1 0 . 6 p e r c e n t in a ll y e a r s .
W o r k e ffo rt, th e re fo re , w o u ld in c r e a s e if S o c ia l S e c u rity 's
b e n e fit a c c r u a ls w e r e m o r e tr a n s p a r e n t to w o r k e r s .
B a s in g S o c ia l S e c u r ity b e n e fits o n a n o t io n a l a c c o u n t b a la n c e a s e x p la in e d a b o v e m ig h t h e lp in this
re g a rd .
W o r k e r s c o u ld m o n ito r th e ir n o t io n a l a c c o u n t b a la n c e a n d s e e th a t it in c re a s e s e a c h y e a r in
a c c o r d a n c e w ith th e ir p a y r o ll t a x p a y m e n ts .
W h i l e S o c ia l S e c u r ity m u st a s s e s s n e t ta x e s g o in g f o r w a r d
in o r d e r to b e s o lv e n t a n d h e n c e th e n o tio n a l a c c o u n t b a la n c e c a n n o t b e n e fit th e w o r k e r d o lla r fo r
d o lla r , it w o u ld b e e a s y f o r w o r k e r s to u n d e r s ta n d th a t in c r e a s in g th e a c c o u n t b a la n c e d o e s c a u s e th e ir
b e n e fits to in c re a s e .
P e rs o n a l re tire m e n t a c c o u n ts w o u ld a lm o s t c e r t a in ly m a k e S o c ia l S e c u rity 's m a r g in a l n e t t a x ra te s e a s ie r
f o r w o r k e r s to u n d e r s ta n d .
F o r e x a m p le , s lig h tly m o re th a n h a lf o f J a n e 's life tim e p a y r o ll ta x e s a r e f o r c e d
s a v in g s th a t e n tir e ly f in a n c e h e r b e n e fits .
It w o u ld b e p o s s ib le to d e v is e a s y s te m w h e r e b y th o s e fo r c e d
s a v in g s a r e d iv e r t e d to a p e r s o n a l re tire m e n t a c c o u n t o v e r th e c o u r s e o f J a n e 's life tim e , d e f in e d b e n e fits
a r e r e d u c e d to z e ro , a n d m a r g in a l n e t t a x ra te s a n d p r o g r e s s iv ity a r e th e s a m e a s th e y a r e u n d e r P la n
X .7 If J a n e in v e s te d h e r a c c o u n t e n tir e ly in g o v e r n m e n t b o n d s , a n d if h e r b e n e fits w e r e p a id a s a life
a n n u ity , s h e w o u ld b e a s s u re d th e s a m e b e n e fit a s in P la n X.
A lte r n a tiv e ly , if J a n e in v e s te d s o m e o f
h e r a c c o u n t in ris k ie r a sse ts, th e re is s o m e c h a n c e h e r b e n e fits w o u ld d e c r e a s e r e la tiv e to th e d e f in e d
b e n e fit, a n d s o m e c h a n c e th a t th e y w o u ld in c re a s e , th is o u t c o m e w o u ld d e p e n d o n th e p e r fo r m a n c e o f
th e a s s e ts.
In a n y c a s e , th e p e r s o n a l re tire m e n t a c c o u n t p la n w o u ld m a k e it tr a n s p a r e n t to j a n e th a t th e
p o r tio n o f p a y r o ll ta x e s g o in g to h e r re tire m e n t a c c o u n t a r e fo r c e d s a v in g s a n d n o t p u re ta x e s .
In th is
w a y , p e r s o n a l re tire m e n t a c c o u n ts w o u ld in c r e a s e th e t r a n s p a r e n c y o f th e s y s te m a n d p o t e n t ia lly im p r o v e
its e f f ic ie n c y in a w a y th a t h a s n o th in g to d o w ith th e re tu rn s th a t m ig h t b e e a r n e d in p r iv a t e a c c o u n ts .
I n d e e d , n o tio n a l a c c o u n ts w o u ld b e ju st a s e ff e c t iv e a s p r iv a t e a c c o u n ts a t m a k in g S o c ia l S e c u rity 's
b e n e fit a c c r u a ls tr a n s p a r e n t to w o r k e r s .
In th e e q u iv a le n t n o t io n a l a c c o u n t p la n , th e p a y r o ll ta x e s th a t
w o u ld b e d iv e r t e d to p e r s o n a l re tire m e n t a c c o u n ts w o u ld c o n tin u e to g o to th e tru st fu n d , b u t a n o tio n a l
a c c o u n t b a la n c e w o u ld b e m a in t a in e d a n d d e f in e d b e n e fits w o u ld b e s e t e q u a l th e a n n u ity v a lu e o f th e
a c c o u n t a t th e tim e th a t re tire m e n t b e n e fits b e g in to b e p a id .
T h is p la n d iffe rs fro m th e e a r lie r n o tio n a l
a c c o u n ts in th a t th e a c c o u n t b a la n c e a c c u r a t e ly m e a s u re s th e v a lu e o f d e f in e d b e n e fits th a t h a v e
a c c r u e d a t a ll p o in ts in tim e .
In th e e a r lie r p la n , d e f in e d b e n e fits a c c r u e le ss th a n d o lla r f o r d o lla r w ith
in c re a s e s in th e n o tio n a l a c c o u n t b a la n c e .
7
Contributions to personal retirement accounts could be designed in many ways. One possibility would be to divert 5.7
percentage points of Janes payroll taxes to a personal retirement account in every year and to reduce her defined ben
efits by the annuity value of a hypothetical account balance calculated as if her personal account contributions earned a
risk-free rate of return in every year.
SOCIAL SECURITYREFORM: WORK INCENTIVES * ISSUE BRIEF,NO. 6
If a p o lic y c a n n o t b e im p le m e n te d th a t e n a b le s p e o p le to u n d e r s ta n d th a t a la r g e s h a re o f th e ir
c o n trib u tio n s to S o c ia l S e c u r ity a r e fo r c e d s a v in g s th a t a r e re tu rn e d d o lla r fo r d o lla r in th e fo rm o f
b e n e fits , th e im p lic a tio n is th a t th e f o r c e d s a v in g s c o m p o n e n t o f S o c ia l S e c u r ity d is c o u r a g e s w o r k e ff o r t
in m u c h th e s a m e w a y th a t th e n e t ta x c o m p o n e n t d o e s .
In th e s e c irc u m s ta n c e s , m a n y p e o p le m ig h t
w e ll r e g a r d s o m e o r a ll o f th e ir f o r c e d s a v in g s a s p u re ta x e s th a t p e n a liz e w o r k e ffo rt.
If th is is th e c a s e ,
¡ere is a t r a d e - o f f b e t w e e n th e le v e l o f b e n e fits a n d th e le v e l o f w o r k in c e n tiv e s — h ig h e r b e n e fits w o u ld
e q u ir e in c r e a s e d f o r c e d s a v in g s th a t w o r k e r s p e r c e iv e to b e p u re ta x e s , w h ic h w o u ld in tu rn a d v e r s e ly
a f f e c t w o r k in c e n tiv e s .
M O D IFY EARLY RETIREMENT DEDUCTIONS A N D DELAYED RETIREMENT CREDITS
T h e a m o u n t o f S o c ia l S e c u r ity b e n e fits a re tire e re c e iv e s d e p e n d s o n th e a g e b e n e fit p a y m e n ts b e g in ,
in a d d it io n to th e life tim e h is to ry o f e a r n in g s .
In itia l b e n e fits fo r a p e rs o n re tirin g a t th e " n o r m a l re tire m e n t
a g e " e q u a l th e ir P IA a d ju s te d fo r p r ic e in fla tio n b e t w e e n th e y e a r th e y tu rn 6 2 a n d th e y e a r b e n e fits
c o m m e n c e (th e n o r m a l re tire m e n t a g e in this c a s e ).
T h a t s a m e p e rs o n c o u ld h a v e c o lle c t e d r e d u c e d
b e n e fits a s e a r ly a s a g e 6 2 o r c o u ld d e la y re tire m e n t a n d r e c e iv e h ig h e r m o n th ly b e n e fits s ta rtin g a la te r
aqe.
U n d e r c u rre n t la w , b e n e fit re d u c tio n s fo r e a r ly re tire m e n t a n d b e n e fit c re d its fo r d e la y e d re tire m e n t a r e
d e s ig n e d to b e a b o u t a c t u a r ia lly fa ir in th e s e n s e th a t th e e x p e c t e d p re s e n t v a lu e o f life tim e b e n e fits
fo r a p e rs o n w ith a g iv e n PIA a n d a v e r a g e e x p e c t e d lo n g e v it y is a p p r o x im a t e ly th e s a m e n o m a tte r
w h e n a n in d iv id u a l c h o o s e s to b e g in c o lle c t in g b e n e fits .
F o r e v e r y m o n th th e p e r s o n re tire s e a r lie r th a n
th e n o r m a l re tire m e n t a g e , b e n e fits a r e r e d u c e d 5 / 9 t h s o f 1 p e r c e n t f o r th e firs t 3 6 m o n th s e a r ly a n d
5 / 1 2 t h s o f 1 p e r c e n t fo r m o n th s e a r ly in e x c e s s o f 3 6 m o n th s .
A n d , f o r e v e r y m o n th th e p e r s o n c h o o s e s
to d e la y c o lle c t in g b e n e fits r e la tiv e to th e n o r m a l re tire m e n t a g e , b e n e fits a r e in c r e a s e d b y 2 / 3 r d s o f 1
¡rce n t u p to a g e 7 0 .
T h e re is n o r e w a r d f o r d e la y in g b e n e fit c o m m e n c e m e n t a f t e r a g e 7 0 .
A s a n e x a m p le , c o n s id e r th e 1 9 4 3 b irth c o h o r t th a t re a c h e s its n o r m a l re tire m e n t a g e o f 6 6 in 2 0 0 9 .
T a b le 1 re p o rts b e n e fits a s a p o r tio n o f th e in fla tio n - a d ju s te d P IA fo r e a c h a g e o f b e n e fit o n s e t b e t w e e n
ages 62 and 70.
A ls o s h o w n a r e th e a d ju s tm e n t fa c to r s th a t w o u ld b e f a ir in th e s e n s e th a t th e
e x p e c t e d p re s e n t v a lu e o f b e n e fits is th e s a m e fo r a ll b e n e fit c o m m e n c e m e n t d a te s , u s in g th e m o r t a lit y
p r o b a b ilit ie s p r o je c te d in th e 2 0 0 5 S o c ia l S e c u r ity T ru ste e R e p o rt a n d a s s u m in g th a t in d iv id u a ls e a r n
a s a fe 2 . 7 p e r c e n t re a l a n n u a l re tu rn o n p r iv a te in v e s tm e n ts .
T h e a d ju s tm e n t fa c to r s u s e d b y S o c ia l
S e c u r ity a r e v e r y c lo s e to f a ir fo r m a le s a n d s lig h tly f a v o r la te c o m m e n c e m e n t o f b e n e fits fo r fe m a le s .
For m a le s , s ta rtin g b e n e fits a t a g e 6 2 in c re a s e s th e e x p e c t e d p re s e n t v a lu e o f b e n e fits b y 0 . 3 p e r c e n t
¡e ia tiv e to s ta rtin g b e n e fits a t a g e 6 6 , a n d s ta rtin g b e n e fits a t a g e 7 0 in c re a s e s th e e x p e c t e d p re s e n t
v a lu e o f b e n e fits b y 1 .4 p e rc e n t.
F or fe m a le s , th e c o m p a r a b le n u m b e rs a r e a 2.1
a g e 6 2 , a n d a 4 . 4 p e r c e n t in c r e a s e a t a g e 7 0 .
p e rc e n t d e c re a s e a t
SOCIAL SECURITYREFORM: WORK INCENTIVE * ISSUE BRIEF NO. 6
Table Î
Initial Benefit As Percent of Inflation-Adjusted PIA
(1943 Birth Cohort)
Age Benefits
Begin
62
63
64
65
66
67
68
69
70
Current Law
77.2
81.3
87.1
93.3
100.0
108.0
116.6
126.0
136.0
Actuarially Fair Adjustment Factors
Males
Females
Unisex
77.0
78.9
78.0
82.0
83.5
82.8
87.4
88.5
88.0
93.4
94.0
93.7
100.0
100.0
100.0
107.3
106.5
106.9
115.3
113.7
114.4
124.2
121.6
122.8
134.2
130.3
132.0
In a d d it io n , S o c ia l S e c u r ity in c lu d e s a n " e a r n in g s te s t" th a t re d u c e s b e n e fits f o r p e o p le w h o c o lle c t
b e n e fits b e f o r e th e n o r m a l re tire m e n t a g e b u t c o n tin u e to w o r k a n d e a r n m o r e th a n a th r e s h o ld a m o u n t
a n d th e n c o m p e n s a te s f o r a n y r e d u c tio n in b e n e fits b y in c r e a s in g b e n e fits la te r in life .
T h is e a r n in g s
te s t is d e s ig n e d to h e lp e n s u re th a t o ld e r p e o p le w h o a r e a b le to c o n tin u e to w o r k p r io r to th e n o r m a l
re tire m e n t a g e d o n o t u n n e c e s s a rily s a c r ific e la te -life b e n e fits fo r h ig h e r e a r ly - life b e n e fits .
In 2 0 0 8 ,
b e n e fits a r e r e d u c e d 5 0 c e n ts f o r e v e r y d o lla r o f e a r n in g s a b o v e $ 1 3 , 5 6 0 a n d b e lo w $ 3 6 , 1 2 0 , a n d
3 3 - 1 / 3 c e n ts fo r e v e r y d o lla r e a r n e d a b o v e $ 3 6 , 1 2 0 .
(T h e th re s h o ld a m o u n ts , $ 1 3 , 5 6 0 a n d $ 3 6 , 1 2 0 ,
a r e in c r e a s e d a n n u a lly in a c c o r d a n c e w ith th e g r o w t h o f e c o n o m y - w id e a v e r a g e e a r n in g s .)
B e n e fits
w ith h e ld p r io r to th e n o rm a l re tire m e n t a g e s e rv e to in c r e a s e b e n e fits a ft e r th e n o r m a l re tire m e n t a g e
b y a n a m o u n t th a t is g a u g e d to th e e a r ly re tire m e n t a d ju s tm e n t fa c to r s in T a b le 1, a n d th o s e in c re a s e s
w o u ld b e just s u ffic ie n t to c o m p e n s a t e e n tir e ly f o r w ith h e ld b e n e fits if th e T a b le 1 a d ju s tm e n t fa c to r s w e r e
fa ir.
In th e c a s e o f th e 1 9 4 3 b irth c o h o r t, p o s t-n o r m a l re tire m e n t a g e b e n e fit in c re a s e s a r e a b o u t rig h t fo r
m a le s a n d t o o la r g e fo r fe m a le s ( c o m p a r e d w ith th e a c t u a r ia lly f a ir a m o u n t).
S o m e a n a ly s ts h a v e a d v o c a t e d in c r e a s in g S o c ia l S e c u rity 's e a r ly re tire m e n t r e d u c tio n s s o a s to
e n c o u r a g e la te r re tire m e n t, a r g u in g th a t p e o p le m a y w o r k lo n g e r if th e ir e a r ly re tire m e n t b e n e fits a r e
lo w e r th a n th e a c t u a r ia lly f a ir a m o u n t.
S u c h p o lic ie s c a n b e e x p e c t e d to b e s u c c e s s fu l, h o w e v e r , o n ly
fo r p e o p le w ith little liq u id w e a lt h a n d w ith o u t a c c e s s to b o r r o w in g o n fa ir te rm s .
T o u n d e r s ta n d th is
result, it is im p o r ta n t to d is tin g u is h th e a g e a t w h ic h S o c ia l S e c u r ity b e n e fits b e g in a n d th e a g e th a t
a n in d iv id u a l re tire s (i.e ., s u b s ta n tia lly c u ts b a c k th e ir w o r k e ffo r t) .
P rio r to th e n o r m a l re tire m e n t a g e ,
e a r ly re tire m e n t a d ju s tm e n t fa c to r s th a t f a v o r e a r ly c o m m e n c e m e n t o f b e n e fits a ls o e n c o u r a g e e a r lie r
re tire m e n t.
T h is is tru e b e c a u s e th e r e la tiv e ly a d v a n t a g e o u s te rm s o n w h ic h b e n e fits a r e p a id e a r ly c a n
b e e n jo y e d o n ly to th e e x te n t th a t b e n e fits a r e n o t r e d u c e d b y th e e a r n in g s test.
B u t th e re v e rs e is n o t
n e c e s s a r ily tr u e — e a r ly re tire m e n t a d ju s tm e n t fa c to r s fa v o r in g la te c o m m e n c e m e n t o f b e n e fits d o n o t
n e c e s s a r ily e n c o u r a g e la te r re tire m e n t.
In th is la tte r c a s e , th e a c t u a r ia l a d ju s tm e n t fa c to r s m ig h t c a u s e th e
in d iv id u a l to b e g in c o lle c t in g b e n e fits la te r, b u t th e y w o u ld n o t in flu e n c e th e re tire m e n t a g e p r o v id e d th a t
th e in d iv id u a l h a s s u ffic ie n t liq u id w e a lt h to s u s ta in th e ir liv in g s ta n d a r d b e t w e e n re tire m e n t a n d th e tim e
b e n e fits c o m m e n c e , o r if h e o r s h e h a s a c c e s s to b o r r o w in g o n fa ir te rm s .
In th e s e c irc u m s ta n c e s , b e in g
re tire d a n d d e la y in g th e o n s e t o f b e n e fits w o u ld r e q u ire g r e a t e r d r a w d o w n o f a s s e ts (o r g r e a t e r d e b t)
WsS i D E PA RIME NT OF T H E i T R£ A S UR Y
17
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEFNO. 6
in itia lly , b u t th e e v e n tu a l h ig h e r b e n e fits w o u ld m o re th a n c o m p e n s a t e (o n a v e r a g e ) fo r th e d r a w d o w n o f
a s s e ts o r in c r e a s e d d e b t.
H e n c e , th e re w o u ld b e n o re a s o n to w o r k lo n g e r.
O n th e o th e r h a n d , e a r ly re tire m e n t a d ju s tm e n t fa c to r s f a v o r in g la te c o m m e n c e m e n t o f b e n e fits m ig h t
a u s e la te r re tire m e n t o n th e p a r t o f s o m e p e o p le w ith little liq u id w e a lt h a n d w ith o u t a c c e s s to
b o r r o w in g o n f a ir te rm s.
S u c h p e o p le w o u ld b e u n a b le to f in a n c e c o n s u m p tio n d u r in g re tire m e n t u n le s s
b e n e fits a r e b e in g p a id , a n d w ill b e re fe rre d to a s b e in g " liq u id it y c o n s tr a in e d ."
C u rre n tly , th e re is n o e a r n in g s te st a ft e r a n in d iv id u a l re a c h e s th e n o r m a l re tire m e n t a g e .
A f te r th e
n o rm a l re tire m e n t a g e , th e re fo re , th e d e la y e d re tire m e n t c r e d its m ig h t in flu e n c e th e a g e a t w h ic h b e n e fits
c o m m e n c e , b u t th e y s h o u ld h a v e n o in flu e n c e o n w h e n re tire m e n t o c c u rs .
T o c o n c lu d e , re d u c in g e a r ly re tire m e n t b e n e fits re la tiv e to b e n e fits p a y a b le a t th e n o r m a l re tire m e n t a g e
w o u ld p r o b a b ly in d u c e s o m e liq u id ity c o n s tra in e d in d iv id u a ls to d e la y th e ir re tire m e n t.
INCREASE THE N O R M A L RETIREMENT AG E
T h e n o rm a l re tire m e n t a g e w a s se t a t a g e 6 5 fo r a ll w o r k e r s w h e n S o c ia l S e c u r ity w a s in s titu te d in 1 9 3 5 ,
c u t le g is la tio n e n a c t e d in 1 9 8 3 p r o v id e d fo r th e n o r m a l re tire m e n t a g e to in c r e a s e g r a d u a lly o v e r tim e
a s s h o w n in F ig u re 9 .
T h e n o r m a l re tire m e n t a g e in c re a s e s s t e a d ily fro m 6 5 f o r p e rs o n s b o r n in 1 9 3 7 to
6 6 fo r p e rs o n s b o r n in 1 9 4 3 , s ta y s a t 6 6 th ro u g h to th e 1 9 5 4 b irth c o h o r t, s t e a d ily in c re a s e s to 6 7 fo r
p e rs o n s b o r n b e t w e e n
1955 and
1 9 6 0 , a n d re m a in s c o n s ta n t a t 6 7 fo r p e rs o n s b o r n a f t e r 1 9 6 0 .
Figure 9: Normal Retirement Age
Birth Year
SOCIAL' SECURITY^REFORM: WORK INCENTIVES • ISSUE E
BRIEF NO. 6
T h e n o r m a l re tire m e n t a g e m ig h t a f f e c t re tire m e n t b e h a v io r b o th th r o u g h f in a n c ia l in c e n tiv e s a n d th ro u g h
th e p e r c e p tio n th a t it is a s u g g e s te d re tire m e n t a g e .
A s is e x p la in e d b e lo w , th e s u g g e s tio n e f f e c t c o u ld
b e m u c h la r g e r th a n th e f in a n c ia l in c e n tiv e s e ffe c t.
W it h r e g a r d to f in a n c ia l in c e n tiv e s , in c r e a s in g th e n o r m a l re tire m e n t a g e is e q u iv a le n t to a p r o p o r t io n a t e
b e n e fit c u t p r o v id e d th a t th e e a r ly a n d la te re tire m e n t a d ju s tm e n t fa c to r s c o n tin u e to b e s e t s o th a t th e
e x p e c t e d p re s e n t v a lu e o f b e n e fits is in d e p e n d e n t o f th e a g e th a t b e n e fits b e g in .
T h is c a n b e s e e n
in T a b le 2 , w h ic h s h o w s th a t in c r e a s in g th e n o r m a l re tire m e n t a g e b y 1 y e a r to a g e 6 7 fo r th e 1 9 4 3
b irth c o h o r t is e q u iv a le n t to a 7 4
p e r c e n t a c r o s s - th e - b o a r d r e d u c tio n in b e n e fits r e g a r d le s s o f th e a g e
a t w h ic h a w o r k e r a c t u a lly re tire s s o lo n g a s th e a d ju s tm e n t fa c to r s f o r e a r ly a n d la te re tire m e n t a r e
re v is e d to b e c o n s is te n t w ith th e c u rre n t a d ju s tm e n t fa c to rs .
T h e re v is e d a d ju s tm e n t fa c to r s fo r th e h ig h e r
re tire m e n t a g e c a n b e o b t a in e d fro m th e c u r r e n t- la w fig u re s b y n o tin g th a t:
(1) b e n e fits a t th e n o r m a l
re tire m e n t a g e ( n o w a g e 6 7 ) a r e 1 0 0 p e r c e n t o f th e in fla tio n - a d ju s te d P IA , a n d (2 ) th e r a tio o f th e
e n trie s in a n y t w o ro w s o f th e re fo rm c o lu m n m ust e q u a l th e r a tio o f th e fig u r e s in th e s a m e t w o r o w s
o f th e c u r r e n t- la w c o lu m n if th e o b je c t iv e in b o th c a s e s is fo r th e e x p e c t e d p re s e n t v a lu e o f b e n e fits
to b e in d e p e n d e n t o f th e a g e th a t b e n e fits b e g in .
T h e im p lic a tio n is th a t th e re fo rm is e q u iv a le n t to a
7 4 p e r c e n t a c r o s s - th e - b o a r d r e d u c tio n in b e n e fits , a n d th a t th e a c t u a r ia lly f a ir m o n th ly e a r ly re tire m e n t
r e d u c tio n s u n d e r th e re fo rm a r e tw o - th ir d s o f 1 p e r c e n t f o r th e first 1 2 m o n th s , fiv e -n in th s o f 1 p e r c e n t fo r
n e x t 3 6 m o n th s , a n d fiv e -tw e lfth s o f o n e p e r c e n t f o r m o n th s e x c e e d in g 4 8 m o n th s .
Table 2
Initial Benefit As Percent of Inflation-Adjusted PIA
(1943 Birth Cohort)
Age Benefits
Begin
Benefit As Percent of Inflation-Adjusted PIA
Current Law
NRA Increased to 67
Benefit Cut Resulting
From NRA Increase
(Percent)
62
77
72
-7.4
63
81
75
-7.4
64
87
81
-7.4
65
93
86
-7.4
66
100
93
-7.4
67
108
o
o
-7.4
68
117
108
-7.4
69
126
117
-7.4
70
136
126
-7.4
T h e f a c t th a t in c r e a s in g th e n o r m a l re tire m e n t a g e w h ile m a in ta in in g e a r ly a n d la te re tire m e n t a d ju s tm e n t
fa c to r s th a t a r e c o n s is te n t w ith th e c u rre n t a d ju s tm e n t fa c to r s is e q u iv a le n t to a p r o p o r t io n a t e r e d u c tio n
in b e n e fits in d ic a te s th a t th e n o r m a l re tire m e n t a g e is n o t a s p e c ia l to o l in th e p o lic y m a k e r 's a r s e n a l fo r
e n c o u r a g in g la te r re tire m e n t.
In p r in c ip le , th e n , p e o p le s h o u ld n o t b e m u c h in flu e n c e d b y th e n o r m a l
re tire m e n t a g e w h e n d e c id in g w h e n to b e g in c o lle c t in g b e n e fits .
th e w e ll- k n o w n e m p ir ic a l fa c ts .
T h is in fe re n c e , h o w e v e r , c o n flic ts w ith
A s s h o w n in T a b le 3 , 21 p e r c e n t o f m a le m e m b e rs o f th e 1 9 3 5 b irth
W S . DEPARTME NT OF TH E I R E ASU RY
19
SOCIAL SECURITY REFORM: WORK INCENTIVES ♦ ISSUE BRIEF NO. 6
c o h o r t b e g a n c o lle c t in g b e n e fits w ith in
1 y e a r o f r e a c h in g th e n o r m a l re tire m e n t a g e ( a g e 6 5 f o r this
c o h o r t) , w h ile o n ly 13 p e r c e n t b e g a n c o lle c t in g b e n e fits d u r in g th e p r e c e d in g y e a r a n d le ss th a n 1
p e r c e n t b e g a n c o lle c t in g b e n e fits d u r in g th e y e a r th a t f o llo w e d .
S o m e a n a ly s ts h y p o th e s iz e th a t p e o p le p e r c e iv e th e n o r m a l re tire m e n t a g e a s a s u g g e s te d re tire m e n t
a g e a n d a r e in flu e n c e d b y th a t s u g g e s tio n .
S u p p o r tin g this h y p o th e s is is th e f a c t th a t m o s t p e o p le
b e g in c o lle c t in g b e n e fits a t a g e 6 2 w h e n th e y a r e first e lig ib le (s e e T a b le 3 ).
A s is d is c u s s e d b e lo w ,
r a tio n a l w e ll- in fo r m e d in d iv id u a ls w ith a r e a s o n a b ly p r u d e n t n e s t e g g a t a g e 6 2 s h o u ld b e n o m o re
a p t to b e g in c o lle c t in g b e n e fits a t a g e 6 2 th e n a t la te r a g e s .
It m a y b e , th e re fo re , th a t p e o p le te n d to
b e g in c o lle c t in g b e n e fits a t 6 2 b e c a u s e o f th e s u g g e s tio n th a t it is a p r u d e n t re tire m e n t a g e ; if so , it is
r e a s o n a b le to s u p p o s e th a t th e n o r m a l re tire m e n t a g e h a s s u g g e s tio n e ffe c ts a s w e ll.
A n a lte r n a tiv e e x p la n a t io n fo r p e o p le 's t e n d e n c y to b e g in c o lle c t in g b e n e fits a t a g e 6 5 is th a t M e d ic a r e
e lig ib ilit y b e g in s a t th a t tim e .
P e o p le m ig h t b e in d u c e d to w o r k s o a s to b e c o v e r e d b y e m p lo y e r -
p r o v id e d h e a lth in s u ra n c e u n til th e y a r e e lig ib le fo r M e d ic a r e .
th e h ig h in c id e n c e o f re tire m e n t a t a g e 6 2 . )
( M e d ic a r e c a n n o t e x p la in , h o w e v e r ,
A s m o re d a t a b e c o m e s a v a ila b le o n n e w b e n e fit a w a r d s
f o r b irth c o h o r ts w ith n o r m a l re tire m e n t a g e s s ig n ific a n tly h ig h e r th a n a g e 6 5 (a s a re su lt o f th e 1 9 8 3
le g is la tio n ) , it w ill b e p o s s ib le to m e a s u re th e e x te n t to w h ic h it is M e d ic a r e e lig ib ilit y o r th e S o c ia l
S e c u r ity n o r m a l re tire m e n t a g e th a t e x p la in s th e p a s t t e n d e n c y to b e g in c o lle c t in g b e n e fits a t a g e 6 5 .
Table 3
Age That Retirement Benefits Begin,
Males Born in 1935 Who Never Collected Disability Benefits*
Age Begin Collecting Benefits
Percent of Sample
<63
51.8
> 63, < 64
7.0
> 64, < 65
13.4
> 65,< 66
21.2
> 66, < 67
0.6
>67
6.0
^Treasury tabulations from the 2002 Continuous Work History Survey.
In c re a s in g th e e a r ly re tire m e n t a g e , c u rre n tly 6 2 , is a p a r tic u la r w a y to " p e n a liz e " e a r ly re tire m e n t b y
in c r e a s in g th e e a r ly re tire m e n t r e d u c tio n a m o u n ts .
F o r e x a m p le , if th e e a r ly re tire m e n t a g e is s e t a t 6 3
fo r th e 1 9 4 3 b irth c o h o r t, th a t p o lic y is e q u iv a le n t to in c r e a s in g th e m o n th ly r e d u c tio n f o r e a r ly re tire m e n t
to 1 0 0 p e r c e n t f o r th e 3 7 th m o n th p r io r to th e n o r m a l re tire m e n t a g e th e p e r s o n b e g in s c o lle c t in g
b e n e fits .
H e n c e , th e c o n c lu s io n s r e g a r d in g in c r e a s in g th e e a r ly re tire m e n t r e d u c tio n s a p p l y h e re :
S o m e liq u id ity c o n s tr a in e d in d iv id u a ls w o u ld d e la y th e ir re tire m e n t w h ile in d iv id u a ls w h o a r e n o t liq u id ity
c o n s tr a in e d w o u ld h a v e n o e c o n o m ic in c e n tiv e to c h a n g e th e ir re tire m e n t b e h a v io r .
O n th e o th e r h a n d , to th e e x te n t th a t s o m e p e o p le r e g a r d th e e a r ly re tire m e n t d a t e a s a s u g g e s te d
re tire m e n t a g e , in c r e a s in g th e e a r ly re tire m e n t a g e w o u ld h a v e s o m e e f f e c t o n th e re tire m e n t b e h a v io r
LBS. DEPARTMENT OF “THE TREASURY
SOCIAL SECURITYREFORM: WORK INCENTIVES * ISSUE BRIEF NO. 6
e v e n o f p e o p le w h o a r e n o t liq u id ity c o n s tra in e d .
T h e S o c ia l S e c u r ity p a y r o ll ta x a p p lie s o n ly to e a r n in g s u p to a m a x im u m a m o u n t o r c a p , a n d o n ly th e s e
id x e d e a r n in g s a r e ta k e n in to a c c o u n t w h e n c o m p u t in g b e n e fits .
a re $ 1 0 2 ,0 0 0 .
F or 2 0 0 8 , m a x im u m t a x a b le e a r n in g s
In fu tu re y e a rs , th is c a p w ill in c r e a s e a t th e s a m e ra te a s e c o n o m y - w id e a v e r a g e
e a r n in g s .
T h e e a r n in g s c a p h a s b e e n in p la c e s in c e S o c ia l S e c u rity 's in c e p tio n , a n d re fle c ts th e v ie w th a t S o c ia l
S e c u r ity s h o u ld p r o v id e a b a s e a m o u n t o f in c o m e in re tire m e n t.
W o r k e r s p a y n o ta x a n d a c c r u e n o b e n e fits o n e a r n in g s a b o v e th e c a p , im p ly in g th a t th e m a r g in a l n e t
ta x ra te o n th e la s t d o lla r e a r n e d is z e r o .
y e a r w o r k e d re m a in s p o s itiv e .)
p o s itiv e :
(A s is d is c u s s e d b e lo w , th e m a r g in a l n e t t a x ra te o n th e la s t
S o c ia l S e c u rity 's e f f e c t o n w o r k e ff o r t fo r s u c h 'w o r k e r s is u n a m b ig u o u s ly
th e y w o r k m o re to c o m p e n s a t e fo r th e r e d u c tio n in th e ir life tim e e a r n in g s b e c a u s e th e y a r e n o t
p e n a liz e d f o r d o in g so .
S o c ia l S e c u r ity h a s o n ly a w e a lt h e f f e c t o n w o r k e f f o r t in th is c a s e .
T h e c a p o n S o c ia l S e c u rity 's t a x a b le w a g e s s e rv e s to e n c o u r a g e w o r k e f f o r t a t th e t o p o f th e in c o m e
d is tr ib u tio n , b u t a t th e e x p e n s e o f r e d u c e d w o r k in c e n tiv e s a t th e lo w e r e n d o f th e in c o m e d is tr ib u tio n .
A
s o lv e n t S o c ia l S e c u r ity s yste m m ust c o lle c t a n e t ta x , th e d iff e r e n c e b e t w e e n th e v a lu e o f ta x e s a n d th e
v a lu e o f b e n e fits , e x c e e d in g $ 1 3 . 6 tr illio n fro m c u rre n t a n d fu tu re w o r k e r s .
E x e m p tin g in c o m e a b o v e th e
c a p fro m c o n s id e r a t io n f o r ta x e s ( a n d b e n e fits ) n e c e s s ita te s h ig h e r n e t t a x ra te s o n e a r n in g s b e lo w th e
cap.
F ig u re s 1 0 a n d
11 illu s tra te th e s e fin d in g s w ith r e fe r e n c e to a m e m b e r o f th e 1 9 9 0 b irth c o h o r t (S u s a n )
w h o s e e a r n in g s a t e a c h a g e a r e th re e tim e s a s la r g e a s J a n e 's .
T h e fig u r e s s h o w S u s a n 's m a r g in a l n e t
t a x ra te s o n th e la s t d o lla r e a r n e d a n d o n th e la s t y e a r o f e a r n in g s , re s p e c tiv e ly .
S u s a n e a r n s m o r e th a n
th e m a x im u m t a x a b le a m o u n t b e t w e e n th e a g e s o f 2 8 a n d 6 0 , s o h e r m a r g in a l n e t ta x ra te o n th e la s t
d o lla r e a r n e d is z e r o in th o s e y e a rs .
s h o w n in F ig u re 11 is s u b s ta n tia l.
j a n e in F ig u re 4 .
N e v e r th e le s s , th e m a r g in a l n e t t a x ra te o n th e la s t y e a r o f w o r k
T h a t m a r g in a l n e t ta x ra te p r o file h a s a s h a p e s im ila r to th e p r o file fo r
T h e s te p -u p a t a g e 4 3 o c c u r s b e c a u s e h e r A I M E firs t e x c e e d s th e s e c o n d P IA b e n d
p o in t in th a t y e a r , a n d th e lo w e r P IA m u ltip lic a tio n f a c t o r c a u s e s b e n e fit a c c r u a ls to d e c lin e .
(A w o r k e r 's
A I M E in c re a s e s e s p e c ia lly r a p id ly w ith a d d it io n a l y e a r s o f w o r k u p to 3 5 y e a rs .) J a n e , in c o n tra s t, h a s
a n A I M E b e t w e e n th e first a n d s e c o n d b e n d p o in ts fo r a ll re tire m e n t a g e s a f t e r a g e 3 3 .
U. S. DEPARTMENT OF THE ,TREASURY
21
SOCIAL SECURITYREFORM: WORK INCENTIVES ♦ ISSUE BRIEF NO. 6
Figure 10: Marginal Net Tax Rates Under Plan X,
High Female Earner, 1990 Birth Cohort
Age
Figure 11: Marginal Net Tax Rates Under Plan X,
High Female Earner, 1990 Birth Cohort
12.00
10.00
Marginal Net Tax Rate on Last Year's Earning /
if Last Year Worked is at Age Shown N
/
\
/
/
C
/ —•~~__
_/
8.00
6.00
— •—. /
4.00
/
...........................
f
f
ne Net Tax
Lifetirne
rax Rate
if Ret re at 67
2.00
j
j
Mar9inal
Net TaX Rate
on
Last Do||ar
/
/
0.00
33
37
41
45
49
53
57
Age
U. 5. DEPARTMENT OF THE TREASURY
22
61
65
69
SOCiAL SECURITYRtFORM: WORK.INCENTIVES.* ISSUE BRIEF NO. 6
S u s a n s n e t ta x ra te o f 5 . 8 p e r c e n t is n o t m u c h h ig h e r th a n J a n e 's life tim e n e t t a x ra te o f 4 . 9 p e r c e n t
e v e n t h o u g h S u s a n s e a r n in g s a r e th re e tim e s a s la r g e a s J a n e 's .
A s is e x p la in e d in T re a s u ry 's s e c o n d
a n d th ird S o c ia l S e c u r ity b rie fs , th e s y s te m is re g re s s iv e fo r e a r n in g s a b o v e m a x im u m t a x a b le e a r n in g s .
In d e e d , if S u s a n 's e a r n in g s w e r e s ix tim e s a s la r g e a s J a n e 's in e v e r y y e a r ra th e r th a n th re e tim e s a s
la r g e , h e r life tim e n e t ta x ra te w o u ld b e o n ly 3 . 2 p e r c e n t — lo w e r th a n J a n e 's .
c
pi
NG
T h u s fa r, S o c ia l S e c u r ity s m a r g in a l n e t ta x ra te s h a v e b e e n d is c u s s e d a s s u m in g th a t re tire m e n t b e n e fits
a r e b a s e d o n a n in d iv id u a l's o w n e a r n in g s .
h a s s u b s ta n tia lly h ig h e r life tim e e a r n in g s .
T h is is n o t th e c a s e fo r a m a r r ie d in d iv id u a l w h o s e s p o u s e
T h o s e in d iv id u a ls m a y r e c e iv e b e n e fits b a s e d o n th e h ig h -
e a r n in g s p o u s e 's e a r n in g s ra th e r th a n o n th e ir o w n e a r n in g s .
S p e c ific a lly , a m a r r ie d in d iv id u a l's P IA is
th e la r g e r o f e ith e r h a lf o f th e h ig h - e a r n e r s P IA o r th e P IA b a s e d o n th e in d iv id u a l's o w n e a r n in g s .
And,
a ft e r th e h ig h - e a r n in g s p o u s e d ie s , S o c ia l S e c u r ity p r o v id e s a s u rv iv o r's b e n e fit u n d e r w h ic h th e lo w e r e a r n in g s p o u s e re c e iv e s th e b e n e fits o f th e h ig h - e a r n e r ra th e r th a n his o r h e r o w n s m a lle r a m o u n t.
t w o fe a tu re s o f c u rre n t la w
These
th e s p o u s e s b e n e fit a n d th e s u rv iv o r's b e n e fit — a r e a d v a n t a g e o u s to m a r r ie d
c o u p le s w ith u n e q u a l e a r n in g s b u t le a d to h ig h e r m a r g in a l n e t t a x ra te s o n th e e a r n in g s o f th e lo w e a r n e r w h ile lo w e r in g m a r g in a l n e t ta x ra te s o n e a r n in g s o f th e h ig h -e a rn e r.
T h e s e e ffe c ts o n m a r g in a l
n e t ta x ra te s in turn h a v e im p lic a tio n s f o r w o r k in c e n tiv e s .
T a b le 4 illu s tra te s th e s e f in d in g s b y c o m p a r in g th e n e t ta x e s p a id b y a c o u p le w ith th e n e t ta x e s th a t
w o u ld b e p a id if th e c o u p le w e r e t w o s in g le s , a s s u m in g P la n X is in p la c e .
T h e c o u p le is c o m p r is e d
4 t w o m e m b e rs o f th e 1 9 9 0 b irth c o h o r t —Jill a n d T o m . Jill h a s e a r n in g s a t e a c h a g e th a t a r e h a lf a s
la r g e a s J a n e 's e a r n in g s fro m F ig u re 1 th a t a r e a s s u m e d in e a r lie r illu s tra tio n s , a n d T o m h a s e a r n in g s
a t e a c h a g e t w ic e a s la r g e a s J a n e 's ( a n d h e n c e fo u r tim e s a s la r g e a s Jill's).
(Jill is a s s u m e d h e re to
b e th e lo w e r e a r n e r b e c a u s e th a t is m o s t o fte n th e c a s e , a n d g e n d e r m a tte rs f o r lo n g e v it y a n d thus th e
v a lu e o f th e s u rv iv o r's b e n e fit.)
th a t Jill re tire s a t 6 2 .
It is a s s u m e d th a t T o m re tire s a t th e n o r m a l re tire m e n t a g e o f 6 7 a n d
T h e s e a s s u m p tio n s a r e c o n s is te n t w ith th e s tro n g in c e n tiv e Jill h a s to b e g in c o lle c t in g
b e n e fits a s s o o n a s p o s s ib le to ta k e a d v a n t a g e o f th e f a c t th a t re tirin g e a r ly re d u c e s h e r b e n e fits o n ly f o r
a s lo n g a s T o m is a liv e .
T o m 's a n d Jill's PIAs b a s e d o n th e ir I n d iv id u a l e a r n in g s a r e $ 1 , 9 4 3 a n d $ 8 5 5 , r e s p e c tiv e ly , p r o v id e d
th e y w o r k a t le a s t th ro u g h to a g e 6 1 . J a n e re tire s a n d b e g in s c o lle c t in g b e n e fits a t a g e 6 2 o n th e
b a s is o f h e r o w n e a r n i n g s - t h a t b e n e fit is $ 8 5 5 r e d u c e d b y 3 0 p e r c e n t to $ 5 9 9 b e c a u s e s h e re tire s
e a r ly .
Jill's la te r b e n e fits d e p e n d o n w h e n T o m d ie s .
If T o m re a c h e s a g e 6 7
h e re tire s a n d b e g in s
c o lle c t in g his fu ll P IA o f $ 1 , 9 4 3 a n d Jill b e g in s c o lle c t in g th e s p o u s e 's b e n e fit o f $ 9 7 1
PIA).
( h a lf o f T o m 's
A s s u m in g th a t T o m d ie s a f t e r re tirin g b u t b e fo r e his w ife , Jill r e c e iv e s th e s u rv iv o r's b e n e fit o f
$ 1 , 9 4 3 — T o m 's fu ll re tire m e n t b e n e fit ra th e r th a n h e r o w n .
f a b le 4 a llo c a t e s th e c o u p le 's S o c ia l S e c u r ity b e n e fits to e a c h s p o u s e in a c c o r d a n c e w ith w h o s e
e a r n in g s g e n e r a t e th e b e n e fits .8 O f th e e x p e c t e d to ta l life tim e b e n e fits a c c r u e d fro m T o m 's e a r n in g s
( $ 1 5 0 , 2 9 8 ) , a b o u t 4 5 p e r c e n t a r e J ills b e n e fits a s a s p o u s e a n d a w i d o w .
T a k in g in to a c c o u n t b o th
th e s p o u s e 's a n d w id o w 's b e n e fits , T o m 's life tim e n e t ta x ra te in th is e x a m p le is 3 . 9 p e rc e n t, a fu ll 3.1
p e r c e n ta g e p o in ts lo w e r th a n it w o u ld b e if T o m w e r e s in g le . Jill's life tim e n e t t a x ra te is 8 . 7 p e rc e n t,
w h ic h is 5 . 4 p e r c e n ta g e p o in ts h ig h e r th a n if s h e w e r e a s in g le p e rs o n .
F or T o m a n d Jill c o m b in e d /
b e in g m a r r ie d r e d u c e s th e ir life tim e n e t ta x ra te fro m 6 . 3 p e r c e n t to 4 . 8 p e rc e n t.
T h e s p o u s e 's a n d "
w i d o w 's b e n e fits a r e a d v a n ta g e o u s to Jill d e s p ite th e f a c t th a t th e y ra is e h e r m a r g in a l n e t ta x ra te s ; th e re
is n o s c e n a r io u n d e r w h ic h Jill re c e iv e s lo w e r to ta l S o c ia l S e c u r ity b e n e fits b e c a u s e s h e q u a lif ie s fo r
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. ó
Table 4
Effect o f Spouses and W idow’s (W idower's) Benefits on a Couple’s Lifetime Net Taxes*
Item
Tom
A s Couple
Jill
Total
Tom
If Two Singles
Jill
Total
—
Primary Insurance Amount at 62
1,943
855
1,943
855
—
—
~
Primary Insurance Amount at 66
1,943
1,943 —
—
Retirement Benefit (non-Widow)
1,943
631
1,943
599
Present Value Taxes
219,195
46,117
265,312
237,433
57,073
294,506
Present Value Benefits
141,430
1,303
142,733
80,284
39,342
119,626
Own
80,012
1,303
81,315
80,284
39,342
119,626
Ü
—
-Spouse's Benefit
48,839
48,839
~
—
Widow's Benefit
12,579
12,579
Lifetime Net Taxes
77,764
44,815
122,579
157.149
17,731
174,880
Present Value Earnings
2,067,874
435,069
2,502,943
2,239,935
538,420
2,778,355
Lifetime Net lax Rate
3.8
10.3
4.9
7.0
3.3
6.3
^Assumes retirement and benefit commencement occurs at age 67 for Tom and 62 for Jill. Note that Tom’s primary insurance
amount is not increased as a result o f work between age 62 and 66.__________________________________________________
s p o u s e s a n d w i d o w s b e n e fits .
T h e a d v a n t a g e Jill re c e iv e s fro m s p o u s e 's a n d w id o w 's b e n e fits is c o n v e y e d , in a m a n n e r th a t re d u c e s
h e r in c e n tiv e to w o r k a n d in c re a s e s T o m 's in c e n tiv e to w o r k .
A s s h o w n in F ig u re 12, th e m a r g in a l n e t
ta x ra te o n th e la s t d o lla r Jill e a rn s is q u ite c lo s e to th e fu ll p a y r o ll ta x ra te o f 1 0 . 6 p e r c e n t in e v e r y y e a r
s h e w o r k s b e c a u s e h e r c o n trib u tio n s to th e s yste m h a v e little e f fe c t o n h e r fu tu re b e n e fits (h e r re tire m e n t
b e n e fits a r e m a in ly b a s e d o n h e r s p o u s e 's e a rn in g s ).
A v e r a g e d o v e r h e r w o r k in g life , th e m a r g in a l n e t
ta x ra te o n th e la s t d o lla r e a r n e d b y Jill is 9 . 6 p e rc e n t, c o m p a r e d w ith a 6 .1
c o lle c ts b e n e fits a s a s in g le p e rs o n .
p e r c e n t a v e r a g e if s h e
In c o n tra s t, th e a v e r a g e m a r g in a l n e t ta x r a te o n th e la s t d o lla r T o m
e a rn s is r e d u c e d b y m a r r ia g e , fro m 9.1 p e r c e n t a s a s in g le p e rs o n to
77
p e r c e n t a s a m a r r ie d p e rs o n .
T h is is b e c a u s e his e a r n in g s a d d to fu tu re b e n e fits fo r b o th h im s e lf a n d Jill, w h ic h s e rv e s to lo w e r th e n e t
ta x ra te .
8
The calculations in Table 4 allow for other contingencies not described in the text. If Tom dies prior to age 31, Jill col*
lects benefits based on her own earnings all her life because Tom does not complete the ten years of work necessary to
qualify for benefits. (Tom's PIA after ten years of work is high enough that the widow's benefit at age 6 7 is higher than
Jills benefit based on her own earnings.) If Tom dies prior to age 6 7 but after age 30, it is assumed that Jill collects her
own benefit between age 62 and 66, and then collects the full widow's benefit starting at age 6 7 (If Jill collects the
w idow s benefit before age 6 ff it is reduced in accordance with the early retirement adjustment factors.)
, A | . S . DEPARTMENT OF THJtlTRE ASURY
24
SOCIAL SECURHY RfcFORAA: WORK INCENTIVES • ISSUE BRIEF NO. 6
Figure 12: Marginal Net Tax Rate on Last Dollar Earned Under Plan X,
Effect of Manage, 1990 Birth Cohort
M a r r i a g e in c re a s e s Jill's m a r g in a l n e t t a x ra te s m o r e th a n it re d u c e s T o m 's.
T h e re a s o n m a r r ia g e
increases
th e c o u p le s m a r g in a l n e t ta x ra te s o n b a la n c e , d e s p ite lo w e r in g its life tim e n e t ta x ra te , is
th a t a $1
in c r e a s e in A I M E in c re a s e s T o m 's P IA o n ly a b o u t h a lf a s m u c h a s it d o e s Jill's ( d u e to th e
p r o g r e s s iv e b e n e fit fo r m u la ) , a n d m a r r ia g e in c re a s e s th e s h a re o f to ta l b e n e fits th a t a r e b a s e d o n T o m 's
e a r n in g s .
S o c ia l S e c u rity 's tre a tm e n t o f m a r r ia g e p r o b a b ly re d u c e s T o m 's a n d Jill's c o m b in e d w o r k e ffo rt.
A la r g e
o o d y o f e m p ir ic a l e v id e n c e s h o w s th a t a m o n g c o u p le s , th e w o r k e ff o r t o f th e lo w e r e a r n e r (th e s o * c a lle d
" s e c o n d a r y e a r n e r " ) is m o re s e n s itiv e to ta x e s th a n th e w o r k e f f o r t o f th e r e la tiv e ly h ig h e a rn e r.
H ence,
e v e n if m a r r ia g e w e r e to lo w e r T o m 's m a r g in a l n e t ta x ra te s b y th e s a m e a m o u n t a s it in c re a s e s Jill's, th e
n e t e f f e c t o f th e s p o u s e s a n d w i d o w s
b e n e fit w o u ld b e to lo w e r c o m b in e d w o r k e ffo rt.
5 e v id e n c e th a t th e w o r k e f f o r t o f s e c o n d a r y e a r n e r s is m o re r e s p o n s iv e to ta x e s th a n th e w o r k e ffo r t
o f p r im a r y e a r n e r s is e s p e c ia lly s tro n g w ith r e s p e c t to th e c h o ic e o f w h e t h e r to w o r k a t a ll.
T h e in c e n tiv e
to w o r k a t a ll d e p e n d s o n th e life tim e n e t ta x ra te , n o t th e m a r g in a l n e t ta x ra te s s h o w n in F ig u re 12 th a t
a r e re le v a n t to th e c h o ic e o f h o w m a n y h o u rs w o r k o n c e o n e c h o o s e s to b e in th e w o r k fo r c e .
A s is
s h o w n in T a b le 4 , th e s p o u s e a n d s u rv iv o r b e n e fits g r e a t ly d is c o u r a g e Jill's in c e n tiv e to p a r t ic ip a t e in th e
la b o r f o r c e a t a ll
th e y ra is e J ills life tim e n e t ta x ra te to 8 . 7 p e r c e n t fro m 3 . 3 p e rc e n t.
O n e p o s s ib ility f o r in c r e a s in g w o r k in c e n tiv e s f o r s e c o n d a r y e a r n e r s is to r e p la c e th e s p o u s e a n d s u rv iv o r
b e n e fits w ith a s y s te m th a t s p lits a c o u p le s jo in t e a r n in g s e v e n ly f o r p u r p o s e s o f c a lc u la t in g b e n e fits .
d ..$•. D E PA R i M f N ! O F iTH Eti TR E A S U RV
25
SOCIAL SECURITY REFORM: WORK INCENTIVES * ISSUE BRIEF NO. 6
T h is w o u ld p re s e rv e th e lo w - e a r n e r 's s h a re o f b e n e fit a c c r u a ls in th e e v e n t o f d iv o r c e a n d e n s u re th a t
th e la s t d o lla r e a r n e d b y e a c h p a r t y c o u n ts t o w a r d b e n e fits in a ll o f th e c o u p le 's h ig h e s t 3 5 y e a r s o f
e a r n in g s .
T h e lo w - e a r n e r 's re tire m e n t b e n e fit w o u ld e q u a l th e h ig h -e a rn e r's b e n e fit if th e y b o th b e g a n
c o lle c t in g b e n e fits a t th e s a m e a g e , a n d th e d e a t h o f e ith e r T o m o r Jill w o u ld h a lv e to ta l h o u s e h o ld
S o c ia l S e c u r ity b e n e fits .
T h e r e d u c tio n in h o u s e h o ld b e n e fits a t th e tim e a s p o u s e d ie s c o u ld b e m a d e
■ m ailer if th e in c o m e a v e r a g in g p la n w e r e s u p p le m e n te d to r e q u ire th a t c o u p le s ' b e n e fits b e p a id a s
3 jo in t
a n d a s u rv iv o r's a n n u ity , w h ic h w o u ld p a y th e s u rv iv o r m o re th a n h a lf o f th e a m o u n t p a id w h e n
b o th th e h u s b a n d a n d w if e a r e a liv e .
T o illu s tra te th e in c o m e a v e r a g in g p la n , s u p p o s e th a t b o th T o m a n d Jill s u rv iv e to th e n o r m a l re tire m e n t
a g e ( a g e 6 7 ) a n d b e g in c o lle c t in g b e n e fits a t th a t tim e .
P la n X w o u ld b e $ 1 , 9 4 3 fo r T o m a n d $ 9 7 1
$ 1 , 9 4 3 w h ile o n ly o n e is a liv e .
T a b le 5 s h o w s th a t th e r e a l b e n e fit u n d e r
(h a lf o f $ 1 , 9 4 3 ) f o r Jill w h ile b o th a r e a liv e , a n d w o u ld b e
U n d e r th e in c o m e - a v e r a g in g p la n , T o m 's a n d Jill's b e n e fits w o u ld b e
e q u a l: $ 1 , 5 6 8 e a c h w h ile b o th a r e a liv e ( $ 3 , 1 6 3 to ta l), a n d $ 1 , 5 6 8 fo r a s u rv iv o r.
If, in a d d it io n to
in c o m e a v e r a g in g , b e n e fits to T o m a n d Jill w e r e p a id a s a jo in t a n d s u rv iv o r a n n u ity p a y in g 8 0 p e r c e n t
a s m u c h w h ile o n ly o n e is a liv e a s w h ile b o th a r e a liv e , th e to ta l h o u s e h o ld a n n u ity w o u ld b e $ 2 , 6 3 0
w h ile b o th a r e a liv e a n d $ 2 , 1 0 4 w h ile o n ly o n e is a liv e .
C o m p a r e d to P la n X, in c o m e a v e r a g in g w ith
Table 5
Real Monthly Benefit Levels: Income Averaging Compared to Spouse's and Widows Benefit*
Household
Composition
Spouse's & Widow's Benefit
Tom
Jill
Total
Both Alive
One Alive
1,943
-
971
--
Income Averaging
Tom
Jill
Total
2,914
1,943
1,568
-
1,568
-
3,136
1,568
Income Averaging
& 80% Joint Survivor Annuity
Tom
Jill
Total
_
—
-
-
2,630
2,104
*Assumes both Tom and Jill work to age 66 and begin collecting benefits at age 67.
a jo in t a n d s u rv iv o r a n n u ity p a y s less w h ile b o th a r e a liv e a n d m o re w h ile o n ly o n e is a liv e .
SPECIAL ISSUES C O N C E R N IN G THE TR A N S ITIO N TO A REFORMED SYSTEM
S o c ia l S e c u rity re fo rm th a t m a k e s th e syste m s o lv e n t c o u ld in c lu d e c h a n g e s to th e s tru c tu re o f b e n e fits
th a t r e d u c e m a r g in a l n e t ta x ra te s fo r p e o p le in th e m id d le o f th e ir w o r k in g liv e s a t th e tim e re fo rm
is in itia te d .
F o r e x a m p le , c o n s id e r a p a r tic u la r 4 5 - y e a r - o ld w o r k e r f o r w h o m a 2 p e r c e n t a g e p o in t
in c re a s e in th e p a y r o ll ta x ra te in c re a s e s n e t life tim e ta x e s b y th e s a m e a m o u n t a s w o u ld a n 8 p e r c e n t
re d u c tio n in c u r r e n t- la w s c h e d u le d b e n e fits .
(T h a t is, p u ttin g in to p la c e e ith e r th e b e n e fit r e d u c tio n o r
th e re v e n u e in c re a s e w o u ld h a v e th e s a m e e f fe c t o n th e p e rs o n 's life tim e n e t ta x e s .)
F or th is w o r k e r ,
c o m p a r e th e f o llo w in g t w o re fo rm p la n s :
Reform 1:
In c re a s e th e p a y r o ll ta x ra te b y 2 p e r c e n ta g e p o in ts a n d le a v e b e n e fits
u n c h a n g e d fro m c u r r e n t- la w s c h e d u le d b e n e fits .
Reform 2:
R e d u c e c u r r e n t- la w s c h e d u le d b e n e fits b y 8 p e rc e n t, ra is e th e p a y r o ll t a x ra te 2
p e r c e n ta g e p o in ts , a n d s u p p le m e n t th e b e n e fit c u t w ith a s e c o n d tie r o f b e n e fits s e t e q u a l to th e
a n n u ity v a lu e o f th e in c r e a s e d p a y r o ll ta x e s .
( C u r r e n t- la w s c h e d u le d b e n e fits a f t e r th e 8 p e r c e n t
r e d u c tio n w ill b e re fe rre d to a s "T ie r 1" b e n e fits , a n d th e b e n e fit s u p p le m e n t w ill b e re fe rre d to
a s "T ie r 2 " b e n e fits .)
SOCIAL SECURITYREFORM: WORK INCENTIVES • ISSUE BRIEF NO. 6
T h e s e t w o re fo rm s a r e d e s ig n e d s o th a t th e w o r k e r 's life tim e n e t ta x e s a n d b e n e fits a r e th e s a m e u n d e r
b o th p la n s .
N e t life tim e ta x e s p a id b y th e w o r k e r a r e th e s a m e b e c a u s e th e ta x in c r e a s e in R e fo rm 1
h a s th e s a m e e f f e c t o n life tim e n e t ta x e s a s th e r e d u c tio n in c u r r e n t- la w b e n e fits u n d e r R e fo rm 2 , a n d th e
c o m b in a t io n o f th e p a y r o ll t a x in c r e a s e a n d T ie r 2 b e n e fits u n d e r R e fo rm 2 h a v e n o e f f e c t o n n e t ta x e s .
B e n e fits a r e th e s a m e b e c a u s e u n d e r R e fo rm 2 , T ie r 2 b e n e fits h a v e th e s a m e p re s e n t v a lu e a s 8 p e r c e n t
o f c u r r e n t- la w s c h e d u le d b e n e fits .
(This is im p lie d b y th e fa c ts th a t th e R e fo rm 2 in c r e m e n ta l ta x h a s th e
s a m e p re s e n t v a lu e a s T ie r 2 b e n e fits a n d th e in c r e m e n ta l t a x h a s th e s a m e p re s e n t v a lu e a s 8 p e r c e n t
o f c u r r e n t- la w s c h e d u le d b e n e fits .)
. D e s p ite th e f a c t th a t b o th re fo rm s im p o s e th e s a m e life tim e n e t t a x o n th e w o r k e r , R e fo rm 2 im p o s e s
s m a lle r m a r g in a l n e t ta x ra te s o n fu tu re w o r k a n d is th e re fo r e m o r e e ffic ie n t.
T h e r e a s o n is th a t th e
r e d u c tio n fro m c u r r e n t- la w b e n e fits to T ie r 1 b e n e fits re d u c e s b e n e fit a c c r u a ls (in c re a s e s n e t ta x e s )
d e r iv in g fro m b o th p a s t a n d fu tu re w o r k , b u t r e d u c in g b e n e fits d e r iv in g fro m p a s t w o r k c a n h a v e n o
c o n s e q u e n c e f o r w o r k e ffo rt.
R e fo rm
1, o n th e o th e r h a n d , le a v e s b e n e fit a c c r u a ls o n p a s t w o r k e ffo r t
u n c h a n g e d a n d t h e r e b y fo c u s e s a ll o f th e in c r e a s e in S o c ia l S e c u rity 's n e t ta x e s o n fu tu re w o r k e ffo rt.
T h is e f f ic ie n c y a d v a n t a g e o f R e fo rm 2 o v e r R e fo rm
tim e o f th e re fo rm .
1 a p p lie s o n ly to w o r k e r s in m id w o r k in g life a t th e
F o r g e n e r a tio n s e n te r in g th e w o r k f o r c e a f te r th e re fo rm is in itia te d - w h o s e e n tire
w o r k in g liv e s a r e a h e a d o f th e m - a ll in c re a s e s in n e t ta x e s a p p l y to fu tu re w o r k e ffo rt.
R e fo rm 2 is e s s e n tia lly e q u iv a le n t to a n 8 p e r c e n t r e d u c tio n in b e n e fits c o m b in e d w ith m a n d a t o r y
p e r s o n a l re tire m e n t a c c o u n ts f in a n c e d w ith a n in c r e a s e d p a y r o ll ta x ra te .
A g e n e r a l fe a tu r e o f re fo rm s
w ith p e r s o n a l re tire m e n t a c c o u n ts is th a t th e y re s tru c tu re b e n e fits in a m a n n e r th a t re d u c e s p a s t b e n e fit
a c c r u a ls b y m o r e th a n th e y r e d u c e fu tu re b e n e fit a c c r u a ls , a n d th is fe a tu r e e n h a n c e s w o r k in c e n tiv e s fo r
m id - c a r e e r w o r k e r s a t th e tim e o f th e re fo rm .
B u t a s R e fo rm 2 m a k e s c le a r , th e s e e f f ic ie n c ie s c a n b e
a c h ie v e d just a s e f f e c t iv e ly w ith n o tio n a l a c c o u n ts a s th e y c a n b e w ith a c t u a l a c c o u n ts .9 A s is e x p la in e d
in T re a s u ry 's fo u rth S o c ia l S e c u r ity b rie f, th e m a in a d v a n t a g e o f p e r s o n a l re tire m e n t a c c o u n ts is th a t th e y
e n s u re th a t a t t e m p te d p r e - fu n d in g is tru ly s e t a s id e to h e lp p a y fu tu re S o c ia l S e c u r ity b e n e fits .
S o m e m ig h t a r g u e th a t it is u n fa ir fo r S o c ia l S e c u r ity re fo rm to r e d u c e p a s t b e n e fit a c c r u a ls .
a s th e e x a m p le o f R e fo rm
H o w e v e r,
1 a n d R e fo rm 2 s h o w s , r e d u c in g p a s t b e n e fit a c c r u a ls d o e s n o t h a rm a
w o r k e r to th e e x te n t th a t h ig h e r fu tu re a c c r u a ls (o r s m a lle r fu tu re p a y r o ll ta x ra te s ) m a k e u p th e d iffe r e n c e .
T h is is n o t to s a y th a t R e fo rm s 1 a n d 2 a r e e q u a l fo r a ll 4 5 - y e a r - o ld w o r k e r s .
O t h e r th in g s th e s a m e ,
w o r k e r s in te n d in g to re tire r e la tiv e ly e a rly , a n d h e n c e to a c c r u e re la tiv e ly f e w a d d it io n a l b e n e fits in th e
fu tu re , w o u ld f a v o r R e fo rm 1 o v e r R e fo rm 2 .
B u t g iv e n th a t c u r r e n t- la w s c h e d u le d b e n e fits a n d ta x e s
c a n n o t b e s u s ta in e d in d e fin ite ly , it w o u ld b e u n r e a s o n a b le to e x p e c t n o c h a n g e s to th e c u rre n t b e n e fit
s tru c tu re .
T h e a n a ly s is o f th is s e c tio n in d ic a te s th a t if p o lic y m a k e r s m u st c h o o s e b e t w e e n p o lic ie s th a t m a k e S o c ia l
S e c u r ity s o lv e n t th o u g h ta x in c re a s e s a lo n e , o r th r o u g h b e n e fit c u ts a lo n e , th e n th e b e n e fit r e d u c tio n
p o lic ie s w o u ld h a v e a n in h e re n t a d v a n t a g e in te rm s o f w o r k in c e n tiv e s a n d thu s e c o n o m ic e f f ic ie n c y .
T h is is tru e b e c a u s e a b e n e fit r e d u c tio n p o lic y c a n r e d u c e b o th p a s t a n d fu tu re b e n e fit a c c r u a ls , w h ile a
9
It is important to note that there are many possible reforms that would increase future benefit accruals at the expense
of past accruals not just personal retirement accounts or notional accounts. For example, computing the AIME as a
simple average of real taxable earnings rather than as an average of indexed covered earnings while modifying the PIA
formula so that the same benefits are paid on average would reduce the importance of early-life earnings and increase
the importance of late-life earnings in the benefit calculation. (Treasury's fifth issue brief discusses this possibility.) This
reform, therefore, would increase future benefit accruals at the expense of past benefit accruals for people in mid-career
at the time of the reform.
' U . S . v D‘EPARTMEN!^t)F THE' TREASURY
Sa88888888888868888888888aaa888a8aaffi8Ba«aiai«Ea8j^
.................. .........
..............
SOCIAL SECURITY REFORM: WORK INCENTIVES • ISSUE BRIErNO. 6
ta x in c r e a s e p o lic y le a v e s p a s t b e n e fit a c c r u a ls u n c h a n g e d .
to R e fo rm
1 a n d R e fo rm 2 a b o v e , th e re a r e o th e r o p tio n s .
H o w e v e r , a s d e m o n s tr a te d w ith re fe r e n c e
T h e s a m e e f f ic ie n c y g a in s c a n b e a c h ie v e d
b y re fo rm s th a t c o m b in e ta x a n d re v e n u e c h a n g e s ; in c r e a s e d e f f ic ie n c y d o e s n o t re q u ire th a t o v e r a ll
b e n e fits b e lo w e r th a n c u r r e n t- la w s c h e d u le d b e n e fits .
C O N C LU S IO N
S o c ia l S e c u r ity m ust a s s e s s a n e t ta x ( lo w e r b e n e fits a n d / o r h ig h e r re v e n u e s ) e x c e e d in g $ 1 3 . 6 tr illio n o n
c u rre n t a n d fu tu re w o r k e r s to f in a n c e n e t b e n e fits th a t th e syste m h a s p a id o r h a s p r o m is e d to e a r lie r b irth
c o h o r ts .
T h is issu e b r ie f a p p lie s lo n g - s ta n d in g p r in c ip le s o f g o o d ta x p o lic y to th e q u e s tio n o f h o w this
n e t t a x s h o u ld b e le v ie d .
A k e y in s ig h t is th a t it is e s s e n tia l to c o n s id e r th e im p lic a tio n s o f th e n e t t a x fo r
b o th fa irn e s s a n d w o r k in c e n tiv e s w h e n d e c id in g h o w it s h o u ld b e a p p o r t io n e d a n d s tru c tu re d .
N e a r ly a ll S o c ia l S e c u r ity re fo rm p r o p o s a ls im p o s e a d is p r o p o r t io n a t e s h a re o f th e b u r d e n o f S o c ia l
S e c u r ity re fo rm o n w o r k e r s w ith r e la tiv e ly h ig h life tim e e a r n in g s ; th a t is, th e y in c r e a s e th e p r o g r e s s iv ity
o f th e s y s te m .
in c e n tiv e s .
In g e n e r a l, th e m o re p ro g r e s s iv e is th e syste m , th e g r e a t e r is th e a d v e r s e im p a c t o n w o r k
W h il e th e r ig h t b a la n c e b e t w e e n p r o g r e s s iv ity a n d w o r k in c e n tiv e s is s u b je c tiv e , m a k in g a n
in fo r m e d c h o ic e re q u ire s th a t th e t r a d e o f f b e u n d e r s to o d .
T h e re a r e m a n y re fo rm s th a t w o u ld e n h a n c e w o r k in c e n tiv e s w ith o u t n e c e s s a r ily a f f e c t in g th e d is tr ib u tio n
o f n e t ta x e s a c ro s s in c o m e g ro u p s .
S u c h re fo rm s a r e o f t w o ty p e s : th o s e th a t h e lp p e o p le m a k e b e tte r
in fo r m e d c h o ic e s , a n d th o s e th a t b e tte r fo c u s S o c ia l S e c u rity 's n e t ta x e s o n w o r k th a t is le a s t re s p o n s iv e
to ta x w h ile n o t s a c r ific in g fa irn e s s .
R e fo rm s o f th e first t y p e in c lu d e in c r e a s in g th e t r a n s p a r e n c y o f
th e f o r c e d s a v in g s s o th a t w o r k e r s b e tte r u n d e r s ta n d th e d e g r e e to w h ic h e a r n in g s in c r e a s e re tire m e n t
b e n e fits , a n d c h a n g in g th e n o rm a l a n d / o r e a r ly re tire m e n t a g e s to im p r o v e p e o p le s ' p e r c e p tio n s o f
w h a t is p r u d e n t.
R e fo rm s o f th e s e c o n d t y p e in c lu d e m a k in g S o c ia l S e c u rity 's n e t t a x ra te s o n e a r n in g s
in p o te n tia l re tire m e n t y e a r s lo w e r th a n in e a r lie r y e a rs , a n d c h a n g in g th e d e s ig n o f c o u p le s ' b e n e fits
s o th a t s p o u s e s w ith s u b s ta n tia lly u n e q u a l e a r n in g s f a c e m o re s im ila r ta x ra te s .
R e fo rm s o f b o th ty p e s
w o u ld im p r o v e w o r k in c e n tiv e s , le a d to g r e a t e r w o r k e ffo r t a n d h ig h e r in c o m e s , a n d w o u ld thu s le s s e n
th e s a c r ific e n e c e s s a r y to m a k e S o c ia l S e c u r ity s o lv e n t.
U . 5 . D E PA RT M E N T O F T H E TRE A SO RY
January 13, 2009
HP-1349
Interim Assistant Secretary for Financial Stability Neel Kashkari Review of the
Financial Market Crisis and the Troubled Assets Relief Program
Washington - Good morning. Thank you, Dean Daly, for that kind introduction. I
would also like to thank the McDonough School of Business at Georgetown for
hosting us today.
Today, I will provide a review of the financial market crisis and Treasury's strategy
to implement the Troubled Assets Relief Program (TARP) to promote financial
stability. First, I will briefly explain why the Administration took the unprecedented
action to request Congressional approval for a $700 billion program to support the
financial system. Second, I will explain why- as a first step- we decided to invest in
healthy banks through purchases of capital, rather than buying illiquid assets. Third,
I will discuss how the capital is being used by recipient banks. Finally, I look forward
to answering your questions.
Before I begin, I will give you a brief update on the latest statistics of the Capital
Purchase Program, a program to invest in healthy banks of all sizes. On Friday, we
executed 43 investments, bringing our total investment to $192 billion in 257 banks
in 42 states and Puerto Rico. The largest investment was $25 billion and the
smallest investment $1 million. In addition, after extensive preparation, we have
also completed a term sheet for S-corps to participate in this program. The S-corp
term sheet will be posted on the Treasury website tomorrow. The application period
will open at that time and will remain open for 30 days.
The Importance o f the Financial System
Let me begin by reviewing how the financial system affects Americans and their
families. Banks serve as the primary intermediary between borrowers and savers.
Americans save for their futures and their families. These savings of individual
Americans are combined and made available to other people and businesses who
need to borrow money for their specific needs. The financial system links millions of
savers around the country with millions borrowers around the country through
billions of individual transactions. This extraordinarily complex, but usually efficient
system includes both banks, where people have their savings accounts, and other
financial institutions that provide, for example, car loans and student loan financing.
This system has developed over our Nation's history and it is built on confidence
and on trust. Savers —be they individuals or businesses —must have confidence in
the people and institutions they entrust with their money. And because no single
bank can touch every family or every business, banks must have confidence to lend
to each other for the system to work. If the financial system were to collapse,
families might not be able to access the money they have saved. The economic
implications of a financial system collapse are profound - for every single
American.
Causes o f the Credit Crisis
With that background, let me briefly describe the fundamental causes of the credit
crisis. The seeds of the credit crisis were planted during a decade of benign
economic conditions, including low interest rates and low inflation. Financial
innovation, which has served the U.S. economy well over the years, also
accelerated. Investors gained increasing confidence in the effectiveness of new
financial products to diversify and distribute risks. With this perceived reduction in
risk, leverage increased across the financial system. Underwriting standards for
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mortgages weakened as more and more reliance was placed on the value of the
collateral (the home) rather than the willingness and ability of the borrower to repay
the loan out of income. Homeowners took out ever larger mortgages with little or no
down payment and little or no documentation of income. Regulators, investors and
homeowners took comfort from the belief that home prices only go up.
As we have learned, that belief was incorrect. To understand the consequence of
that miscalculation, consider that the residential mortgage market in the United
States is an $11 trillion market. With banks' highly leveraged balance sheets and
minimal down payments on home loans, even a minor drop in home prices and rise
in defaults can result in a large hit to banks' capital. Large losses can threaten the
solvency of financial institutions.
Rooted in housing, this credit crisis is complicated by a number of related factors:
First, home prices adjust downward slowly, in part due to homeowners’ reluctance
to realize losses; most people would rather keep their home than sell for a loss if
they can avoid it since it usually is their largest financial asset. Next, this necessary
housing correction, which is not over, is setting the pace of the credit crisis. Finally,
this slow adjustment makes it difficult to value mortgages and mortgage-backed
securities, because investors don't know for sure where the bottom of the housing
market is and when it will be reached.
But investors are forward looking. With the high leverage in our financial system,
the large and necessary housing correction, and credit problems arising in other
sectors of the economy, investors quickly realized that the financial system had
insufficient capital to withstand the expected losses. But the opacity of mortgagebacked securities and the difficulty in valuing mortgage assets meant it was hard for
investors to determine exactly which institutions were at greatest risk.
Not wanting to be exposed to a failing institution, but also not being able to
determine for certain which institutions were at risk, investors pulled back wherever
they could.
A capital problem for some institutions led to a liquidity problem for all institutions.
That liquidity problem created a serious risk that our financial system as a whole,
both in the U.S. and abroad, could fail.
Secretary Paulson and Chairman Bernanke recognized early that there might come
a time when the private markets would become unwilling to provide the necessary
capital to our financial system to deal with the large losses from the housing
correction. In such a scenario, only the Federal government would be in a position
to support the financial system - to step in to provide the needed capital to prevent
a collapse. Government intervention was not our first choice, as it often has
unintended, far-reaching consequences. But it was a necessary choice.
Capital is essential for a healthy financial system; it permits banks to take risks and
absorb losses while honoring their obligations to depositors and other creditors.
During an economic downturn, many businesses and consumers want to see extra
capital in their bank in order to have confidence the bank is sound and their money
safe. Similarly, in such times, many banks want to see increased capital in other
banks in order to have confidence to do business with them.
Although government leaders have numerous tools to combat financial market
crises, there was no existing tool to provide capital to the financial system. In early
2008, we evaluated numerous policy alternatives and focused on a program to
strengthen banks' balance sheets by purchasing illiquid mortgage assets in very
large scale. By ridding their balance sheets of hard to value and troubled assets,
banks would be better able to attract the private capital needed to recapitalize our
system. We all hoped such government intervention would not become necessary,
but recognized the possibility and began contingency planning.
In late summer, after the failure of Bear Stearns, the crisis intensified and our
financial institutions came under even more pressure from deteriorating market
conditions and the loss of confidence. In a very short period of time, some of our
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largest financial institutions failed. In July, IndyMac failed. In the month of
September alone, we witnessed the conservatorship of Fannie Mae and Freddie
Mac, the bankruptcy of Lehman Brothers, the rescue of AIG by the Fed, the
distressed sale of Wachovia, and the failure of Washington Mutual. Eight major
U.S. financial institutions effectively failed in 6 months - six of them in September
alone.
As a result, credit markets froze. The commercial paper market shut down, 3-month
Treasuries dipped below zero, and a money market mutual fund "broke the buck"
for only the second time in history, precipitating a $200 billion net outflow of funds
from that market. The savings of millions of Americans and the ability of businesses
and consumers to access affordable credit were put at serious risk.
The Need for Government Action
Recognizing the threat to our financial system and to every American family,
Secretary Paulson and Chairman Bernanke knew the time had come to provide
government support for the U.S. financial system. On September 18, they went to
the Congress to ask for unprecedented authority to prevent a financial collapse.
Congress also recognized this threat and just two weeks later, on October 3, the
Congress passed and President Bush signed into law the Emergency Economic
Stabilization Act of 2008. We worked hard with the Congress to build tremendous
flexibility into the legislation because the one constant throughout the credit crisis
has been its unpredictability.
In our discussions with the Congress, we focused on a two part plan: one, our
initial, market-based plan to purchase illiquid mortgage assets as a means to attract
private capital to the financial system, and two, providing sufficient flexibility to deal
with any individual contingencies that arose. In the two weeks between the time we
submitted the draft legislation and the time the bill passed, credit markets
deteriorated more quickly than we had expected. One key measure we looked at
was LIBOR-OIS spread - a measure of perceived credit risk in the financial system.
Typically, 5 - 1 0 basis points, on September 1, the one month spread was 47 basis
points. By the 18th, when we first went to Congress, the spread had climbed to 135
basis points. By the time the bill passed, just two week later on October 3, the
spread had nearly doubled to 263 basis points.
Why did we switch from illiquid asset purchases to capital investments? Simply put,
our Nation was faced with the potential imminent collapse of our banking and
financial system and more immediate and powerful actions were needed. It was
clear to Secretary Paulson and Chairman Bernanke that we needed to use the
authority and flexibility granted under the law as aggressively as possible to quickly
stabilize the system. Purchasing equity in healthy banks around the country would
be a faster and more direct way to inject much-needed capital into the system and
restore confidence compared with asset purchases. We began immediately
designing a capital purchase program in addition to continuing work on illiquid asset
purchases, which would take longer to implement.
Meanwhile, credit markets continued to deteriorate. On October 10, the LIBOR-OIS
spread had risen to 338 basis points. So, four days later, on October 14, when our
Capital Purchase Program was ready, we announced a plan to invest $250 billion in
banks and savings institutions of all sizes, in combination with the FDIC's
announcement of its guarantee of senior bank debt. These combined actions were
taken to build confidence in the U.S. financial system. We believe these actions
were successful.
The Capital Purchase Program was not a bailout of participating banks. Only
healthy, viable banks are eligible for the program and it is designed to generate a
positive return to the taxpayer.
At the same time, we continued working hard on our illiquid asset purchase
programs. We were keenly aware that, while $700 billion is a large sum of money, it
is a finite amount. We needed to use the available funds to provide the maximum
benefit to the system, while leaving enough dry powder to deal with contingencies.
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Throughout the process, we carefully monitored how the markets were responding
to our actions and conditions in the broader economy. We asked ourselves: Would
banks apply for the capital? Would credit markets respond? What was happening in
the economy?
We were pleased that healthy banks of all sizes were signing up for the program
and credit markets were showing signs of thawing. But the economic indicators
were less positive. On October 31, data on third quarter GDP showed negative 0.3
percent growth. In addition, data released on October 28 showed that through
August, home prices in 10 major cities had fallen 18 percent over the previous year.
A large contingency also arose that threatened the financial system and we had to
restructure the Federal Reserve's loan to AIG, using $40 billion of TARP funds.
With about half the original $700 billion available for asset purchases, we asked
ourselves: would such a program still be the best approach? For an asset purchase
program to be effective, it must be done in very large scale. We concluded that
capital would provide the most benefit given available resources.
It is also important to support the non-banking market, which is essential to helping
consumers, businesses and our economy get the credit they need. The Federal
Reserve is setting-up a $200 billion program, the Term Asset-Backed Securities
Loan Facility (TALF). With $20 billion from the TARP, we will help make it easier for
American families to get affordable auto loans, student loans, and consumer credit,
as well as loans for small businesses.
Where We Are Today
As of today, we have fully allocated the first $350 billion and, at the PresidentElect's request, President Bush has asked Congress to make available the
remaining $350 billion for the next Administration. As I mentioned when I opened,
we have invested $189 billion of the $250 billion Capital Purchase Program in 257
institutions in 42 states across the country, as well as Puerto Rico. There is a huge
demand for the program: the number of applications under-review at the regulators
is in the thousands, representing every state in the country, and hundreds more
have already been pre-approved by Treasury. We are pleased with the large
number of banks that have applied. As I also noted above, we have also allocated
$20 billion for the TALF to support consumer and small business lending. Today,
the LIBOR-OIS spread has fallen to 19 basis points. We believe the combined
actions of Treasury, the Federal Reserve and FDIC have prevented a financial
collapse.
We have also had to deal with several contingencies, including a possible loss of
confidence in Citigroup, and the impending failures of AIG and the domestic auto
companies which have consumed the remaining allocation within the first $350
billion. We believe that when government intervention is required to prevent the
failure of a firm, the firm's shareholders should pay a high price to discourage
imprudent risk-taking in the future. Our actions to stabilize Fannie Mae, Freddie
Mac and AIG demonstrate this perspective where existing shareholders were
severely diluted and the taxpayers received warrants for 80 percent of the
companies.
This approach has challenges, however, when the system as a whole comes under
pressure and several similarly-situated institutions are at risk. We have worked hard
to develop programs to encourage private capital to flow into the banking sector.
Whenever possible, we have designed programs that avoid the government
controlling private institutions. We have used a combination of tools such as
preferred investments and asset guarantees as a means to enhance the confidence
of systemically-important institutions on a case-by-case basis.
Update on Lending
People recently have begun to ask what the banks are doing with the money we've
invested in them. We designed important features into our investment contracts to
limit what banks can do with the money: one, we restricted dividend increases and
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share repurchases and, two, placed restrictions on executive compensation. By
increasing a bank's capital, the bank will have strong economic incentives to deploy
the capital profitably. Banks are in the business of lending and they will provide
credit to sound borrowers whenever possible. They may also use the capital to
absorb losses as part of loan write-downs and restructurings. If a bank doesn't put
the new capital to work earning a profit or reducing a loss, its returns for its
shareholders will suffer.
What about mergers and acquisitions? Why didn't Treasury prohibit them? We must
remember that when a failing bank is acquired by a healthy bank, the community of
the failing bank is better off than if the bank had been allowed to fail. Branches and
financial services in that community are usually preserved. Costs to the taxpayers
via the FDIC deposit fund are also lower than had the bank been allowed to fail.
Prudent mergers and acquisitions can strengthen our financial system and our
communities, while protecting taxpayers.
People then ask: when will we see banks making new loans? It is important to note
that over $60 of the $250 billion CPP has yet to be received by the banks. Treasury
is executing at a rapid speed, but it will take some time to review and fund all the
remaining applications. This capital needs to get into the system before it can have
the desired effect. In addition, we are still at a point of low confidence - both due to
the financial crisis and the economic downturn. As long as confidence remains low,
banks will remain cautious about extending credit, and consumers and businesses
will remain cautious about taking on new loans. As confidence returns, Treasury
expects to see more credit extended.
This reduced demand for and provision of credit is common in an economic
downturn. During the past nine recessions, inflation-adjusted total private sector
lending per quarter has contracted on average 30 percent from peak to trough,
while real GDP has contracted 2.0 percent. So we should not be surprised that
lending and borrowing will be lower during this current economic downturn. We
absolutely need our banks to continue to make credit available - especially given
the disruption in the non-banking financial markets. Our banks' role as provider of
credit in our economy is even more important now. But we must not attempt to force
them to make loans whose risks they are not comfortable with. Bad lending
practices were at the root cause of this crisis. Returning to those practices will not
help end this financial turmoil.
People have then asked: how will you track lending activity? Treasury has been
working with the banking regulators to design a program to measure the activities of
banks that have received TARP capital. We plan to use quarterly call report data to
study changes in the balance sheets and intermediation activities of institutions we
have invested in and compare their activities to a comparable set of institutions that
have not received TARP capital investments. Because call report data is infrequent,
we also plan to augment that analysis with a selection of data we plan to collect
monthly from the largest banks we have invested in for a more frequent snapshot.
The provision of credit that is vital to our economy will not materialize as fast as any
of us would like, but it will happen much faster as a result of deploying resources
from the TARP to stabilize the system and increase capital in our banks.
Conclusion
The EESA is not an economic stimulus plan, nor is it an economic growth plan. It
was one of several initiatives taken by the Federal government to stabilize the
financial system - a necessary precondition to any economic recovery. We believe
the combined actions of Treasury, the Federal Reserve and FDIC have helped
stabilize the financial system and prevent a financial collapse. Nonetheless, the
current crisis took years to build up and will take time to work through, and we still
face some real economic challenges. As Secretary Paulson has said, there is no
single action the Federal government can take to end the financial market turmoil
and the economic downturn, but the authorities Congress provided last fall
dramatically expanded the tools available to address the needs of our system.
Thank you and I would be happy to take your questions.
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January 13, 2009
HP-1350
United States, France Sign Protocol to Income Tax Treaty
Washington - The Treasury Department today announced that United States
Ambassador to France Craig Roberts Stapleton and French Minister of Finance
Christine Lagarde signed a protocol updating the current income tax treaty between
the United States and France.
In a ceremony held in Paris, the two officials signed a Protocol that makes several
significant changes to the existing U.S.-France income tax treaty. The agreement
provides for the elimination of source-country taxation of certain direct dividends as
well as the elimination of source-country taxation of cross-border royalty payments.
The Protocol also provides for mandatory arbitration of certain cases that cannot be
resolved by the competent authorities within a specified period of time, strengthens
the treaty's provisions preventing so-called treaty shopping (the inappropriate use
of a tax treaty by third-country residents), and updates the rules for the exchange of
taxpayer information between the tax authorities of each country.
-30-
REPORTS
*
*
Protocol
Memorandum
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PROTOCOL
AMENDING THE CONVENTION
BETWEEN
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND
THE GOVERNMENT OF THE FRENCH REPUBLIC
FOR THE AVOIDANCE OF DOUBLE TAXATION
AND THE PREVENTION OF FISCAL EVASION
WITH RESPECT TO TAXES ON INCOME AND CAPITAL,
SIGNED AT PARIS ON AUGUST 31,1994,
AS AMENDED BY THE PROTOCOL SIGNED ON DECEMBER 8,2004
2
THE GOVERNMENT OF THE UNITED STATES OF AMERICA
AND
THE GOVERNMENT OF THE FRENCH REPUBLIC
DESIRING to amend the Convention Between the Government of the United
States of America and the Government of the French Republic for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income and Capital, signed at Paris on August 31, 1994, as
amended by the Protocol signed at Washington on December 8, 2004 ("the
Convention"), have agreed as follows:
ARTICLE I
1. Subparagraph b) (iii) of paragraph 2 of Article 4 (Resident) of the Convention
shall be deleted and replaced by the following:
“(iii) in the case of the United States, a regulated investment
company, a real estate investment trust, and a real estate mortgage
investment conduit; in the case of France, a “société
d’investissement à capital variable” (SICAV), a “société
d’investissement immobilier cotée” (SUC), a “société de placement
à prépondérance immobilière à capital variable” (SPPICAV); and
any similar investment entities agreed upon by the competent
authorities of both Contracting States.”
2. Subparagraphs b) (iv), (b) (v), and (b) (vi) of paragraph 2 of Article 4
(Resident) of the Convention shall be deleted.
3
3. New subparagraph c) of paragraph 2 of Article 4 (Resident) of the Convention
shall be added as follows:
“c) An item of income paid from the United States to a French qualified
partnership shall be considered derived by a resident of France only to the
extent that such income is included currently in the taxable income of a
shareholder, associate or other member that is otherwise treated as a
resident of France under the provisions of this Convention. A French
qualified partnership means a partnership:
(i) that has its place of effective management in France,
(ii) that has not elected to be taxed in France as a corporation,
(iii) the tax base of which is computed at the partnership level for
French tax purposes, and
(iv) all of the shareholders, associates or other members of which,
pursuant to the tax laws of France, are liable to tax therein in
respect of their share of the profits of that partnership.”
4. New paragraph 3 of Article 4 (Resident) of the Convention shall be added as
follows:
“3. For purposes of applying this Convention, an item of income, profit or
gain derived through an entity that is fiscally transparent under the laws
of either Contracting State, and that is formed or organized:
a) in either Contracting State, or;
b) in a state that has concluded an agreement containing a provision for
the exchange of information with a view to the prevention of tax evasion
with the Contracting State from which the income, profit, or gain is
derived,
shall be considered to be derived by a resident of a Contracting State to
the extent that the item is treated for purposes of the taxation law of such
Contracting State as the income, profit or gain of a resident.”
5. Paragraphs 3 and 4 of Article 4 (Resident) of the Convention shall be
renumbered as paragraphs 4 and 5.
4
ARTICLE II
Article 10 (Dividends) of the Convention shall be deleted and replaced by the
following:
“Article 10
Dividends
1. Dividends paid by a company that is a resident of a Contracting State to
a resident of the other Contracting State may be taxed in that other State.
2. However, such dividends may also be taxed in the Contracting State of
which the company paying the dividends is a resident and according to the
laws of that State, but if the beneficial owner of the dividends is a resident
of the other Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount of the dividends if the beneficial owner is
a company that owns:
(i) directly at least 10 percent of the voting stock of the company
paying the dividends, if such company is a resident of the United
States; or
(ii) directly or indirectly at least 10 percent of the capital of the
company paying the dividends, if such company is a resident of
France;
b) 15 percent of the gross amount of the dividends in all other cases.
5
3. Notwithstanding the provisions of paragraph 2, such dividends shall not
be taxed in the Contracting State of which the company paying the
dividends is a resident if the beneficial owner is a company that is a
resident of the other Contracting State that has owned, directly or
indirectly through one or more residents of either Contracting State,
shares representing 80 percent or more of the voting power of the
company paying the dividends in the case of the United States, or 80
percent or more of the capital of the company paying the dividends in the
case of France, for a 12-month period ending on the date on which
entitlement to the dividends is determined and:
a) satisfies the conditions of clause (i) or (ii) of subparagraph c) of
paragraph 2 of Article 30 (Limitation on Benefits of the Convention);
b) satisfies the conditions of clauses (i) and (ii) of subparagraph e) of
paragraph 2 of Article 30, provided that the company satisfies the
conditions described in paragraph 4 of that Article with respect to the
dividends;
c) is entitled to benefits with respect to the dividends under paragraph 3 of
Article 30; or
d) has received a determination pursuant to paragraph 6 of Article 30 with
respect to this paragraph.
4. Paragraphs 2 and 3 shall not affect the taxation of the company in
respect of the profits out of which the dividends are paid.
6
5. a) Subparagraph a) of paragraph 2 and paragraph 3 shall not apply in
the case of dividends paid by a U.S. Regulated Investment Company
(RIC), a U.S. Real Estate Investment Trust (REIT), a French “société
d'investissement à capital variable” (SICAV), a French “société
d’investissement immobilier cotée” (SUC), or a French “société de
placement à prépondérance immobilière à capital variable” (SPPICAV).
b) In the case of dividends paid by a RIC or a SICAV, subparagraph (b) of
paragraph 2 shall apply. In the case of dividends paid by a REIT, a SIIC
or a SPPICAV, subparagraph (b) of paragraph 2 shall apply only if:
(i) the beneficial owner of the dividends is an individual, or a
pension trust or other organization maintained exclusively to
administer or provide retirement or employee benefits that is
established or sponsored by a resident, in either case holding an
interest of not more than 10 percent in the REIT, SIIC or
SPPICAV;
(ii) the dividends are paid with respect to a class of shares that is
publicly traded and the beneficial owner of the dividends is a
person holding an interest of not more than 5 percent of any class of
the REIT’s, SIIC’s or SPPICAV’s shares; or
(iii) the beneficial owner of the dividends is a person holding an
interest of not more than 10 percent in the REIT, SIIC or SPPICAV
and, in the case of a REIT, such REIT is diversified.
7
c) For purposes of this paragraph, a REIT shall be “diversified” if the
value of no single interest in real property exceeds 10 percent of its total
interests in real property. For the purposes of this provision, foreclosure
property shall not be considered an interest in real property. Where a
REIT holds an interest in a partnership, it shall be treated as owning
directly a proportion of the partnership’s interests in real property
corresponding to its interest in the partnership.
6. a) The term “dividends” means income from shares, “jouissance”
shares or “jouissance” rights, mining shares, founders’ shares or other
rights, not being debt-claims, participating in profits, as well as income
treated as a distribution by the taxation laws of the State of which the
company making the distribution is a resident; and income from
arrangements, including debt obligations, that carry the right to participate
in, or are determined with reference to, profits of the issuer or one of its
associated enterprises, as defined in subparagraph (a) or (b) of paragraph
1 of Article 9 (Associated Enterprises), to the extent that such income is
characterized as a dividend under the law of the Contracting State in
which the income arises. The term “dividend” shall not include income
referred to in Article 16 (Directors’ Fees).
b) The provisions of this Article shall apply where a beneficial owner of
dividends holds depository receipts evidencing ownership of the shares in
respect of which the dividends are paid, in lieu of the shares themselves.
7. The provisions of paragraphs 2 through 4 shall not apply if the
beneficial owner of the dividends, being a resident of a Contracting State,
carries on business in the other Contracting State, of which the company
paying the dividends is a resident, through a permanent establishment
situated therein, or performs in that other State independent personal
services from a fixed base situated therein, and the dividends are
attributable to such permanent establishment or fixed base. In such case,
the provisions of Article 7 (Business Profits) or Article 14 (Independent
Personal Services), as the case may be, shall apply.
8. a) A company that is a resident of a Contracting State and that has a
permanent establishment in the other Contracting State, or that is subject
to tax on a net basis in that other Contracting State on items of income
that may be taxed in that other State under Article 6 (Income From Real
Property) or under paragraph 1 of Article 13 (Capital Gains), may be
subject in that other Contracting State to a tax in addition to the tax
allowable under the other provisions of this Convention. Such tax,
however, may be imposed only on the portion of the business profits of
the company attributable to the permanent establishment and the portion
of the income referred to in the preceding sentence that is subject to tax
under Article 6 or paragraph 1 of Article 13 that,
(i) in the case of the United States, represents the “dividend
equivalent amount” of those profits and income; the term “dividend
equivalent amount” shall, for the purposes of this subparagraph,
have the meaning that it has under the law of the United States as it
may be amended from time to time without changing the general
principle thereof; and
(ii) in the case of France, is included in the base of the French
withholding tax in accordance with the provisions of Article 115
quinquies of the French tax code (Code général des impôts) or with
any similar provisions which amend or replace the provisions of
that Article.
b) The taxes referred to in subparagraph (a) also shall apply to the portion
of the business profits, or of the income subject to tax under Article 6
(Income From Real Property) or paragraph 1 of Article 13 (Capital Gains)
that is referred to in subparagraph (a), which is attributable to a trade or
business conducted in one Contracting State through a partnership or
other entity treated as a fiscally transparent entity under the laws of that
State by a company that is a member of such partnership or entity and a
resident of the other Contracting State.
9
9. The tax referred to in subparagraphs (a) and (b) of paragraph 8 shall not
be imposed at a rate exceeding the rate specified in subparagraph (a) of
paragraph 2. In any case, it shall not be imposed on a company that:
a) satisfies the conditions of clause (i) or (ii) of subparagraph (c) of
paragraph 2 of Article 30 (Limitation on Benefits of the Convention);
b) satisfies the conditions of clauses (i) and (ii) of subparagraph (e) of
paragraph 2 of Article 30, provided that the company satisfies the
conditions described in paragraph 4 of that Article with respect to an item
of income, profit, or gain described in paragraph 7;
c) is entitled under paragraph 3 of Article 30 to benefits with respect to an
item of income, profit, or gain described in paragraph 7; or
d) has received a determination pursuant to paragraph 6 of Article 30 with
respect to this paragraph.
10. Subject to the provisions of paragraph 8, where a company that is a
resident of a Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the
dividends paid by the company, except insofar as such dividends are paid
to a resident of that other State or insofar as the dividends are attributable
to a permanent establishment or fixed base situated in that other State, nor
subject the company’s undistributed profits to a tax on the company’s
undistributed profits, even if the dividends paid or the undistributed
profits consist wholly or partly of profits or income arising in such other
State.”
ARTICLE III
1. Paragraph 1 of Article 12 (Royalties) of the Convention shall be deleted and
replaced by the following:
“1. Royalties arising in a Contracting State and beneficially owned by a
resident of the other Contracting State shall be taxable only in that other
State.”
2. Paragraphs 2, 3, 4, and 5 of Article 12 (Royalties) of the Convention shall be
deleted.
10
3. New paragraphs 2 and 3 of Article 12 (Royalties) of the Convention shall be
added as follows:
“2. The term “royalties” as used in this Article means:
a) payments of any kind received as a consideration for the use of, or the
right to use, any copyright of literary, artistic, or scientific work or any
neighboring right (including reproduction rights and performing rights),
any cinematographic film, any sound or picture recording, any software,
any patent, trademark, design or model, plan, secret formula or process, or
other like right or property, or for information concerning industrial,
commercial, or scientific experience; and
b) gains derived from the alienation of any such right or property
described in this paragraph that are contingent on the productivity, use, or
further alienation thereof.
3. The provisions of paragraph 1 shall not apply if the beneficial owner of
the royalties, being a resident of a Contracting State, carries on business in
the other Contracting State, in which the royalties arise, through a
permanent establishment situated therein, or performs in that State
independent personal services from a fixed base situated therein, and the
royalties are attributable to such permanent establishment or fixed base.
In such case the provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall apply.”
4. Paragraphs 6 and 7 of Article 12 (Royalties) of the Convention shall be
renumbered as paragraphs 4 and 5.
ARTICLE IV
Paragraph 5 of Article 13 (Capital Gains) of the Convention shall be deleted and
replaced by the following:
“5. Gains described in subparagraph (b) of paragraph 2 of Article 12
(Royalties) shall be taxable only in accordance with the provisions of
Article 12.”
11
ARTICLE V
The last sentence of paragraph 1 of Article 17 (Artistes and Sportsmen) of the
Convention shall be deleted and replaced by the following:
“However, the provisions of this paragraph shall not apply where the
amount of the gross receipts derived by such entertainer or sportsman
from such activities, including expenses reimbursed to him or borne on
his behalf, does not exceed 10,000 United States dollars or its equivalent
in euros for the taxable period concerned.”
ARTICLE VI
The first sentence of paragraph 1 of Article 18 (Pensions) of the Convention
shall be deleted and replaced by the following:
“Payments under the social security legislation or similar legislation of a
Contracting State to a resident of the other Contracting State or to a
citizen of the United States, and pension distributions and other similar
remuneration arising in one of the Contracting States in consideration of
past employment paid to a resident of the other Contracting State,
whether paid periodically or in a lump sum, shall be taxable only in the
first-mentioned State.”
12
ARTICLE VII
Article 22 (Other Income) of the Convention shall be deleted and replaced by
the following:
“Article 22
Other Income
1. Items of income beneficially owned by. a resident of a Contracting
State, wherever arising, not dealt with in the foregoing Articles of this
Convention shall be taxable only in that State.
2. The provisions of paragraph 1 shall not apply to income, other than
income from real property as defined in paragraph 2 of Article 6 (Income
From Real Property), if the beneficial owner of such income, being a
resident of a Contracting State, carries on business in the other
Contracting State through a permanent establishment situated therein, or
performs in that other State independent personal services from a fixed
base situated therein, and the right or property in respect of which the
income is paid is attributable to such permanent establishment or fixed
base. In such case the provisions of Article 7 (Business Profits) or Article
14 (Independent Personal Services), as the case may be, shall apply.”
ARTICLE VIII
1. Regarding Article 24 (Relief From Double Taxation) of the Convention as
incorporated in the altemat of the United States, in both the English and French
version of such altemat, paragraph 1 shall be renumbered paragraph 2, and
paragraph 2 shall be renumbered paragraph 1.
2. Clause (iii) of subparagraph a) of paragraph 1 of Article 24 (Relief From
Double Taxation) of the Convention, as amended by paragraph 1 of this Article
VIII of this Protocol, shall be deleted and replaced by the following:
“(iii) in the case of income referred to in Article 10 (Dividends),
Article 11 (Interest), paragraph 1 of Article 13 (Capital Gains),
Article 16 (Director’s Fees), and Article 17 (Artistes and
Sportsmen), to the amount of tax paid in the United States in
accordance with the provisions of the Convention; however, such
credit shall not exceed the amount of French tax attributable to such
income.”
13
3. Clause (i) of subparagraph b) of paragraph 1 of Article 24 (Relief From
Double Taxation) of the Convention, as amended by paragraph 1 of this Article
VIII of this Protocol, shall be deleted and replaced by the following:
“(i) income consisting of dividends paid by a company that is a
resident of the United States, or interest arising in the United States,
as described in paragraph 5 of Article 11 (Interest), or royalties
arising in the United States, as described in paragraph 4 of Article
12 (Royalties), that is derived and beneficially owned by such
individual and that is paid by:
aa) the United States or any political subdivision or local
authority thereof; or
bb) a person created or organized under the laws of a state of
the United States or the District of Columbia, the principal
class of shares of or interests in which is substantially and
regularly traded on a recognized stock exchange as defined in
subparagraph (d) of paragraph 7 of Article 30 (Limitation on
Benefits of the Convention); or
cc) a company that is a resident of the United States,
provided that less than 10 percent of the outstanding shares
of the voting power in such company was owned (directly or
indirectly) by the resident of France at all times during the
part of such company's taxable period preceding the date of
payment of the income to the owner of the income and
during the prior taxable period (if any) of such company, and
provided that less than 50 percent of such voting power was
owned (either directly or indirectly) by residents of France
during the same period; or
dd) a resident of the United States, not more than 25 percent
of the gross income of which for the prior taxable period (if
any) consisted directly or indirectly of income derived from
sources outside the United States;”.
4. Clause (i) of subparagraph e) of paragraph 1 of Article 24 (Relief From
Double Taxation) of the Convention as amended by paragraph 1 of this Article
VIII of this Protocol, shall be deleted and replaced by the following:
“(i) Where a company resident of France is taxed in that state
according to French domestic law on a consolidated tax base,
including the profits or losses of subsidiaries that are residents of
the United States or of permanent establishments situated in the
United States, the provisions of the Convention shall not prevent
the application of that law.”
14
5. Subparagraph (c) of paragraph 2 of Article 24 (Relief From Double Taxation)
of the Convention, as amended by paragraph 1 of this Article VIII of this
Protocol, shall be deleted.
ARTICLE IX
1. The last sentence of paragraph 2 of Article 25 (Non-Discrimination) shall be
deleted and replaced by the following:
“The provisions of this paragraph shall not prevent the application by
either Contracting State of the taxes described in paragraph 8 of Article 10
(Dividends).”
2. The first sentence of clause a) of paragraph 3 of Article 25 shall be deleted
and replaced by the following:
“Except where the provisions of paragraph 1 of Article 9 (Associated
Enterprises), paragraph 6 of Article 11 (Interest), or paragraph 5 of Article
12 (Royalties) apply, interest, royalties, and other disbursements paid by
an enterprise of a Contracting State to a resident of the other Contracting
State shall, for the purposes of determining the taxable profits of such
enterprise, be deductible under the same conditions as if they had been
paid to a resident of the first-mentioned State.”
15
ARTICLE X
Paragraph 5 of Article 26 (Mutual Agreement Procedure) shall be deleted and
replaced by the following paragraphs:
“5. Where, pursuant to a mutual agreement procedure under this Article,
the competent authorities have endeavored but are unable to reach a
complete agreement, the case shall be resolved through arbitration
conducted in the manner prescribed by, and subject to, the requirements
of paragraph 6 and any rules or procedures agreed upon by the
Contracting States, if:
a) tax returns have been filed with at least one of the Contracting States
with respect to the taxable years at issue in the case;
b) the case is not a particular case that both competent authorities agree,
before the date on which arbitration proceedings would otherwise have
begun, is not suitable for determination by arbitration; and
c) all concerned persons agree according to the provisions of
subparagraph (d) of paragraph 6.
An unresolved case shall not, however, be submitted to arbitration if a
decision on such case has already been rendered by a court or
administrative tribunal of either Contracting State.
16
6. For the purposes of paragraph 5 and this paragraph, the following rules
and definitions shall apply:
a) the term “concerned person” means the presenter of a case to a
compétent authority for consideration under this Article and all other
persons, if any, whose tax liability to either Contracting State may be
directly affected by a mutual agreement arising from that consideration;
b) the “commencement date” for a case is the earliest date on which the
information necessary to undertake substantive consideration for a mutual
agreement has been received by both competent authorities;
c) arbitration proceedings in a case shall begin on the later of:
(i) two years after the commencement date of that case, unless both
competent authorities have previously agreed to a different date,
and
(ii) the earliest date upon which the agreement required by
subparagraph d) has been received by both competent authorities;
d) the concerned person(s), and their authorized representatives or agents,
must agree prior to the beginning of arbitration proceedings not to
disclose to any other person any information received during the course of
the arbitration proceeding from either Contracting State or the arbitration
panel, other than the determination of such panel;
e) unless any concerned person does not accept the determination of an
arbitration panel the determination shall constitute a resolution by mutual
agreement under this Article and shall be binding on both Contracting
States with respect to that case only; and
f) for purposes of an arbitration proceeding under paragraph 5 and this
paragraph, the members of the arbitration panel and their staffs shall be
concerned “persons or authorities” to whom information may be disclosed
under Article 27 (Exchange of Information) of the Convention.”
17
ARTICLE XI
Article 27 (Exchange of Information) of the Convention shall be deleted and
replaced by the following:
“Article 27
Exchange of Information
1. The competent authorities of the Contracting States shall exchange
such information as may be relevant for carrying out the provisions of this
Convention or to the administration or enforcement of the domestic laws
concerning taxes of every kind and description imposed on behalf of the
Contracting States, insofar as taxation thereunder is not contrary to the
Convention. The exchange of information is not restricted by Articles 1
(Personal Scope) and 2 (Taxes Covered).
2. Any information received under this Article by a Contracting State
shall be treated as secret in the same manner as information obtained
under the domestic laws of that State and shall be disclosed only to
persons or authorities (including courts and administrative bodies)
concerned with the assessment or collection or administration of, the
enforcement or prosecution in respect of, the determination of appeals in
relation to the taxes referred to in paragraph 11 or the oversight of the
above. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings
or injudicial decisions.
3. In no case shall the provisions of paragraphs 1 and 2 be construed so as
to impose on a Contracting State the obligation:
a) to carry out administrative measures at variance with the laws and
administrative practice of that or of the other Contracting State;
b) to supply information which is not obtainable under the laws or in the
normal course of the administration of that or of the other Contracting
State;
c) to supply information which would disclose any trade, business,
industrial, commercial or professional secret or trade process, or
information the disclosure of which would be contrary to public policy
(“ordre public”).
18
4. a) If information is requested by a Contracting State in accordance with
this Article, the other Contracting State shall use its information gathering
measures to obtain the requested information, even though that other State
may not need such information for its own tax purposes. The obligation
contained in the preceding sentence is subject to the limitations of
paragraph 3 but in no case shall such limitations be construed to permit a
Contracting State to decline to supply information solely because it has no
domestic interest in such information.
b) If specifically requested by the competent authority of a Contracting
State, the competent authority of the other Contracting State shall, if
possible, provide information under this Article in the form of depositions
of witnesses and authenticated copies of unedited original documents
(including books, papers, statements, records, accounts, and writings), to
the same extent such depositions and documents can be obtained under
the laws and administrative practices of the other Contracting State with
respect to its own taxes.
c) A Contracting State shall allow representatives of the other Contracting
State to enter the first-mentioned Contracting State to interview taxpayers
and look at and copy their books and records, but only after obtaining the
consent of those taxpayers and the competent authority of the firstmentioned State (who may be present or represented, if desired), and only
if the two Contracting States agree, in an exchange of diplomatic notes, to
allow such inquiries on a reciprocal basis. Such inquiries shall not be
considered audits for purposes of French domestic law.
5. In no case shall the provisions of paragraph 3 be construed to permit a
Contracting State to decline to supply information solely because the
information is held by a bank, other financial institution, nominee or
person acting in an agency or a fiduciary capacity or because it relates to
ownership interests in a person.”
19
ARTICLE XII
Paragraph 5 of Article 28 (Assistance in Collection) of the Convention shall be
deleted and replaced by the following:
“The assistance provided for in this Article shall not be accorded with
respect to citizens, companies, or other entities of the Contracting State to
which application is made.”
ARTICLE XIII
1. Paragraph 2 of Article 29 (Miscellaneous Provisions) of the Convention shall
be deleted and replaced by the following:
“2. Notwithstanding any provision of the Convention except the
provisions of paragraph 3, the United States may tax its residents, as
determined under Article 4 (Resident) and its citizens as if the Convention
had not come into effect, and France may tax entities which have their
place of effective management and which are subject to tax in France as if
paragraph 3 of Article 4 of the Convention had not come into effect.
Notwithstanding the other provisions of this Convention, a former citizen
or former long-term resident of a Contracting State may, for the period of
ten years following the loss of such status, be taxed in accordance with the
laws of that Contracting State, with respect to its income from, or treated
as from, sources within that Contracting State. For this purpose, the term
“long term resident” means, with respect to a Contracting State, any
individual (other than a citizen of that Contracting State) who is a lawful
permanent resident of that Contracting State in at least eight taxable years
during the preceding fifteen taxable years.”
2. Subparagraph b) of paragraph 3 of Article 29 (Miscellaneous Provisions) of
the Convention shall be deleted and replaced by the following:
“b) the benefits conferred under paragraph 2 of Article 18 (Pensions), and
under Articles 19 (Public Remuneration), 20 (Teachers and Researchers),
21 (Students and Trainees), and 31 (Diplomatic and Consular Officers),
upon individuals resident in a Contracting State who are neither citizens
of, nor have immigrant status in, that Contracting State.”
20
3. In view of the amendment of Article 24 (Relief from Double Taxation) of the
Convention by paragraph 1 of Article VIII of this Protocol, Subparagraph (b) of
paragraph 7 of Article 29 (Miscellaneous Provisions) of the Convention, as
incorporated in the altemat of the United States, in both the English and French
version of such altemat, shall be deleted and replaced by the following:
“b) United States state and local income taxes on income from personal
services and any other business income (except income that is exempt
under subparagraph 1 a) (i) or (ii) of Article 24 (Relief from Double
Taxation) shall be allowed as business expenses.”
4. A new paragraph 9 of Article 29 (Miscellaneous Provisions) of the
Convention shall be added as follows:
“9. Notwithstanding the provisions of Article 19 (Public Remuneration),
remuneration, other than a pension, paid by France or a local authority
thereof, or an agency or instrumentality of France or that authority, to an
individual in respect of services rendered to France, or to that authority,
agency or instmmentality shall be taxable only in the United States if the
services are rendered in the United States and the individual is a resident
and a national of the United States or an alien admitted to the United
States for permanent residence (a “green card holder”).”
21
ARTICLE XIV
Article 30 (Limitation on Benefits of the Convention) of the Convention shall be
deleted and replaced by the following:
“Article 30
Limitation on Benefits of the Convention
l| A resident of a Contracting State shall be entitled to benefits otherwise
accorded to residents of a Contracting State by this Convention only to the
extent provided in this Article.
2. A resident of a Contracting State shall be entitled to all the benefits of
this Convention if the resident is:
a) an individual;
b) a Contracting State, a political subdivision (in the case of the United
States) or local authority thereof, or an agency or instrumentality of that
State, subdivision, or authority;
c) a company, if:
(i) its principal class of shares (and any disproportionate class of
shares) is regularly traded on one or more recognized stock
exchanges, and either
aa) its principal class of shares is primarily traded on a
recognized stock exchange located in the Contracting State
of which the company is a resident (or, in the case of a
company resident in France, on a recognized stock exchange
located within the European Union or, in the case of a
company resident in the United States, on a recognized stock
exchange located in another state that is a party to the North
American Free Trade Agreement); or
bb) the company’s primary place of management and control
is in the Contracting State of which it is a resident; or
(ii) at least 50 percent of the aggregate voting power and value of
the shares (and at least 50 percent of any disproportionate class of
shares) in the company are owned directly or indirectly by five or
fewer companies entitled to benefits under clause (i) of this
subparagraph or by persons described in subparagraph b), provided
that, in the case of indirect ownership, each intermediate owner is a
resident of either Contracting State;
22
d) a person described in clause (ii) of subparagraph (b) of paragraph 2 of
Article 4 (Resident) of this Convention, provided that
(i) in the case of a pension trust and any other organization
established in a State and maintained exclusively to administer or
provide retirement benefits that is established or sponsored by a
person that is a resident of that State under the provisions of Article
4, more than 50 percent of the person’s beneficiaries, members or
participants are individuals resident in either Contracting State; or
(ii) the organization sponsoring such person is entitled to the
benefits of this Convention pursuant to this Article, or
e) a person other than an individual, if:
(i) on at least half the days of the taxable year at least 50 percent of
the aggregate voting power and value of its shares (and at least 50
percent of any disproportionate class of shares) or other beneficial
interests in the person is owned, directly or indirectly, by residents
of the Contracting State of which that person is a resident that are
entitled to the benefits of this Convention under subparagraph (a),
subparagraph (b), clause (i) of subparagraph (c), or subparagraph
(d) of this paragraph, provided that, in the case of indirect
ownership, each intermediate owner is a resident of that
Contracting State; and
(ii) less than 50 percent of the person’s gross income for the taxable
year, as determined in the person's State of residence, is paid or
accrued, directly or indirectly, to persons who are not residents of
either Contracting State entitled to the benefits of this Convention
under subparagraph a), subparagraph b), clause (i) of subparagraph
c), or subparagraph d) of this paragraph in the form of payments
that are deductible for purposes of the taxes covered by this
Convention in the person’s State of residence (but not including
arm’s length payments in the ordinary course of business for
services or tangible property and payments in respect of financial
obligations to a bank that is not related to the payor).
23
f) An investment entity referred to in clause (iii) of subparagraph (b) of
paragraph 2 of Article 4 (Resident) provided that more than half of the
shares, rights, or interests in such entity are owned directly or indirectly
by:
(i) persons that are resident of the Contracting State of which the
investment entity is a resident and that qualify for benefits under
subparagraph a), subparagraph b), clause (i) of subparagraph c), or
subparagraph d) of this paragraph, and
(ii) citizens of the United States in the case of an investment entity
that is a resident of the United States,
provided that, in the case of indirect ownership, each intermediate owner
is a resident of the Contracting State of which the investment entity is a
resident.
3. A company that is a resident of a Contracting State shall also be
entitled to the benefits of the Convention if:
a) at least 95 percent of the aggregate voting power and value of its shares
(and at least 50 percent of any disproportionate class of shares) is owned,
directly or indirectly by seven or fewer persons that are equivalent
beneficiaries; and
b) less than 50 percent of the company’s gross income, as determined in
the company’s State of residence, for the taxable year is paid or accrued,
directly or indirectly, to persons who are not equivalent beneficiaries, in
the form of payments (but not including arm’s length payments in the
ordinary course of business for services or tangible property and payments
in respect of financial obligations to a bank that is not related to the
payor), that are deductible for the purposes of the taxes covered by this
Convention in the company’s State of residence.
4. a) A resident of a Contracting State shall be entitled to benefits of the
Convention with respect to an item of income derived from the other
Contracting State, regardless of whether the resident is entitled to benefits
under paragraph 2 or 3 of this Article, if the resident is engaged in the
active conduct of a trade or business in the first-mentioned State (other
than the business of making or managing investments for the resident’s
own account, unless these activities are banking, insurance or securities
activities carried on by a bank, insurance company or registered securities
dealer), and the income derived from the other Contracting State is
derived in connection with, or is incidental to, that trade or business.
24
b) If a resident of a Contracting State derives an item of income from a
trade or business activity in the other Contracting State, or derives an item
of income arising in the other Contracting State from an associated
enterprise, subparagraph a) of this paragraph shall apply to such item only
if the trade or business activity in the first-mentioned State is substantial
in relation to the trade or business activity in the other State. Whether a
trade or business activity is substantial for purposes of this paragraph shall
be determined based on all the facts and circumstances.
c) In determining whether a person is “engaged in the active conduct of a
trade or business” in a Contracting State under subparagraph a) of this
paragraph, activities conducted by persons connected to such person shall
be deemed to be conducted by such person. A person shall be connected
to another person if one possesses at least 50 percent of the beneficial
interest in the other (or, in the case of a company, at least 50 percent of
the aggregate vote and at least 50 percent of the aggregate value of the
shares in the company or of the beneficial equity interest in the company)
or another person possesses, directly or indirectly, at least 50 percent of
the beneficial interest (or, in the case of a company, at least 50 percent of
the aggregate vote and at least 50 percent of the aggregate value of the
shares in the company or of the beneficial equity interest in the company)
in each person. In any case, a person shall be considered to be connected
to another person if, based on all the relevant facts and circumstances, one
has control of the other or both are under the control of the same person or
persons.
25
5. Notwithstanding the preceding provisions of this Article, where an
enterprise of a Contracting State derives income from the other
Contracting State, and that income is attributable to a permanent
establishment which that enterprise has in a third jurisdiction, the tax
benefits that would otherwise apply under the other provisions of the
Convention shall not apply to that income if the combined tax that is
actually paid with respect to such income in the first-mentioned
Contracting State and in the third jurisdiction is less than 60 percent of the
tax that would have been payable in the first-mentioned State if the
income were earned in that Contracting State by the enterprise and were
not attributable to the permanent establishment in the third jurisdiction.
Any dividends, interest or royalties to which the provisions of this
paragraph apply shall be subject to tax in the other Contracting State at a
rate that shall not exceed 15 percent of the gross amount thereof. Any
other income to which the provisions of this paragraph apply shall be
subject to tax under the provisions of the domestic law of the other
Contracting State, notwithstanding any other provision of the Convention.
The provisions of this paragraph shall not apply if:
a) in the case of royalties, the royalties are received as compensation for
the use of, or the right to use, intangible property produced or developed
by the permanent establishment itself; or
b) in the case of any other income, the income derived from the other
Contracting State is derived in connection with, or is incidental to, the
active conduct of a trade or business carried on by the permanent
establishment in the third jurisdiction (other than the business of making,
managing or simply holding investments for the enterprise’s own account,
unless these activities are banking or securities activities carried on by a
bank or registered securities dealer).
6. A resident of a Contracting State that is not entitled to benefits pursuant
to the preceding paragraphs of this Article shall, nevertheless, be granted
benefits of the Convention if the competent authority of the other
Contracting State determines that the establishment, acquisition or
maintenance of such person and the conduct of its operations did not have
as one of its principal purposes the obtaining of benefits under the
Convention. The competent authority of the other Contracting State shall
consult with the competent authority of the first-mentioned State before
denying the benefits of the Convention under this paragraph.
26
7. For the purposes of this Article,
a) the term “principal class of shares” means the ordinary or common
shares of the company, provided that such class of shares represents the
majority of the voting power and value of the company. If no single class
of ordinary or common shares represents the majority of the aggregate
voting power and value of the company, the “principal class of shares” is
that class or those classes that in the aggregate represent a majority of the
aggregate voting power and value of the company.
b) the term “disproportionate class of shares” means any class of shares of
a company resident in one of the States that entitles the shareholder to
disproportionately higher participation, through dividends, redemption
payments or otherwise, in the earnings generated in the other State by
particular assets or activities of the company.
c) the term “shares” shall include depository receipts thereof.
d) the term “recognized stock exchange” means:
(i) the NASDAQ System owned by the National Association of
Securities Dealers, Inc. and any stock exchange registered with the
U.S. Securities and Exchange Commission as a national securities
exchange under the U.S. Securities Exchange Act of 1934;
(ii) the French stock exchanges controlled by the “Autorité des
marchés financiers”;
(iii) the stock exchanges of Amsterdam, Brussels, Frankfurt,
Hamburg, London, Lisbon, Madrid, Milan, Stockholm, Sydney,
Tokyo, Toronto and the Swiss stock exchange; and
(iv) any other stock exchanges agreed upon by the competent
authorities of the Contracting States.
e) a company’s primary place of management and control shall be in the
State of which it is a resident only if executive officers and senior
management employees exercise day-to-day responsibility for more of the
strategic, financial and operational policy decision making for the
company (including its direct and indirect subsidiaries) in that State than
in any other state, and the staffs conduct more of the day-to-day activities
necessary for preparing and making those decisions in that State than in
any other state.
f) the term “equivalent beneficiary” means a resident of a member state of
the European Union or of a party to the North American Free Trade
Agreement, but only if that resident:
(i)
aa) would be entitled to all the benefits of a comprehensive
convention for the avoidance of double taxation between any
member state of the European Union or any party to the
North American Free Trade Agreement and the Contracting
State from which the benefits of this Convention are claimed
under provisions analogous to subparagraph a), subparagraph
b), clause (i) of subparagraph c), or subparagraph d) of
paragraph 2 of this Article, provided that if such convention
does not contain a comprehensive limitation on benefits
article, the person would be entitled to the benefits of this
Convention by reason of subparagraph a), subparagraph b),
clause (i) of subparagraph c), or subparagraph d) of
paragraph 2 of this Article if such person were a resident of
one of the Contracting States under Article 4 (Resident) of
this Convention; and
bb) with respect to insurance premiums and to income
referred to in Articles 10 (Dividends), 11 (Interest) or 12
(Royalties) of this Convention, would be entitled under such
convention to an exemption from excise tax on such
premiums or a rate of tax with respect to the particular item
of income for which benefits are being claimed under this
Convention that is at least as low as the rate applicable under
this Convention; or
(ii) is a resident of a Contracting State that is entitled to the benefits
of this Convention by reason of subparagraph a), subparagraph b),
clause (i) of subparagraph c), or subparagraph d) of paragraph 2 of
this Article.
For the purposes of applying paragraph 3 of Article 10 (Dividends) in
order to determine whether a person owning shares, directly or indirectly,
in the company claiming the benefits of this Convention is an equivalent
beneficiary, such person shall be deemed to hold the same voting power
in the case of a company resident of the United States, or share of the
capital in the case of a company resident of France, in the company
paying the dividend as the company claiming the benefits holds in such
company.
28
g) with respect to dividends, interest, or royalties arising in France and
beneficially owned by a company that is a resident of the United States, a
company that is a resident of a member state of the European Union shall
be treated as satisfying the requirements of subparagraph (f)(i)(bb) for
purposes of determining whether such United States resident is entitled to
benefits under this paragraph if a payment of dividends, interest, or
royalties arising in France and paid directly to such resident of a member
state of the European Union would have been exempt from tax pursuant to
any directive of the European Union, notwithstanding that the income tax
convention between France and that other member state of the European
Union would provide for a higher rate of tax with respect to such payment
than the rate of tax applicable to such United States company under
Article 10 (Dividends), 11 (Interest), or 12 (Royalties) of this
Convention.”
ARTICLE XV
Paragraph 1 of Article 32 (Provisions for Implementation) of the Convention
shall be deleted and replaced by the following:
“1. The competent authorities of the Contracting States may prescribe
rules and procedures, jointly or separately, to determine the mode of
application of the provisions of this Convention.”
ARTICLE XVI
1. The Contracting States shall notify each other when their respective
constitutional and statutory requirements for the entry into force of this Protocol
have been satisfied. The Protocol shall enter into force on the date of receipt of
the later of such notifications.
2. The provisions of this Protocol shall have effect:
a) in respect of taxes withheld at source, for amounts paid or credited on
or after the first day of January of the year in which this Protocol enters
into force;
b)
in respect of other taxes, for taxable periods beginning on or after
the first day of January next following the date on which the Protocol
enters into force.
29
3. Notwithstanding paragraph 2, the provisions of paragraphs 5 and 6 of Article
26 (Mutual Agreement Procedure) shall have effect with respect to
a) cases that are under consideration by the competent authorities as of the
date on which this Protocol enters into force, and
b) cases that come under such consideration after that time,
and the commencement date for a case described in subparagraph a) of this
paragraph shall be the date on which this Protocol enters into force.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto,
have signed this Protocol.
DONE at Paris, in duplicate, this thirteenth day of January, 2009, in the English
and French languages, each text being equally authentic.
FOR THE GOVERNMENT
OF THE UNITED STATES OF
AMERICA
FOR THE GOVERNMENT
OF THE FRENCH REPUBLIC
MEMORANDUM OF UNDERSTANDING
At the signing today of the Protocol Amending the Convention Between the
Government of the United States of America and the Government of the French
Republic for the Avoidance of Double Taxation and the Prevention of Fiscal
Evasion with Respect to Taxes on Income and Capital, Signed at Paris on
August 31, 1994, as Amended by the Protocol Signed on December 8, 2004, the
undersigned have agreed to define the mode of application of paragraphs 5 and 6
of Article 26 (Mutual Agreement Procedure) of the Convention, as further
amended by the Protocol signed today, as follows:
In respect of any case where the competent authorities have endeavored but are
unable to reach an agreement under Article 26 regarding the application of the
Convention, binding arbitration shall be used to determine such application,
unless the competent authorities agree that the particular case is not suitable for
determination by arbitration. If an arbitration proceeding under paragraph 5 of
Article 26 commences (the Proceeding), the following rules and procedures
shall apply.
a) The Proceeding shall be conducted in the manner prescribed by, and
subject to the requirements of, paragraphs 5 and 6 of Article 26 and these
rules and procedures, as completed by any other rules and procedures
agreed upon by the competent authorities pursuant to subparagraph q)
below.
b) The determination reached by an arbitration panel in the Proceeding
shall be limited to a determination regarding the amount of income,
expense or tax reportable to the Contracting States.
c) Notwithstanding the initiation of the Proceeding, the competent
authorities may reach a mutual agreement to resolve a case and terminate
the Proceeding. Correspondingly, a concerned person may withdraw a
request for the competent authorities to engage in the Mutual Agreement
Procedure (and thereby terminate the Proceeding) at any time.
d) The requirements of subparagraph d) of paragraph 6 of Article 26 shall
be met when the competent authorities have each received from each
concerned person a statement agreeing that the concerned person and each
person acting on the concerned person's behalf shall not disclose to any
other person any information received during the course of the Proceeding
from either Contracting State or the arbitration panel, other than the
determination of the Proceeding. A concerned person that has the legal
authority to bind any other concerned person(s) on this matter may do so
in a comprehensive statement.
2
e) Each Contracting State shall have 90 days from the date on which the
Proceeding begins to send a written communication to the other
Contracting State appointing one member of the arbitration panel. The
members appointed shall not be employees of the tax administration of the
Contracting State which appoints them. Within 60 days of the date on
which the second such communication is sent, the two members appointed
by the Contracting States shall appoint a third member, who shall serve as
Chair of the panel. If the members appointed by the Contracting States fail
to agree upon the third member, these members shall be regarded as
dismissed and each Contracting State shall appoint a new member of the
panel within 30 days of the dismissal of the original members. The
competent authorities shall develop a non-exclusive list of individuals
with familiarity in international tax matters who may potentially serve as
the Chair of the panel. In any case, the Chair shall not be a citizen of
either Contracting State.
f) The arbitration panel may adopt any procedures necessary for the
conduct of its business, provided that the procedures are not inconsistent
with any provision of Article 26.
g) Each of the Contracting States shall be permitted to submit, within 60
days of the appointment of the Chair of the arbitration panel, a Proposed
Resolution describing the proposed disposition of the specific monetary
amounts of income, expense or taxation at issue in the case, and a
supporting Position Paper, for consideration by the arbitration panel.
Copies of the Proposed Resolution and supporting Position Paper shall be
provided by the panel to the other Contracting State on the date on which
the later of the submissions is submitted to the panel. In the event that
only one Contracting State submits a Proposed Resolution within the
allotted time, then that Proposed Resolution shall be deemed to be the
determination of the panel in that case and the Proceeding shall be
terminated. Each of the Contracting States may, if it so desires, submit a
Reply Submission to the panel within 120 days of the appointment of its
Chair, to address any points raised by the Proposed Resolution or Position
Paper submitted by the other Contracting State. Additional information
may be submitted to the arbitration panel only at its request, and copies of
the panel's request and the Contracting State's response shall be provided
to the other Contracting State on the date on which the request or the
response is submitted. Except for logistical matters such as those
identified in subparagraphs 1), n) and o) below, all communications from
the Contracting States to the arbitration panel, and vice versa, shall take
place only through written communications between the designated
competent authorities and the Chair of the panel.
3
h) The presenter of the case to the competent authority of a Contracting
State shall be permitted to submit, within 90 days of the appointment of
the Chair of the arbitration panel, a Position Paper for consideration by the
arbitration panel. Copies of the Position Paper shall be provided by the
panel to the Contracting States on the date on which the later of the
submissions of the Contracting States is submitted to the panel.
i) The arbitration panel shall deliver a determination in writing to the
Contracting States within six months of the appointment of its Chair. The
panel shall adopt as its determination one of the Proposed Resolutions
submitted by the Contracting States.
j) The determination of the arbitration panel shall pertain to the
application of the Convention in a particular case, and shall be binding on
the Contracting States. The determination of the panel shall not state a
rationale. It shall have no precedential value.
k) As provided in subparagraph e) of paragraph 6 of Article 26, the
determination of an arbitration panel shall constitute a resolution by
mutual agreement under Article 26. Each concerned person must, within
30 days of receiving the determination of the panel from the competent
authority to which the case was first presented, advise that competent
authority whether that concerned person accepts the determination of the
panel. In the event the case is in litigation, each concerned person who is a
party to the litigation must also advise, within the same time frame, the
relevant court of its acceptance of the determination of the panel as the
resolution by mutual agreement and withdraw from the consideration of
the court the issues resolved through the Proceeding. If any concerned
person fails to so advise the relevant competent authority and relevant
court within this time frame, the determination of the panel shall be
considered not to have been accepted in that case. Where the
determination of the panel is not accepted, the case may not subsequently
be the subject of a Proceeding.
l) Any meeting(s) of the arbitration panel shall be in facilities provided by
the Contracting State whose competent authority initiated the mutual
agreement proceedings in the case.
m) The treatment of any associated interest or penalties is outside the
scope of the Proceeding and shall be determined by applicable domestic
law of the Contracting State(s) concerned.
4
n) No information relating to the Proceeding (including the panel's
determination) may be disclosed by the members of the arbitration panel
or their staffs or by either competent authority, except as permitted by the
Convention and the domestic laws of the Contracting States. In addition,
all material prepared in the course of, or relating to, the Proceeding shall
be considered to be information exchanged between the Contracting
States. All members of the arbitration panel and their staffs must agree in
statements sent to each of the Contracting States in confirmation of their
appointment to the arbitration panel to abide by and be subject to the
confidentiality and nondisclosure provisions of Article 27 (Exchange of
Information) of the Convention and the applicable domestic laws of the
Contracting States. In the event those provisions conflict, the most
restrictive condition shall apply.
o) The fees and expenses shall be borne equally by the Contracting States.
In general, the fees of members of the arbitration panel shall be set at the
fixed amount of $2,000 (two thousand United States dollars) per day or
the equivalent amount in euro, subject to modification by the competent
authorities. In general, the expenses of members of the arbitration panel
shall be set in accordance with the International Centre for Settlement of
Investment Disputes (ICSID) Schedule of Fees for arbitrators (as in effect
on the date on which the arbitration proceedings begin), subject to
modification by the competent authorities. Any fees for language
translation shall also be borne equally by the Contracting States. Meeting
facilities, related resources, financial management, other logistical
support, and general administrative coordination of the Proceeding shall
be provided, at its own cost, by the Contracting State whose competent
authority initiated the mutual agreement proceedings in the case. Any
other costs shall be borne by the Contracting State that incurs them.
p)
For purposes of paragraphs 5 and 6 of Article 26 and this
paragraph, each competent authority shall confirm in writing to the other
competent authority and to the concerned person(s) the date of its receipt
of the information necessary to undertake substantive consideration for a
mutual agreement. Such information shall be submitted to the competent
authorities under relevant internal rules and procedures of each of the
Contracting States. However, this information shall not be considered
received until both competent authorities have received copies of all
materials submitted to either Contracting State by the concerned person(s)
in connection with the mutual agreement procedure.
5
q) The competent authorities of the Contracting States may complete the
above rules and procedures as necessary to more effectively implement
the intent of paragraph 5 of Article 26 to eliminate double taxation.
This Memorandum of Understanding shall enter into force on the date of entry
into force of the Protocol Amending the Convention Between the Government
of the United States of America and the Government of the French Republic for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income and Capital, Signed at Paris on August 31, 1994, as
Amended by the Protocol Signed on December 8, 2004, signed at Paris on
January 13, 2009.
IN WITNESS WHEREOF, the undersigned, being duly authorized thereto,
have signed this Memorandum of Understanding.
DONE at Paris, in duplicate, this thirteenth day of January, 2009, in the English
and French languages, each text being equally authentic.
FOR THE GOVERNMENT
OF THE UNITED STATES OF
AMERICA
FOR THE GOVERNMENT
OF THE FRENCH REPUBLIC
January 13, 2009
HP-1351
Treasury Distributes 119.242 Million Stimulus Checks in 2008
Washington-The Treasury Department today announced that it distributed
323,000 additional stimulus payments in December, totaling $213 million. As of the
end of 2008, a total of 119.242 million payments have been distributed totaling
$96,343 billion since disbursements started April 28.
Individuals who did not qualify for a stimulus payment in 2008, but may be eligible
for a recovery rebate credit in 2009, should claim the credit on their tax returns this
year. For more information visit the IRS Web site.
-30-
ww.treas.gov/press/releases/hpl 351 .htm
8/3/2010
1
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January 13, 2009
HP-1352
Treasury Provides TARP Funds to Local Banks
Washington- The U.S. Treasury Department announced details this week of a
$14.77 billion investment in 43 banks made through its Capital Purchase Program.
Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief
Program, to help to stabilize and strengthen the U.S. financial system. Treasury
allocated $250 billion under TARP's Capital Purchase Program to invest in U.S.
financial institutions. To date, the Department has made $192 billion of investments,
receiving preferred stock and warrants from participating institutions. Investments
have ranged from as small as $1 million to as large as $25 billion, financing
community banking and Community Development Financial Institutions in 42 states
and Puerto Rico.
Institutions that sell shares to the government must comply with restrictions on
executive compensation during the period that Treasury holds equity issued
through this program and agree to limitations on dividends and stock repurchases.
Information about Treasury's Troubled Asset Relief Program can be found at
http://www.treas.gov/initiatives/eesa/.
Following are the transaction details:
Seller
State
City
Name of Institution
Price Paid
Bank of America Corporation
Charlotte
NC
$10,000,000,000
FirstMerit Corporation
Akron
OH
$125,000,000
Farmers Capital Bank
Corporation
Frankfort
KY
$30,000,000
Peapack-Gladstone Financial
Corporation
Gladstone
NJ
$28,685,000
Commerce National Bank
Newport
Beach
CA
$5,000,000
The First Bancorp, Inc.
Damariscotta
ME
$25,000,000
Sun Bancorp, Inc.
Vineland
NJ
$89,310,000
Crescent Financial Corporation
Cary
NC
$24,900,000
American Express Company
New York
NY
$3,388,890,000
Central Pacific Financial Corp.
Honolulu
HI
Centrue Financial Corporation
St. Louis
MO
$32,668,000
Eastern Virginia Bankshares,
Inc.
Tappahannock VA
$24,000,000
Colony Bankcorp, Inc.
Fitzgerald
GA
$28,000,000
Independent Bank Corp.
Rockland
MA
$78,158,000
Cadence Financial Corporation
Starkville
MS
$44,000,000
http://www.treas.gov/press/releases/hpl352.htai
$135,000,000
8/3/2010
LCNB Corp.
Lebanon
OH
$13,400,000
Center Bancorp, Inc.
Union
NJ
$10,000,000
F.N.B. Corporation
Hermitage
PA
$100,000,000
C&F Financial Corporation
West Point
VA
$20,000,000
North Central Bancshares, Inc.
Fort Dodge
IA
$10,200,000
Carolina Bank Holdings, Inc.
Greensboro
NC
$16,000,000
First Bancorp
Troy
NC
$65,000,000
First Financial Service
Corporation
Elizabethtown
KY
$20,000,000
Codorus Valley Bancorp, Inc.
York
PA
$16,500,000
MidSouth Bancorp, Inc.
Lafayette
LA
$20,000,000
First Security Group, Inc.
Chattanooga
TN
$33,000,000
Shore Bancshares, Inc.
Easton
MD
$25,000,000
The Queensborough Company
Louisville
GA
$12,000,000
American State Bancshares,
Inc.
Great Bend
KS
$6,000,000
Security California Bancorp
$6,815,000
Riverside
CA
Security Business Bancorp
San Diego
CA
$5,803,000
Sound Banking Company
Morehead City NC
$3,070,000
Mission Community Bancorp
San Luis
Obispo
CA
$5,116,000
Redwood Financial Inc.
Redwood Falls MN
$2,995,000
Surrey Bancorp
Mount Airy
NC
$2,000,000
Independence Bank
East
Greenwich
Rl
$1,065,000
Valley Community Bank
Pleasanton
CA
$5,500,000
Rising Sun Bancorp
Rising Sun
MD
$5,983,000
Community Trust Financial
Corporation
Ruston
LA
$24,000,000
GrandSouth Bancorporation
Greenville
SC
$9,000,000
Texas National Bancorporation
Jacksonville
TX
$3,981,000
Congaree Bancshares, Inc.
Cayce
SC
$3,285,000
New York Private Bank & Trust
Corporation
New York
NY
$267,274,000
-30REPORTS
•
Chart
http://www.treas.gov/press/releases/hp 13 52.htm
8/3/2010
Seller
Name of Institution
Bank of America Corporation
FirstMerit Corporation
Farmers Capital Bank Corporation
Peapack-Gladstone Financial Corporation
Commerce National Bank
The First Bancorp, Inc.
Sun Bancorp, Inc.
Crescent Financial Corporation
American Express Company
Central Pacific Financial Corp.
Centrue Financial Corporation
Eastern Virginia Bankshares, Inc.
Colony Bankcorp, Inc.
Independent Bank Corp.
Cadence Financial Corporation
LCNB Corp.
Center Bancorp, Inc.
F.N.B. Corporation
C&F Financial Corporation
North Central Bancshares, Inc.
Carolina Bank Holdings, Inc.
First Bancorp
First Financial Service Corporation
Codorus Valley Bancorp, Inc.
MidSouth Bancorp, Inc.
First Security Group, Inc.
Shore Bancshares, Inc.
The Queensborough Company
American State Bancshares, Inc.
Security California Bancorp
Security Business Bancorp
Sound Banking Company
Mission Community Bancorp
Redwood Financial Inc.
Surrey Bancorp
Independence Bank
Valley Community Bank
Rising Sun Bancorp
Community Trust Financial Corporation
GrandSouth Bancorporation
Texas National Bancorporation
City
Charlotte
Akron
Frankfort
Gladstone
Newport Beach
Damariscotta
Vineland
Cary
New York
Honolulu
St. Louis
Tappahannock
Fitzgerald
Rockland
Starkville
Lebanon
Union
Hermitage
West Point
Fort Dodge
Greensboro
Troy
Elizabethtown
York
Lafayette
Chattanooga
Easton
Louisville
Great Bend
Riverside
San Diego
Morehead City
San Luis Obispo
Redwood Falls
Mount Airy
East Greenwich
Pleasanton
Rising Sun
Ruston
Greenville
Jacksonville
State
NC
OH
KY
NJ
CA
ME
NJ
NC
NY
HI
MO
VA
GA
MA
MS
OH
NJ
PA
VA
IA
NC
NC
KY
PA
LA
TN
MD
GA
KS
CA
CA
NC
CA
MN
NC
RI
CA
MD
LA
SC
TX
Price Paid
$10,000,000,000
$125,000,000
$30,000,000
$28,685,000
$5,000,000
$25,000,000
$89,310,000
$24,900,000
$3,388,890,000
$135,000,000
$32,668,000
$24,000,000
$28,000,000
$78,158,000
$44,000,000
$13,400,000
$10,000,000
$100,000,000
$20,000,000
$10,200,000
$16,000,000
$65,000,000
$20,000,000
$16,500,000
$20,000,000
$33,000,000
$25,000,000
$12,000,000
$6,000,000
$6,815,000
$5,803,000
$3,070,000
$5,116,000
$2,995,000
$2,000,000
$1,065,000
$5,500,000
$5,983,000
$24,000,000
$9,000,000
$3,981,000
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January 14, 2009
HP-1353
Treasury Designates Additional FARC International Commission Members
Washington, DC-The U.S. Department of the Treasury's Office of Foreign Assets
Control (OFAC) today designated three international representatives of the
Revolutionary Armed Forces of Colombia (FARC), a narco-terrorist organization.
The OFAC action was taken pursuant to the Foreign Narcotics Kingpin Designation
Act (Kingpin Act), which applies financial sanctions against significant foreign
narcotics traffickers and organizations, like the FARC.
"Today's action exposes three additional members of the FARC's International
Commission," said Adam J. Szubin, Director of OFAC. "The FARC is one of the
world's largest suppliers of cocaine and continues to be Colombia's most notorious
and vicious narco-terrorist organization. This is the seventh action over the past
year that OFAC has taken against this group and we will continue our efforts to
financially isolate the FARC, its leaders and their support network."
The three individuals designated are identified as key members of the FARC's
International Commission: Omar Arturo Zabala Padilla (alias "Lucas Gualdron"),
Maria Remedios Garcia Albert (alias "Soraya" and "Irene"), and Vlaudin Rodrigo
Vega (alias "Carlos Vlaudin"). These International Commission members represent
the FARC in France, Italy, Switzerland, Spain, and Australia.
As representatives of the FARC and members of its International Commission,
these individuals work abroad to obtain recruits, support, and protection for the
FARC's acts of narcotics trafficking and terrorism. Omar Arturo Zabala Padilla, the
FARC's International Commission member for France, Italy and Switzerland, directs
nearly 80% of the FARC's activities in Europe, which include contacts with other
terrorist groups and arms deals. Maria Remedios Garcia Albert, the FARC's
International Commission member for Spain, a key liaison between the leadership
of the FARC and its supporters based in Europe, was arrested by Spanish
authorities on July 26, 2008 and later released pending trial. Files recovered from
the computer of Raul Reyes, a top FARC leader who was killed by Colombian
forces in a March 2008 raid, noted the "special support" of Vlaudin Rodrigo Vega,
the FARC's International Commission member for Australia.
In 2003, President George W. Bush identified the FARC as a significant foreign
narcotics trafficker, or "drug kingpin," pursuant to the Kingpin Act. This followed the
State Department's designation of the FARC as a Specially Designated Global
Terrorist in 2001 pursuant to Executive Order 13224, and its 1997 designation of
the FARC as a Foreign Terrorist Organization. To date, OFAC has designated 77
individuals and 10 entities for their support to the FARC. This OFAC action
continues ongoing efforts under the Kingpin Act to apply financial measures against
significant foreign narcotics traffickers and their organizations worldwide. In addition
to the 75 drug kingpins that have been designated by the President, 530
businesses and individuals have been designated by OFAC pursuant to the Kingpin
Act since June 2000.
Today's action freezes any assets the designated individuals may have under U.S.
jurisdiction and prohibits U.S. persons from conducting transactions or dealings in
the property interests of the designees. Penalties for violations of the Kingpin Act
range from civil penalties of up to $1,075,000 per violation to more severe criminal
penalties. Criminal penalties for corporate officers may include up to 30 years in
http://www.treas.gov/press/releases/hp 1353 .htm
8/3/2010
prison and fines of up to $5,000,000. Criminal fines for corporations may reach
$10,000,000. Other individuals face up to 10 years in prison, and fines pursuant to
Title 18 of the United States Code, for criminal violations of the Kingpin Act.
For a complete list of the individuals and entities designated today, please visit:
http://www.treasurv.gov/offices/enforcement/ofac/actions/index.shtml
To view previous OFAC actions directed against the FARC, please visit:
* Treasury Action against the FARC on September 30.
2008. http://www.treas.gov/press/reieases/hp1169.htm
* Treasury Action against the FARC on September 12,
2008. http://www.ustreas.aov/press/releases/hp1132.htm
* Treasury Action against the FARC on July 31. 2008.
http://www.treas.gov/press/releases/hp1096.htm
* Treasury Action against the FARC on May 7, 2008.
http://www.treas.gov/press/releases/hp986.htm
* Treasury Action against the FARC on April 22.
2008. http://www.treas.gov/press/releases/hp938.htm
* Treasury Action against the FARC on January 15,
2008. http://www.treas.gov/press/reieases/hp762.htm
* Treasury Action against the FARC on November 1,
2007. (http://www.treas.goy/press/releases/hp661.htm
8 Treasury Action against the FARC on September 28,.
2006, http://www.treas.gov/press/releases/lp119.htm
8 Treasury Action against the ¡FARC on February 19. 2004.
http://www. ustreas. goy/press/reieases/js 1181 .him
-30-
REPORTS
*
Designation Chart
iittp://www.treas.gov/press/releases/hpl 353 .htm
8/3/2010
Revolutionary Armed Forces
, _ .
■.
of Colombia (FARC)
u s - Department of the Treasury
asia |
Office of Foreign Assets Control
^ , 4r
September 2008
FARC Designated by the President as a
Significant Foreign Narcotics Trafficker on May 29, 2003
FARC
INTERNATIONAL COMMISSION MEMBERS
ipüSp
BL
J
i àÊÊÊÊIÊÊÊÊÊÊÊÊÊthÆi
Arreste«!
in C olom bia
Aug 2 0 0 8
Nubia CALDERON DE TRUJILLO
"Esperanza"
DOB 25 Mar 1956
CC 36159126 (Colombia)
Francisco Antonio CADENA COLLAZOS
"El Cura Camilo"
DOB 1 Jan 1947
CC 4904771 (Colombia)
Jaira Alfonso LESMES BULLA
"Javier Calderon"
DOB 25 Mar 1947
CC 17164408 (Colombia)
FARC Representative fo r Ecuador
FARC Representative fo r Brazil
FARC Representative fo r
Argentina, Chile, Uruguay, Paraguay
C If
Ovidio SALINAS PEREZ
"Juan Antonio Rojas"
DOB 3 Jul 1945
CC 17125959 (Colombia)
FARC Representative fo r Panama
Efrain Pablo TREJO FREIRE
"Pablo Trejos Freyre"
DOB 07 Jun 1951
CC 13004986 (Colombia)
Jorge DAVALOS TORRES
DOB 14 Dec 1972
CC 94377215 (Colombia)
Orlay JURADO PALOMINO
"Commander Hermes"
DOB 9 Feb 1950
CC 7245990 (Colombia)
Liliana LOPEZ PALACIOS
"Olga Lucia Marin”
DOB 21 Sep 1961
CC 51708175 (Colombia)
FARC Representative fo r Peru
FARC Representative fo r Canada
FARC Representative fo r Venezuela
FARC Representative fo r Mexico
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January 14, 2009
hp1354
Treasury Releases Capital Purchase Program Term
Washington- The U.S. Treasury Department today released the term sheet and
answers to frequently asked questions for qualified financial institutions applying to
the Capital Purchase Program that are S corporations. The term sheet provides for
issuances of debt instead of stock, unlike other term sheets for the Capital
Purchase Program.
S corporations are corporations which make a valid election to be taxed under
Subchapter S of Chapter 1 of the Internal Revenue Code. S corporations are
generally not subject to corporate income tax, but their shareholders must take into
account their share of the S corporation's income. To preserve their status, S
Corporations cannot, among other restrictions, issue a second class of stock such
as the preferred stock issued to Treasury by other qualified financial institutions
under the Capital Purchase Program. These institutions cannot have more than 100
shareholders who, subject to limited exceptions, must be natural persons, not other
companies or institutions.
S Corporations will have until February 13 to apply with their federal banking
agency using forms on the Treasury's Troubled Assets Relief Program website.
Treasury already has provided capital to 257 large and small financial institutions in
42 states and Puerto Rico. The largest investment was $25 billion and the smallest
investment has been $1 million. Among the institutions funded to date were several
certified community development financial institutions, which the Treasury exempts
from warrant requirements. Today's announcement furthers Treasury's assurance
that the Capital Purchase Program has been and will continue to be available to
community banks across the nation, many of which have already applied and have
received funds under the program.
-30REPORTS
* Term Sheet - S-Corporations
* FAQ - ¿-Corporations
http://www.treas.gov/press/releases/hp 1354.htm
8/3/2010
January 15, 2009
2009-1-15-11-15-19-29958
U.S, International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $77,315 million as of the end of that week, compared to $78,006 million as of the end of the
prior week.
1 Official reserve assets and other foreign currency assets (approximate market value, in US millions)
1
II
~Ijjanuary 9, 2009
A. Official reserve assets (in US millions unless otherwise specified)
1(1 ) Foreiqn currency reserves (in convertible foreign currencies)
4
Euro
Yen
1
Total
II
II
|(a) Securities
||9,326
||14,328
lof which: issuer headquartered in reporting country but located abroad
||
||
II0
|(b) total currency and deposits with:
II
II
II
|(i) other national central banks, BIS and IMF
||10,736
||7,008
||17,744
|ii) banks headquartered in the reporting country
||
II
II0
I
il
il
il
il“
il»
il»
J
i
I
|of!which: located abroad
(iii) banks headquartered outside the reporting country
of which: located in the reporting country
o
(2) IMF reserve position
||77,315
|
___ [123,654-------- 1
I
------1
|
7,658
9,310
(3) SDRs 2
3
(4) qold (includinq gold deposits and, if appropriate, gold swapped) °
11,041
--volume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,908
--financial derivatives
-loans to nonbank nonresidents
-other (foreign currency assets invested through reverse repurchase
agreements)
7,908
B. Other foreign currency assets (specify)
P-securities not included in official reserve assets
|~deposits not included in official reserve assets
|~ioans not included in official reserve assets
|—financial derivatives not included in official reserve assets
|—gold not included in official reserve assets
| -other
Il
II
IS. Predetermined short-term net drains on foreign currency assets (nominal value)
ii
ii
Maturity breakdown (residual maturity)
ll
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
| 1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200911511151929958.htm
8/3/2010
1—outflows (-)
llPrincipal
([interest
l-inflow s (+-)
llPrincipal
|| Interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
-351,882
-520,264
(a) Short positions ( - ) ^
-168,383
(b) Long positions (+)
3. Other (specify)
-outflow s related to repos (-)
-in flow s related to reverse repos (+)
-tra d e credit (-)
-tra d e credit (+)
-o th e r accounts payable (-)
-o th e r accounts receivable (+)
ill. Contingent short-term net drains on foreign currency assets (nominal value)
ii
i
[ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - II
ii
i
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 3
months and up to
1 year
More than 1 and
up to 3 months
I
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities
(+)
(+)
|—IMF (+)
|—BIS
I
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities
-B IS
-IM F
(-)
{-)
(-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country { - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
|(a) Short positions
|(i) Bought puts
|(ii) Written calls
|(b) Long positions
http://www.treas.gov/press/releases/200911511151929958.htm
8/3/2010
1
1(1 ) To be reported with standard periodicity and timeliness:
l(a ) short-term domestic currency debt indexed to the exchange rate
fin a n c ia l instruments denominated in foreign currency and settled b y other means (e.g., in domestic
¡c u rre n c y )
|--nondeliverable forwards
| --short positions
| -lo n g positions
¡-other instruments
|(c) pledged assets
¡-included in reserve assets
¡-included in other foreign currency assets
|(d) securities lent and on repo
8,069
¡-lent or repoed and included in Section I
¡-lent or repoed but not included in Section I
¡--borrowed or acquired and included in Section I
¡-borrowed or acquired but not included in Section I
8,069
J(e) financial derivative assets (net, marked to market)
¡- fo rw a r d s
-futures
-sw aps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b ) long positions (+)
¡-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ir
http://www.treas.gov/press/releases/200911511151929958.htm
8/3/2010
(a) short positions
(i) bought puts
|(ii) written calls
|(b) long positions
(i) bought calls
,(ii) written puts
(2) To be disclosed less frequently:
(a) currency composition of reserves (by groups of currencies)
1)77,315
--currencies in SDR basket
1|77,315
2-currencies not in SDR basket
j—by individual currencies (optional)
i
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/200911511151929958.htm
8/3/2010
January 15, 2009
HP-1355
Treasury Targets Financial Networks of Key Supporters of the Burmese Junta
Washington, DC~The U.S. Department of the Treasury's Office of Foreign Assets
Control (OFAC) today applied additional sanctions against key financial backers of
the Burmese regime pursuant to the Tom Lantos Block Burmese JADE (Junta's
Anti-Democratic Efforts) Act of 2008 and Executive Orders 13448 and 13464.
"Congress and the Administration have made clear the need to apply vigorous
sanctions against the Burmese junta as long as it continues to suppress democratic
dissent," said OFAC Director Adam J. Szubin. "The junta's imprisonment of
prominent democracy advocates confirms Burma's unwillingness to abide by
international commitments and underscores the need to maintain pressure against
one of the world's worst violators of human rights."
Today's action adds two individuals and 14 companies to OFAC's List of Specially
Designated Nationals. OFAC has now subjected 100 individuals and entities to its
Burma sanctions, targeting key state-owned enterprises, senior junta officials,
regime cronies and their business networks.
This most recent action targets regime cronies Zaw Zaw and Win Aung, along with
their business networks and the business networks of two already-designated
cronies of the Burmese junta, Tay Za and Steven Law.
Zaw Zaw is the managing director of the Max Myanmar Group of Companies, a
Burmese entity with interests in the gem, timber, construction, and tourism
industries. Max Myanmar has provided important services in support of the
Burmese junta, particularly in the form of construction projects. Treasury's action
targets eight companies of the Max Myanmar Group as well as Zaw Zaw's
Singapore-based company, Max Singapore International Pte. Ltd.
Win Aung has made large financial donations to the Burmese junta and has
provided services in support of the regime on significant construction projects. Win
Aung is being designated along with two of his companies, Dagon International
Limited and Dagon Timber Limited.
OFAC is levying a third round of sanctions against the financial network of Tay Za,
a notorious regime henchman and arms dealer who was listed by the President in
the Annex to Executive Order 13448 on October 18, 2007, an Executive Order
issued in response to the Burmese junta's brutal crackdown on pro-democracy
protesters. Today's action targets Espace Avenir, a Rangoon hotel owned or
controlled by Tay Za.
In addition, today's action targets Sentosa Treasure Pte. Ltd., a Singaporean firm
owned by Cecilia Ng, who was designated on February 25, 2008, along with her
husband, junta crony Steven Law. Also designated are nine firms that previously
had been identified as being owned by Ng.
Finally, OFAC is targeting Myanmar Ivanhoe Copper Company Limited (MICCL), a
joint venture owned or controlled by the Burmese state-owned No. 1 Mining
Enterprise, which was designated on July 29, 2008. MICCL controls the Monywa
copper project, the biggest of its kind in the country, located in Myanmar's
northwestern Sagaing division.
http://www.treas.gov/press/releases/hp 13 55 .htm
8/3/2010
As a result of today's action, any assets the designees may have subject to U.S.
jurisdiction are frozen, and all financial and commercial transactions by any U.S.
person with the designated companies and individuals are prohibited.
-30-
yww.treas.gov/press/releases/hpl 355.htm
8/3/2010
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January 16, 2009
HP-1356
Treasury, Federal Reserve and the FDIC Provide Assistance to Bank of
America
Washington, DC - The U.S. government entered into an agreement today with
Bank of America to provide a package of guarantees, liquidity access and capital as
part of its commitment to support financial market stability.
Treasury and the Federal Deposit Insurance Corporation will provide protection
against the possibility of unusually large losses on an asset pool of approximately
$118 billion of loans, securities backed by residential and commercial real estate
loans, and other such assets, all of which have been marked to current market
value. The large majority of these assets were assumed by Bank of America as a
result of its acquisition of Merrill Lynch. The assets will remain on Bank of America's
balance sheet. As a fee for this arrangement, Bank of America will issue preferred
shares to the Treasury and FDIC. In addition and if necessary, the Federal Reserve
stands ready to backstop residual risk in the asset pool through a non-recourse
loan.
In addition, Treasury will invest $20 billion in Bank of America from the Troubled
Assets Relief Program in exchange for preferred stock with an 8 percent dividend to
the Treasury. Bank of America will comply with enhanced executive compensation
restrictions and implement a mortgage loan modification program.
Treasury exercised this funding authority under the Emergency Economic
Stabilization Act's Troubled Asset Relief Program (TARP). The investment was
made under the Targeted investment Program. The objective of this program is to
foster financial market stability and thereby to strengthen the economy and protect
American jobs, savings, and retirement security.
Separately, the FDIC board announced that it will soon propose rule changes to its
Temporary Liquidity Guarantee Program to extend the maturity of the guarantee
from three to up to 10 years where the debt is supported by collateral and the
issuance supports new consumer lending.
With these transactions, the U.S. government is taking the actions necessary to
strengthen the financial system and protect U.S. taxpayers and the U.S. economy.
As was stated in November when the first transaction under the Targeted
Investment Program was announced, the U.S. government will continue to use all
of our resources to preserve the strength of our banking institutions and promote
the process of repair and recovery and to manage risks.
-30REPORTS
*
"
Guarantee Term Sheet
Preferred Investment Term Sheet
http://www.treas.gov/press/releases/hp13 56.htm
8/3/2010
January 15, 2009
Summary of Terms
Eligible Asset Guarantee
Eligible Assets:
A pool of financial instruments consisting of securities
backed by residential and commercial real estate loans and
corporate debt, derivative transactions that reference such
securities, loans, and associated hedges, as agreed, and
such other financial instruments as the U.S. government
(USG) has agreed to guarantee or lend against (the Pool).
Each specific financial instrument in the Pool must be
identified on signing of the guarantee agreement. Financial
instruments in the Pool will remain on the books of
institution but will be appropriately "ring-fenced."
The following financial instruments will be excluded from
the Pool: (i) foreign assets (definition to be provided by
USG); (ii) assets originated or issued on or after March 14,
2008; (iii) equity securities; and (iv) any other assets that
USG deems necessary to exclude.
Size:
The Pool contains up to $118 billion of financial
instruments. More specifically, the Pool includes cash
assets with a current book (i.e., carrying) value of up to
$37 billion and a derivatives portfolio with maximum
potential future losses of up to $81 billion (based on
valuations agreed between institution and USG).
Term and Coverage
of Guarantee:
Guarantee is in place for 10 years for residential assets and
5 years for non-residential assets. Residential assets will
include loans secured solely by 1-4 family residential real
estate, securities predominately collateralized by such
loans, and derivatives that predominately reference such
securities. Institution has the right to terminate the
guarantee at any time (with the consent of USG), and the
parties will negotiate in good faith as to an appropriate fee
or rebate in connection with any permitted termination. If
institution terminates the guarantee, it must prepay any
January 15, 2009
outstanding Federal Reserve loan (described below) in full.
Guarantee covers Eligible Losses on the Pool. Eligible
Losses are the aggregate incurred credit losses (net of any
gains and recoveries) on the Pool during the term of the
guarantee, beyond the January 15, 2009, marks and credit
valuation adjustments for the Pool (as agreed between
institution and USG). Eligible Losses do not include
unrealized mark-to-market losses but do include realized
losses from a sale permitted under the asset management
template (described below).
Deductible:
Institution absorbs all Eligible Losses in the Pool up to
$10 billion.
USG (UST/FDIC) will share Eligible Losses in the Pool in
excess of that amount, up to $10 billion. All Eligible Losses
beyond the institution's deductible will be shared USG
(90%) and institution (10%).
Financing:
Federal Reserve will provide a non-recourse loan facility to
institution, subject to institution's 10% loss sharing.
Federal Reserve loan commitment will terminate (and any
loans thereunder will mature) on the termination dates of
USG guarantee. Institution has the right to terminate the
Federal Reserve loan commitment and prepay any Federal
Reserve loans at any time (with consent of Federal
Reserve).
Federal Reserve will charge a fee on undrawn amounts of
20 bp per annum and a floating interest rate on drawn
amounts of OIS plus 300 bp per annum. Interest and fee
payments will be with recourse to the institution.
Institution may draw on Federal Reserve loan facility if and
when additional mark-to-market and incurred credit losses
on the Pool reach $18 billion.
January 15, 2009
Fee for Guarantee Preferred Stock and
Warrants:
Institution will issue to USG (UST/FDIC) (i) $4 billion of
preferred stock with an 8% dividend rate (under terms
described below); and (ii) warrants with an aggregate
exercise value of 10% of the total amount of preferred
issued. The fee may be adjusted, as necessary, based on
the results of an actuarial analysis of the final composition
of the Pool, as required under section 102(c) of the
Emergency Economic Stabilization Act of 2008.
Management of
Assets:
Institution generally will manage the financial instruments
in the Pool in accordance with its ordinary business
practices, but will be required to comply with an asset
management template provided by USG. This template will
require institution, among other things, to obtain USG
approval (not to be unreasonably withheld) before any
Material Disposition. A Material Disposition is a disposition
of financial instruments in the Pool that creates an Eligible
Loss that, combined with other dispositions of Pool
instruments in the same year, exceeds 1% of the Pool size
at the beginning of the year. This template also will
include, among other things, a foreclosure mitigation policy
acceptable to USG.
Revenues and Risk
Weighting:
Institution will retain the income stream from the Pool.
Risk weighting for the financial instruments in the Pool will
be 20%.
Dividends:
Institution is prohibited from paying common stock
dividends in excess of $.01 per share per quarter for three
years without USG consent. A factor taken into account for
consideration of USG consent is the ability to complete a
common stock offering of appropriate size.
Executive
Compensation:
An executive compensation plan, including bonuses, that
rewards long-term performance and profitability, with
appropriate limitations, must be submitted to, and
January 15, 2009
approved by, USG. Executive compensation requirements
will be consistent with the terms of the preferred stock
purchase agreement between USG and institution.
Corporate
Governance:
Other matters as specified, consistent with the terms of the
preferred stock purchase agreement between USG and
institution.
The foregoing is accepted and agreed
by and am ong th e follow ing as of
January 15, 2009:
DEPARTMENT OF THE TREASURY
FEDERAL RESERVE BOARD
BANK OF AMERICA CORPORATION
FEDERAL DEPOSIT INSURANCE CORP.
Summarv of Terms
Preferred Securities
Issuer:
Bank o f America (“BofA”)
Initial Holder:
United States Department o f the Treasury (“UST”).
Size:
$20 billion
Security:
Preferred, liquidation preference $25,000 per share.
Ranking:
Same terms as preferred issued in CPP.
Term:
Perpetual life.
Dividend:
The Preferred will pay cumulative dividends at a rate o f 8% per annum.
Dividends will be payable quarterly in arrears on February 15, May 15,
August 15 and November 15 o f each year.
Redemption:
In stock or cash, as mutually agreed between UST and BofA. Otherwise,
redemption terms o f CPP preferred terms apply.
Restrictions
on Dividends:
Institution is prohibited from paying common stock dividends, in excess
o f $.01 per share per quarter, for 3 years without UST consent. A factor
taken into account for consideration o f the UST’s consent is the ability to
complete a common stock offering o f appropriate size.
Repurchases:
Same terms as preferred issued in CPP.
Voting rights:
The Preferred shall be non-voting, other than class voting rights on (i) any
authorization or issuance o f shares ranking senior to the Preferred, (ii) any
amendment to the rights o f Preferred, or (iii) any merger, exchange or
similar transaction which would adversely affect the rights o f the
Preferred.
If dividends on the Preferred are not paid in full for six dividend periods,
whether or not consecutive, the Preferred will have the right to elect 2
directors. The right to elect directors will end when foil dividends have
been paid for all prior dividend periods.
Transferability:
The Preferred will not be subject to any contractual restrictions on
transfer.
Executive
Compensation:
Other:
The top five Senior Executive Officers (“SEOs”) will be subject to the
Capital Purchase Program (CPP) terms on Executive Compensation plus
SEOs would be excluded from receiving any severance payments. An
additional group o f approximately twenty-five top senior executives will
be subject to the CPP rules on severance/golden parachutes. Bonus pools
for the SEOs and senior executive group will be reduced for the 2008 and
2009 annual bonus cycle by approximately 40% from 2007, with any
change for the 2009 year’s bonus cycle requiring Treasury approval. All
affected executives will need to sign waivers releasing Treasury from
liability, including a clawback provision for any payments made in excess
o f the agreement. Certifications o f compliance must be provided by the
company on a quarterly basis.
BofA must maintain its corporate expenditures policy, with material
amendments to be approved by Treasury. The policy will require oversight
and approvals for major expenses, including those involving conferences
and events, travel, corporate aircraft usage and entertainment.
BofA will be required to maintain its policy regarding lobbying,
government ethics and political activity, including governmental gifts,
lobbying, and political contributions.
BofA management will monitor the use o f the proceeds o f the Preferred
and periodically report to its board o f directors on the use o f those funds.
Summary of Warrant Terms
Warrant:
BofA will issue a warrant to UST for an aggregate exercise value o f 10%
o f the total preferred issued, equating to $2.0 billion.
Exercise Price:
The strike price will be equal to $13.30 per share (the 20 day trailing
average ending on January 14, 2009). The warrants issued to UST are not
subject to reduction based on additional offerings.
Term:
Ten years, immediately exercisable, in whole or in part.
FROM THE OFFICE OF PUBLIC AFFAIRS
We recommend printing this release using the PDF file below.
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HP-1357
Treasury International Capital (TIC) Data fo r November
Treasury International Capital (TIC) data for November 2008 are released today and posted on the U.S. Treasury website (w^',treas,gQV/ti.c)- The next
release, which will report on data for December, is scheduled for February 17, 2009.
Net foreign purchases of iong-term securities were negative $21.7 billion.
•
Net foreign purchases of iong-term U.S. securities were negative $56.0 billion. Of this, net purchases by private foreign investors were negative $18.9
billion, and net purchases by foreign official institutions were negative $37.1 billion.
*
U.S. residents sold a net $34.3 billion of long-term foreign securities.
Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been negative $33.7 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $51.1 billion. Foreign
holdings of Treasury bills increased $82.1 billion.
Banks' own net dollar-denominated liabilities to foreign residents increased $39.4 billion.
Monthly net TIC flows were $56.8 billion. Of this, net foreign private flows were $64.7 billion, and net foreign official flows were negative $7.9 billion.
-30-
TIC Monthly Reports on Cross-Border Financial Flows
____________ (B illions o f dollars, not seasonally adjusted)____________
12 Months Through
2006
2007 Nov-07 Nov-08 Aug-08
Foreigners' Acquisitions of Long-term Securities
1
2
3
Gross Purchases of Domestic U.S. Securities
Gross Sales of Domestic U.S. Securities
Domestic Securities Purchased, net (line 1 less line 2) /I
21077.1 29730.6
19933.9 28724.8
1143.2 1005.8
Sep-08
Oct-08 Nov-08
29260.4
28255.5
1004.9
31508.7
31050.5
458.1
2163.9
2169.4
-5.5
3081.9
3051.9
30.0
2492.1
2528.7
-36.6
1548.0
1604.0
-56.0
4
5
6
7
8
Private, net /2
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
946.6
125.9
193.8
482.2
144.6
818.1
195.0
99.9
342.8
180.4
829.0
209.8
123.6
347.2
148.4
316.1
220.7
8.3
50.3
36.8
4.8
28.0
-11.0
-12.6
0.4
34.8
15.8
14.8
-7.3
11.5
-19.4
34.0
-33.5
-13.8
-6.1
-18.9
3.3
-9.5
-15.2
2.5
9
10
11
12
13
Official, net /3
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
196.6
69.6
92.6
28.6
5.8
187.7
3.0
119.1
50.6
15.1
175.9
-1.9
130.5
45.2
2.1
142.0
83.7
-14.6
39.6
33.2
-10.2
4.8
-13.1
-0.5
-1.4
-4.8
4.9
-8.7
-1.2
0.0
-17.2
-1.1
-16.7
0.7
-0.1
-37.1
-26.2
-11.6
-0.9
1.6
5515.9
5766.8
-250.9
8187.6
8416.8
-229.2
8098.7
8363.4
-264.7
7942.0
7868.2
73.8
585.5
565.2
20.2
710.0
674.6
35.4
645.3
609.0
36.3
411.5
377.2
343
-144.5
-106.5
-133.9
-95.3
-149.8
-114.9
53.7
20.1
17.4
2.9
37.8
-2.4
14.6
21.7
13.0
21.3
892.3
776.6
740.2
531.9
14.8
65.4
-0.4
-21.7
-174.6
-235.1
-237.6
-200.2
-12.9
-13.5
-14.8
-12.0
Net Foreign Acquisition of Long-Term Securities
(lines 19 and 20):
717.7
541.5
502.7
331.8
1.9
51.9
-15.2
-33.7
Increase in Foreign Holdings of Dollar-denominated ShortU.S. Securities and Other Custody Liabilities: 16
146.2
198.0
176.7
269.2
22.2
13.0
92.0
51.1
14
15
16
17
18
Gross Purchases of Foreign Securities from U.S. Residents
Gross Sales of Foreign Securities to U.S. Residents
Foreign Securities Purchased, net (line 14 less line 15) /4
Foreign Bonds Purchased, net
Foreign Equities Purchased, net
19
Net Long-Term Securities Transactions (line 3 plus line
20
Other Acquisitions of Long-term Securities, net 15
21
22
http://www.treas.gov/press/releases/hpl357.htm
8/3/2010
U.S. Treasury Bills
Private, net
Official, net
Other Negotiable Instruments
and Selected Other Liabilities: /7
Private, net
Official, net
23
24
25
26
27
28
29
Change in Banks' Own Net Dollar-Denominated Liabilities
30 Monthly Net TIC Flows (lines 21,22,29) /8
of which
Private, net
31
Official, net
32
/I
/2
/3
-9.0
16.1
-25.0
49.7
28.1
21.5
29.6
28.2
1.4
446.4
206.8
239.6
31.6
18.5
13.1
90.9
59.7
31.2
147.4
63.6
83.8
82.1
15.5
66.6
155.1
174.9
-19.8
148.4
72.2
76.2
147.0
66.1
80.9
-177.2
-76.9
-100.3
-9.4
-1.3
-8.1
-77,9
-69.5
-8.4
-55.4
-17.5
-37.9
-31.0
-6.9
-24.1
198.0
-122.9
-122.3
-62.5
-7.4
77.8
183.8
39.4
1061.8
616.7
557.1
538.5
16.7
142.7
260.6
56.8
923.0
138.9
327.5
289.2
289.5
267.5
319.6
218.9
19.1
-2.5
125.4
17.3
248.7
11.9
64.7
-7.9
Net foreign purchases of U.S. securities (+)
Includes international and regional organizations
The reported division of net purchases of long-term securities between net purchases by foreign official institutions and net purchases
of other foreign investors is subject to a "transaction bias" described in Frequently Asked Questions 7 and 10.a.4 on the TIC web site.
Net transactions in foreign securities by U.S. residents. Foreign purchases of foreign securities = U.S. sales of foreign securities to foreigners.
Thus negative entries indicate net U.S. purchases of foreign securities, or an outflow of capital from the United States; positive entries
indicate net U.S. sales of foreign securities.
Minus estimated unrecorded principal repayments to foreigners on domestic corporate and agency asset-backed securities +
estimated foreign acquisitions of U.S. equity through stock swaps estimated U.S. acquisitions of foreign equity through stock swaps +
increase in nonmarketable Treasury Bonds and Notes Issued to Official Institutions and Other Residents of Foreign Countries.
These are primarily data on monthly changes in banks' and broker/dealers' custody liabilities. Data on custody claims are collected
quarterly and published in the Treasury Bulletin and the TIC web site.
"Selected Other Liabilities" are primarily the foreign liabilities of U.S. customers that are managed by U.S. banks or broker/dealers.
TIC data cover most components of international financial flows, but do not include data on direct investment flows, which are collected
and published by the Department of Commerce's Bureau of Economic Analysis. In addition to the monthly data summarized here, the
TIC collects quarterly data on some banking and nonbanking assets and liabilities. Frequently Asked Question 1 on the TIC web
site describes the scope of TIC data collection.
/4
/5
16
II
/8
REPORTS
•
(PDF! TIC Monthly Reports on Cross-Border Financial Flows (Billions of dollars, not seasonally adjusted )
http://www.treas.gov/press/releases/hpl357.htm
8/3/2010
DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
January 16, 2008
EMBARGOED UNTIL 9:00 AM
Contact: Rob Saliterman
(202) 622-2960
TREASURY INTERNATIONAL CAPITAL DATA FOR NOVEMBER
Treasury International Capital (TIC) data for November 2008 are released today and posted on the
U.S. Treasury website (www.treas.gov/tic). The next release, which will report on data for
December, is scheduled for February 17, 2009.
Net foreign purchases o f long-term securities were negative $21.7 billion.
•
Net foreign purchases o f long-term U.S. securities were negative $56.0 billion. O f this, net
purchases by private foreign investors were negative $18.9 billion, and net purchases by
foreign official institutions were negative $37.1 billion.
•
U.S. residents sold a net $34.3 billion o f long-term foreign securities.
Net foreign acquisition o f long-term securities, taking into account adjustments, is estimated to have
been negative $33.7 billion.
oreign holdings o f dollar-denominated short-term U.S. securities, including Treasury bills, and
other custody liabilities increased $51.1 billion. Foreign holdings o f Treasury bills increased $82.1
billion.
Banks’ own net dollar-denominated liabilities to foreign residents increased $39.4 billion.
Monthly net TIC flows were $56.8 billion. O f this, net foreign private flows were $64.7 billion, and
net foreign official flows were negative $7.9 billion.
TIC Monthly Reports on Cross-Border Financial Flows
__________ (Billions o f dollars, not seasonally adjusted)
2006
2007
12 Months Through
Nov-08
Nov-07
Aug-08
Sep-08
Oct-08
Nov-08
Foreigners' Acquisitions of Long-term Securities
1
2
3.
Gross Purchases of Domestic U.S. Securities
Gross Sales of Domestic U.S. Securities
Domestic Securities Purchased, net (line 1 less line 2) /1
21077.1 29730.6
19933.9 28724.8
1143.2 1005.8
29260.4
28255.5
1004.9
31508.7
31050.5
458.1
2163.9
2169.4
-5.5
3081.9
3051.9
30.0
2492.1
2528.7
-36.6
1548.0
1604.0
-56.0
4
5
6
7
8
Private, net /2
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
946.6
125.9
193.8
482.2
144.6
818.1
195.0
99.9
342.8
180.4
829.0
209.8
123.6
347.2
148.4
316.1
220.7
8.3
50.3
36.8
4.8
28.0
-11.0
-12.6
0.4
34.8
15.8
14.8
-7.3
11.5
-19.4
34.0
-33.5
-13.8
-6.1
-18.9
3.3
-9.5
-15.2
2.5
9
10
11
12
13
Official, net 13
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
196.6
69.6
92.6
28.6
5.8
187.7
3.0
119.1
50.6
15.1
175.9
-1.9
130.5
45.2
2.1
142.0
83.7
-14.6
39.6
33.2
-10.2
4.8
-13.1
-0.5
-1.4
-4.8
4.9
-8.7
-1.2
0.0
-17.2
-1.1
-16.7
0.7
-0.1
-37.1
-26.2
-11.6
-0.9
1.6
5515.9
5766.8
-250.9
8187.6
8416.8
-229.2
8098.7
8363.4
-264.7
7942.0
7868.2
73.8
585.5
565.2
20.2
710.0
674.6
35.4
645.3
609.0
36.3
411.5
377.2
34.3
-144.5
-106.5
-133.9
-95.3
-149.8
-114.9
53.7
20.1
17.4
2.9
37.8
-2.4
14.6
21.7
13.0
21.3
892.3
776.6
740.2
531.9
14.8
65.4
-0.4
-21.7
-174.6
-235.1
-237.6
-200.2
-12.9
-13.5
-14.8
-12.0
717.7
541.5
502.7
331.8
1.9
51.9
-15.2
-33.7
146.2
-9.0
16.1
-25.0
198.0
49.7
28.1
21.5
176.7
29.6
28.2
1.4
269.2
446.4
206.8
239.6
22.2
31.6
18.5
13.1
13.0
90.9
59.7
31.2
92.0
147.4
63.6
83.8
51.1
82.1
15.5
66.6
155.1
174.9
-19.8
148.4
72.2
76.2
147.0
66.1
80.9
-177.2
-76.9
-100.3
-9.4
-1.3
-8.1
-77.9
-69.5
-8.4
-55.4
-17.5
-37.9
-31.0
-6.9
-24.1
198.0
-122.9
-122.3
-62.5
-7.4
77.8
183.8
39.4
1061.8
616.7
557.1
538.5
16.7
142.7
260.6
56.8
923.0
138.9
327.5
289.2
289.5
267.5
319.6
218.9
19.1
-2.5
125.4
17.3
248.7
11.9
64.7
-7.9
14
15
16
17
18
Gross Purchases of Foreign Securities from U.S. Residents
Gross Sales of Foreign Securities to U.S. Residents
Foreign Securities Purchased, net (line 14 less line 15) /4
Foreign Bonds Purchased, net
Foreign Equities Purchased, net
19
Net Long-Term Securities Transactions (line 3 plus line 16):
20
Other Acquisitions of Long-term Securities, net IS
21
Net Foreign Acquisition of Long-Term Securities
(lines 19 and 20):
27
28
Increase in Foreign Holdings of Dollar-denominated Short-term
U.S. Securities and Other Custody Liabilities: 16
U.S. Treasury Bills
Private, net
Official, net
Other Negotiable Instruments
and Selected Other Liabilities: /7
Private, net
Official, net
29
Change in Banks' Own Net Dollar-Denominated Liabilities
23
24
25
26
30 Monthly Net TIC Flows (lines 21,22,29) /8
of which
Private, net
Official, net
32
/I
/2
/3
/4
15
/6
H
/8
Net foreign purchases of U.S. securities (+)
Includes international and regional organizations
The reported division of net purchases of long-term securities between net purchases by foreign official institutions and net purchases
of other foreign investors is subject to a "transaction bias" described in Frequently Asked Questions 7 and 10.a.4 on the TIC web site.
Net transactions in foreign securities by U.S. residents. Foreign purchases of foreign securities = U.S. sales of foreign securities to foreigners.
Thus negative entries indicate net U.S. purchases of foreign securities, or an outflow of capital from the United States; positive entries
indicate net U.S. sales of foreign securities.
Minus estimated unrecorded principal repayments to foreigners on domestic corporate and agency asset-backed securities +
estimated foreign acquisitions of U.S. equity through stock swaps estimated U.S. acquisitions of foreign equity through stock swaps +
increase in nonmarketable Treasury Bonds and Notes Issued to Official Institutions and Other Residents of Foreign Countries.
These are primarily data on monthly changes in banks' and broker/dealers' custody liabilities. Data on custody claims are collected
quarterly and published in the Treasury Bulletin and the TIC web site.
"Selected Other Liabilities" are primarily the foreign liabilities of U.S. customers that are managed by U.S. banks or broker/dealers.
TIC data cover most components of international financial flows, but do not include data on direct investment flows, which are collected
and published by the Department of Commerce's Bureau of Economic Analysis. In addition to the monthly data summarized here, the
TIC collects quarterly data on some banking and nonbanking assets and liabilities. Frequently Asked Question 1 on the TIC web
site describes the scope of TIC data collection.
2
January 16, 2009
hp-1358
U.S. Government Finalizes Terms of Citi Guarantee Announced in November
Washington, DC - The Treasury Department, Federal Reserve and the Federal
Deposit Insurance Corporation have finalized the terms of the guarantee agreement
with Citigroup that was previously announced on November 23. 2008. The
agreement provides protection against the possibility of unusually large losses on
an asset pool of approximately $301 billion of loans and securities backed by
residential and commercial real estate and other such assets, which will remain on
Citigroup's balance sheet.
The capital investment finalized last month and asset protections finalized today
provide support as Citigroup executes its ongoing restructuring plans. This
agreement was previously announced on November 23, 2008. No new money has
been committed today and no government funds have been transferred. The U.S.
government will continue efforts to strengthen our banking institutions and support
financial markets.
-30-
http ://www.tr eas.go v/press/rel ease s/hp 1358.htm
8/3/2010
January 16, 2009
HP-1359
Treasury Targets Taiwanese Proliferators
Washington, DC--The U.S. Department of Treasury today designated two
Taiwanese individuals and two Taiwanese entities pursuant to Executive Order
13382, an authority aimed at freezing the assets of proliferators of weapons of
mass destruction (WMD) and their supporters, and at isolating them from the U.S.
financial and commercial systems.
"Proliferators depend on access to the international financial and commercial
systems to support their dangerous trade," said Stuart Levey, Under Secretary for
Terrorism and Financial Intelligence. "Our action today exposes a North Korean
procurement channel, and we urge governments and companies worldwide to cut
this channel off entirely."
Alex H.T. Tsai (Tsai) has been designated for providing, or attempting to provide,
financial, technological or other support for, or goods or services in support of the
Korea Mining Development Trading Corporation (KOMID), which was identified as a
proliferator by President George W. Bush in the June 2005 Annex to Executive
Order 13382.
Tsai has been supplying goods with weapons production capabilities to KOMID and
its subordinates since the late 1990s, and he has been involved in shipping items to
North Korea that could be used to support North Korea's advanced weapons
program. On June 19, 2008, Tsai was indicted by Taiwan's Taipei District
Prosecutors Office for forging shipping invoices and illegally shipping restricted
materials to North Korea.
Global Interface Company Inc. has been designated for being owned or controlled
by Tsai, who is a shareholder of the company and acts as its president. Tsai is also
the general manager of Trans Merits Co. Ltd., a subsidiary of Global Interface
Company Inc. that has been designated for being owned or controlled by Global
Interface Company Inc.
Alex H.T. Tsai's wife, Lu-chi Su, has also been designated pursuant to Executive
Order 13382 for acting or purporting to act on behalf of, directly or indirectly, Trans
Merits Co. Ltd. Lu-chi Su is an officer in Global Interface Company Inc. and Trans
Merits Co. Ltd. and is directly involved in the companies' operations.
Designations under E .0 .13382 are implemented by Treasury's Office of Foreign
Assets Control (OFAC), and they prohibit all transactions between the designees
and any U.S. person, and freeze any assets the designees may have under U.S.
jurisdiction.
Identifying Information
ALEX H.T. TSAI
AKA: Hsein Tai Tsai
DOB: August 8,1945
POB: Tainan, Taiwan
Passport Number: 131134049 (Taiwan)
http://www.treas.gov/press/releases/hp13 59.htm
8/3/2010
LU-CHI SU
AKA: Lu-Chi Tsai Su
DOB: February 7 1950
Alt DOB: November 1950
POB: Yun Lin Hsien, Taiwan
Passport Number: 210215095 (Taiwan)
GLOBAL INTERFACE COMPANY INC.
Formerly Known As: Trans Scientific Corp.
Address: 9F-1, No. 22, Hsin Yi Rd., Sec. 2, Taipei, Taiwan
Alt. Address: 1st Floor, No. 49, Lane 280, Kuang Fu S. Road, Taipei, Taiwan;
Business Registration Document Number: 12873346 (Taiwan)
TRANS MERITS CO. LTD.
Address: 1F, NO. 49, Lane 280, Kuang Fu S. Road, Taipei, Taiwan
Business Registration Document Number: 16316976 (Taiwan)
-30 -
http://www.treas.gov/press/releases/hp 1359.htm
8/3/2010
January 16, 2009
hp-1360
Treasury Targets AI Qaida Operatives in Iran
Washington, D.C. - The U.S. Department of the Treasury today designated four al
Qaida associates under Executive Order 13224, which targets terrorists and those
providing support to terrorists or acts of terrorism.
"It is important that Iran give a public accounting of how it is meeting its
international obligations to constrain al Qaida," said Stuart Levey, Under Secretary
for Terrorism and Financial Intelligence. "Global efforts to financially isolate al
Qaida have made it difficult for the core leadership to raise funds and sustain itself.
Nevertheless, al Qaida remains a very dangerous threat, and it is crucial to keep
targeting the support lines of al Qaida and its affiliates."
Under E .0 .13224, any assets held by these individuals under U.S. jurisdiction are
frozen and U.S. persons are prohibited from engaging in any transactions with the
designees.
"Even though individual terrorist attacks are relatively inexpensive to carry out, it
costs a great deal of money for al Qaida to operate globally. These realities
demand that we keep up the financial pressure against al Qaida and like-minded
terrorist organizations," Levey continued. "Designations have a far reaching impact,
deterring would-be donors from providing financial support to terrorism and leaving
al Qaida leadership struggling to identify much-needed funding resources."
MUSTAFA HAMID
AKAs:
POB:
DOB:
Nationality:
Mustafa Muhammad 'Atiya Hamid
Mustafa Atiya
Abu Walid al-Misri
Abu al-Walid al-Masri
Abu al-Walid
Hashim al-Makki
Alexandria, Egypt
March 1945
Egyptian
Pakistani
Mustafa Hamid is a senior al Qaida associate who served as a primary interlocutor
between al Qaida and the Government of Iran. Before the fall of the Taliban, Hamid
served as an instructor at a terrorist camp near Jalalabad that trained in the use of
explosives. Hamid is the father-in-law of senior al Qaida military commander Sayf
al-Adl. He formerly served as a correspondent for a satellite television station, at the
request of senior al Qaida leadership. While living in Iran, Hamid was harbored by
the Islamic Revolutionary Guard Corps (IRGC), which served as Hamid's point of
contact for communications between al Qaida and Iran.
In the mid-1990s, Mustafa Hamid reportedly negotiated a secret relationship
between Usama Bin Laden and Iran, allowing many al Qaida members safe transit
through Iran to Afghanistan.
In the late 1990s, Mustafa Hamid passed communications between Usama bin
Laden and the Government of Iran. When tensions were high between Iran and
Afghanistan, Mustafa Hamid traveled multiple times from Kandahar to Tehran as an
intermediary for the Taliban.
http://www.treas.gov/press/releases/hpl360.htm
8/3/2010
In late 2001, Mustafa Hamid was in Tehran delivering messages from the Taliban to
the Government of Iran. Hamid also negotiated on behalf of al Qaida in an attempt
to relocate al Qaida families to Iran. As part of this effort, senior al Qaida member
Abu Hafs the Mauritanian traveled with Hamid and two IRGC members to Tehran
for meetings. Beginning in late 2001, the family of a senior al Qaida military
commander lived with Mustafa Hamid's family in Iran. Separately, in 2002 Mustafa
Hamid facilitated contacts between the IRGC and another senior al Qaida military
commander. In mid-2003, Mustafa Hamid was arrested in Iran along with other al
Qaida members and associates.
MUHAMMAD RAB'A AL-SA YID AL-BAHTIYTI
AKAs:
DOB:
P013
Nationality:
Muhammad Mahmud Rabi' al-Zayd al-Bahtiti
Muhammad Mahmud al-Bahtiti
Muhammad Rabi' al-Sa'id al-Hatiti
Muhammad Rabi' al-Bahtiti
Abu Dujana al-Masri
1971
Al-Sharqiyyah, Egypt
Egyptian
Pakistani
Muhammad Rab'a al-Sayid al-Bahtiyti is a senior member of the Egyptian Islamic
Jihad (EIJ) and an al Qaida operative. Bahtiyti has served as a trusted aide to his
father- in-law Ayman al-Zawahiri.
In the mid-1990s, Bahtiyti served on an al Qaida military committee and provided
military training that included urban warfare tactics for al Qaida members. Bahtiyti
drafted training manuals for al Qaida as well as a book on security that was used as
a template for al Qaida's surveillance operations.
In 1995, Bahtiyti reportedly was involved in the bombing of the Egyptian Embassy
in Islamabad, Pakistan.
After September 11,2001, Ayman al-Zawahiri instructed Bahtiyti to take alZawahiri's family to Iran. Bahtiyti reportedly traveled to Iran with al-Zawahiri's
daughters, where he was subsequently responsible for them. In January 2003,
while working from Iran, Bahtiyti arranged housing on behalf of al Qaida. Bahtiyti
reportedly was arrested by Iranian authorities in mid-2003.
ALI SALEH HUSAIN
AKAs:
DOB:
POB:
Nationality:
Height
Abu Dahhak
'Ali Salih Husayn al-Dhahak al-Tabuki
Ali Saleh Husain al-Tabuki
'Ali Salih Husayn 'Ula'lah
'Ali Salih Husayn
'Ala'lah Dhahhak al-Tabuki
Abu Dhahak al-Yemeni
Circa 1970
al-Hudaydah, Yemen
Yemeni
5'9"
Ali Saleh Husain is a senior al Qaida associate who had close relations with Usama
bin Laden. Husain was responsible for logistics pertaining to al Qaida-affiliated
fighters and acted as an interlocutor between al Qaida and its Chechnya-based
affiliates. Husain coordinated with Usama bin Laden on the training of fighters in
terrorist camps in Afghanistan who were preparing to travel to Chechnya.
Circa early 2001, Husain reportedly arranged a meeting that included a senior al
Qaida operations chief to discuss operations planned against Israel. In April 2002,
al Qaida senior official Abu Zubaydah indicated that the responsibility for
operational meetings for attacks against Israel had been handed over to Husain.
Husain also was reportedly Abu Zubaydah's secondary point of contact for
obtaining fraudulent passports.
http://www.treas.gov/press/releases/hpl360.htm
8/3/2010
In 2001 after the fall of the Taliban, Husain facilitated the move of al Qaidaassociated fighters, including an al Qaida military commander, from Afghanistan to
Iran. After leaving Afghanistan, Husain was responsible for smuggling al Qaida
members and associates via networks in Zahedan, Iran. In early 2002, Husain sent
$20,000 to a senior al Qaida lieutenant who had requested financial assistance.
Husain was detained by the Government of Iran in early 2003.
SA'AD BIN LADEN
AKAs:
DOB:
POB:
Nationality:
Passport No.
Sad Bin Laden
Sa'ad Muhammad Awad Abud
Muhammad Awad
Muhammad 'Awad Adbud
Sa'ad Muhammad Baabood
Abdul Rahman Al-Kahtane
Bin Muhammad Awad Abbud
1982
Saudi Arabia
Saudi Araibian
520951(Sudan)
530951(Sudan)
Sa'ad bin Laden, one of Usama bin Laden's sons, has been involved in al Qaida
activities. For example, in late 2001, Sa'ad facilitated the travel of Usama bin
Laden's family members from Afghanistan to Iran. Sa'ad made key decisions for al
Qaida and was part of a small group of al Qaeda members that was involved in
managing the terrorist organization from Iran. He was arrested by Iranian
authorities in early 2003.
As of September 2008, it was possible that Sa'ad bin Laden was no longer in
Iranian custody.
-30-
.treas.gov/press/releases/hp 1360.htm
January 16, 2009
hp1361
PWG Private-Sector Committees Finalize Best Practices for Hedge Funds
W ashington- The two private-sector committees established by the President's
Working Group on Financial Markets (PWG) released their finalized sets of best
practices for asset managers and hedge fund investors in an effort to increase
accountability for participants in this industry.
The PWG originally tasked the committees, selected in September 2007 and
comprised of well-respected asset managers and investors, with collaborating on
industry issues and developing best practices. The committees released their draft
best practices in April 2008, and provided a public comment period.
The committees amended the reports in certain respects to further the fundamental
goal of the best practices and to clarify parts of the report. The final best practices
being released today may be viewed at the committees' website,
www.amaicmte.org.
The final best practices for the asset managers call on hedge funds to adopt
comprehensive best practices in all aspects of their business, including the critical
areas of disclosure, valuation of assets, risk management, business operations,
compliance and conflicts of interest.
"Given all of the events of recent months, it is more important than ever for the
hedge fund industry to stand behind a set of far-reaching best practices that will
promote investor protection and reduce systemic risk, said Eric Mindich, CEO of
Eton Park Capital Management, who chairs the Asset Managers' Committee.
The final best practices for investors include a Fiduciary's Guide, which provides
recommendations to individuals charged with evaluating the appropriateness of
hedge funds as a component of an investment portfolio, and an Investor's Guide,
which provides recommendations to those charged with executing and
administering a hedge fund program if one is added to the investment portfolio.
Gary Bruebaker, Chief Investment Officer of the Washington State Investment
Board, said, 'These final recommendations can provide an important tool to those
who are doing the diligence necessary to assess and monitor investments in hedae
funds."
The committees' work was based on the PWG's Principles and Guidelines
Regarding.Private Pools of Capital issued in F e b ru ir® 0 7 fe h £ h spdtfht to
enhance investor protections and systemic risk safeguards. The PWG includes the
heads of the U.S. Treasury Department, the Federal Reserve Board, the Securities
and Exchange Commission and the Commodity Futures Trading Commission.
The PWG Principles and Guidelines Regarding Private Pools of Capital issued in
early 2007 provided a clear but flexible approach to address issues presented by
the growth and dynamism of these investment vehicles. The PWG designed the
principles to endure as financial markets evolved and identified four stakeholders
who contribute to hedge fund vigilance: asset managers, creditors, investors and
regulators.
Regulators moved to implement these principles and worked to encourage the
industry to adopt the principles. Secretary Paulson in June 2007 announced that
http://www.treas.gov/press/releases/hp 1361 .htm
8/3/2010
the PWG would call upon experienced industry participants who could lead the
charge to raise standards for Improving transparency and accountability. The group
selected chairmen to lead two private-sector committees to develop the best
practices.
The PWG and the committee chairmen sought a range of experience and
leadership when considering committee members. The Asset Managers'
Committee includes representatives from a diverse group of hedge fund managers
representing many different investment strategies. The Investors' Committee
includes representatives from labor organizations, endowments, foundations,
corporate and public pension funds, investment consultants and non-U.S. investors.
The reports can be found at www.amaicmte.org.
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http:// www. treas.go v/press/releases/hp 1361 .htm
8/3/2010
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January 16, 2009
HP-1362
Treasury Announces TARP Investments in Chrysler Financial
Washington, DC -The Treasury Department today announced that it will make a
$1.5 billion loan to a special purpose entity created by Chrysler Financial to finance
the extension of new consumer auto loans as part of a broader program to assist
the domestic automotive industry in becoming financially viable.
The five year loan will pay interest at a rate of one month LIBOR + 100 basis points
for the first year and one month LIBOR + 150 basis points for years two to five.
Treasury's loan will be secured by a senior secured interest in a pool of newly
originated consumer automotive loans, and Chrysler Holding will serve as a
guarantor for certain covenants of Chrysler Financial.
Under the agreement Chrysler Financial must be in compliance with the executive
compensation and corporate governance requirements of Section 111 of the
Emergency Economic Stabilization Act, as well as enhanced restrictions on
executive compensation.
The special purpose entity created by Chrysler Financial will issue warrants to
Treasury in the form of additional notes in an amount equal to 5 percent of the total
size of the loan. The additional notes will vest 20 percent on the closing date and 20
percent on each anniversary of the closing date and will have other terms similar to
the loan.
Treasury exercised this funding authority under the Emergency Economic
Stabilization Acts Troubled Asset Relief Program (TARP). The investment was
made under the Automotive Industry Financing Program.
REPORTS
* Term Sheet
http ://www. treas. go v/press/releases/hp 1362.htm
8/3/2010
Automotive Industry Financing Program
CHRYSLER LB RECEIVABLES TRUST
Secured Term Loan
Summary of Terms
Borrower:
Chrysler LB Receivables Trust (the “Borrower”).
Lender:
United States Department of the Treasury (the “Lender”).
Guarantor:
Chrysler Holding LLC, as guarantor only of certain covenants of
Chrysler Financial Services Americas LLC (“Chrysler Financial”)
relating to restrictions on dividends and distributions
Maximum Loan Amount:
$1.5 billion (the “Loan”).
Closing Date:
January 16, 2009
Interest:
One month LIBOR plus the applicable spread amount, payable
monthly in arrears on the 17th of each month. The applicable spread
amount is 1.0% during the first year of the term and 1.5% during
each of the remaining years.
Payment of Principal:
Principal will be paid monthly from cash collections remaining after
payment o f fees and interest.
Term:
Five (5) year term loan, with full repayment of any remaining
principal and accrued but unpaid interest on January 16, 2014.
Purpose:
Borrower shall use the Loan to fund retail loans made by Chrysler
Financial on or after January 1, 2009 to enable the purchase of
Chrysler automobiles (each, an “Auto Loan”, and collectively, the
“Auto Loans”).
Borrower shall establish a deposit account (the “Funding Account”)
at a financial institution acceptable to Lender into which Borrower
shall deposit the Loan proceeds. Subject to certain conditions, funds
may be withdrawn from the Funding Account as needed to purchase
Auto Loans at the agreed advance rate percentage of the outstanding
principal balance, subject to adjustment to compensate for belowmarket auto loan interest rates. The Auto Loans must meet certain
geographic, credit quality and other standard overconcentration
limits for transactions of this type.
The Auto Loans will be serviced by Chrysler Financial, which will
also act as Administrator of the Borrower’s Auto Loan program.
Borrower shall also establish a deposit account (the “Collection
W/1331473v4
Account”) at a financial institution acceptable to Lender into which
Borrower shall deposit any interest, principal or other proceeds or
payments received on or in respect of the Auto Loans (the “Auto
Loan Proceeds”). Any use o f funds in the Funding Account or the
Collection Account in contravention o f the loan shall be an event of
default. Upon any event o f default, Lender shall have sole and
absolute control over all funds in the Funding Account and the
Collection Account.
If Borrower elects to sell the Auto Loans to another securitization
vehicle, it must prepay the Loan in full.
Transferability of Auto Loans:
Borrower shall not transfer, sell or assign any Auto Loan without the
consent of the Lender unless it pays all obligations owed to the
Lender in full.
Security:
An Indenture Trustee will hold, for the benefit o f the holders of
notes issued under the Indenture, perfected first-priority liens on all
existing and after-acquired property (tangible and intangible) of the
Borrower, including but not limited to (i) all funds in the Funding
Account and the Collection Account, and (ii) all Auto Loans.
Class A Notes:
The Loan will be evidenced by Class A Notes issued under the
Indenture. The Class A Notes will be subject to the payment
priorities set forth below.
Class C Notes:
Chrysler Financial may arrange for supplemental subordinated loans
to the Borrower in an amount up to the overcollateralization o f the
Borrower. The holders o f these loans will receive Class C Notes
issued under the Indenture in an aggregate principal amount equal to
the funding they provide. Class C Notes will accrue interest and
will be subject to the payment priorities set forth below.
No Additional Debt:
The Borrower may not incur any additional debt, other than the
Class C Notes, without consent of Lender, which consent shall be in
the sole and absolute discretion of Lender.
Payment Priorities:
Collections received by the Borrower with respect to the Auto Loans
will be applied first to pay certain trustee, servicing and hedge costs,
then to pay interest, fees and costs on the Class A Notes, the Class B
Notes, and the Class C Notes, in that order, and then to pay in full
principal on the Class A Notes, the Class B Notes, and the Class C
Notes, in that order. No principal may be paid on the Class C Notes
until the Class A Notes and the Class B Notes have been paid in full.
No principal may be paid on the Class B Notes until the Class A
Notes have been paid in full.
Prepayment:
Borrower may prepay the Loan at any time in accordance with the
loan documents, without premium or penalty, provided that the
Borrower provides Lender with two business days written notice of
Borrower’s intention to prepay the Loan.
.vents of Default:
The Loan documents shall include events of default that are standard
for transactions of this type, including the following, subject to
specified cure periods:
(1) Any failure by the Borrower to make any scheduled payment
of interest or principal;
(2) Any violation by the Borrower of any representation or
warranty contained in the loan documents;
(3) Any material failure by the Borrower to comply with any
covenant or agreement in the loan documents;
(4) Impairment o f security interests granted by the loan
documents; and
(5) The occurrence o f an event of bankruptcy with respect to the
Borrower.
Guarantee:
Chrysler Holding LLC (“Holding”) shall guarantee payment to the
Lender only of any amounts paid to Holding by Chrysler Financial
in violation of certain dividend and distribution restrictions in the
facility documents.
Executive Compensation:
Until such time as the obligations owing to the Lender under the
loan documents are no longer outstanding, Chrysler Financial shall
comply with the following restrictions on executive privileges and
compensation, subject to agreed upon exceptions:
(A)
Chrysler Financial shall take all necessary action to ensure
that its Benefit Plans with respect to the Senior Executive
Officers comply in all respects with Section 111(b) of the
EES A, including the provisions for the Capital Purchase
Program, as implemented by any guidance or regulation
thereunder that has been issued and is in effect as o f the
Closing Date, including the rules set forth in 31 CFR Part 30
and the provisions prohibiting severance payments to Senior
Executive Officers, and shall not adopt any new Benefit Plan
with respect to its Senior Executive Officers that does not
comply therewith;
(B) Chrysler Financial shall comply in all respects with the
limits on annual executive compensation deductibles
imposed by Section 162(m)(5) o f the Code, as applicable;
(C)
Chrysler Financial shall reduce by 40.00% the aggregate
amount of bonus compensation that may be paid to Senior
Executive Officers or Senior Employees in fiscal year 2009
from the aggregate bonus compensation actually paid to such
employees in 2007, subject to certain adjustments;
(D)
Chrysler Financial shall not adopt or maintain any
compensation plan that would encourage manipulation of its
reported earnings to enhance the compensation of any o f its
employees; and
(E)
Chrysler Financial shall maintain all suspensions and other
restrictions of contributions to Benefit Plans that are in place
or initiated as of the closing date.
Until such time as the obligations owing to the Lender under the
loan documents are no longer outstanding, the Lender shall have the
right to require Chrysler Financial to claw back any bonuses or other
compensation, including golden parachutes, paid to any Senior
Employees in violation of any of the foregoing.
Summary of Warrant Terms:
In lieu of warrants, the Lender will receive as additional
consideration Class B Notes issued under the Indenture. The Class
B Notes will have the same terms and maturity date as the Class A
Notes, subject to the payment priorities set forth above. The Lender
will receive Class B Notes in the aggregate principal amount of 5%
of the Maximum Loan Amount (20% of such amount to vest on the
Closing Date, and 20% to vest on each succeeding anniversary of
the Closing Date on which any portion of the Loan remains
outstanding).
|
.V
January 16, 2009
HP-1363
Treasury’s First Accounts Program Brings Thousands Into Financial
Mainstream
Washington-The Treasury Department, through the First Accounts Program, has
contributed to the opening of over 37,000 savings and checking accounts in urban,
suburban, rural and Native American communities across the country.
The Treasury released today a report, Findings from the First A ccounts Program,
detailing approaches to bringing unbanked individuals into the financial mainstream.
The report summarizes the First Accounts Program, a grant program administered
by Treasury and intended to provide financial services to low- and moderateincome Americans without bank accounts.
"We hope that these findings will be of assistance to researchers, policy makers
and practitioners as they continue their efforts to bring more American families into
the financial mainstream and toward greater financial security," said Deputy
Assistant Secretary for Financial Education Dan lannicola, Jr.
The executive summary may be viewed online at:
http://www.treas.gov/offices/domestic-finance/financial-institution/fineducation/firstaccounts/. The full report will be available online later this month. A
limited number of printed copies are available upon request to
first.accounts@do.treas.gov.
-30-
http://www.treas.gov/press/releases/hp 1363 .htm
8/3/2010
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A d o b e ®
A c ro b a t®
H e a d e r® .
January 16, 2009
hp-1364
Treasury Issues Additional Executive Compensation Rules Under TARP
The U.S. Department of the Treasury today issued interim final rules for reporting
and recordkeeping requirements under the executive compensation standards of
the Troubled Asset Relief Program's (TARP) Capital Purchase Program (CPP).
The new rule issued today requires the chief executive officer (CEO) to certify
annually within 135 days after the financial institution's fiscal year end that the
financial institution and its compensation committee have complied with these
executive compensation standards.
In addition, within 120 days of the closing date of the Securities Purchase
Agreement between the financial institution and the Treasury, the CEO is required
to certify that the compensation committee has reviewed the senior executives'
incentive compensation arrangements with the senior risk officers to ensure that
these arrangements do not encourage senior executives to take unnecessary and
excessive risks that could threaten the value of the financial institution.
The CEO must provide the 120-day and annual certifications to the TARP Chief
Compliance Officer.
The financial institution is also required to keep records to substantiate these
certifications for at least six years following each certification and provide these
records to the TARP Chief Compliance Officer upon request.
Treasury originally published executive compensation standards for CPP last
October. The rules generally apply to the chief executive officer, chief financial
officer, plus the next three most highly compensated executive officers. These
standards include:
* ensuring that incentive compensation for senior executives does not
encourage unnecessary and excessive risks that threaten the value of the
financial institution;
* requiring clawback of any bonus or incentive compensation paid to a senior
executive based on statements of earnings, gains, or other criteria that are
later proven to be materially inaccurate;
* prohibiting the financial institution from making any golden parachute
payment (based on the Internal Revenue Code provision) to a senior
executive; and
* agreeing not to deduct for tax purposes executive compensation in excess
of $500,000 for each senior executive.
The rule also makes a few clarifications and a technical amendment to the October
interim final rule.
Treasury also issued today a revised version of the executive compensation
guidelines applicable to financial institutions participating in programs for
Systemically Significant Failing Institutions (Treasury Notice 2008-PSSFI) to add
similar compliance reporting and recordkeeping requirements as in today's Interim
Final Rule.
http://www.treas.gov/press/releases/hp 1364.htm
8/3/2010
In addition, Treasury is also issuing Frequently Asked Questions relating to the
executive compensation standards to assist financial institutions' compliance with
these standards.
The interim final rule, FAQs, and revised Treasury Notice 2008-PSSFI are attached.
-30REPORTS
*
*
*
CPP Executive Compensation Interim Final Rule
Revised Notice 2008-PSSFI
Executive Compensation FAQ
http://www.treas.gov/press/releases/hp1364.htm
8/3/2010
Billing Code 4810-25-P
DEPARTMENT OF THE TREASURY
31 CFR Part 30
RIN 1505-AC09
TARP CAPITAL PURCHASE PROGRAM
AGENCY: Domestic Finance, Treasury.
ACTION: Interim final rule.
SUMMARY: This interim final rule, promulgated pursuant to sections 101(a)(1),
101(c)(5), and 111(b) of the Emergency Economic Stabilization Act o f 2008, Division A
of Public Law 110-343 (EESA), provides further guidance on the executive
compensation provisions applicable to participants in the Troubled Asset Relief Program
(TARP) Capital Purchase Program (CPP). The Department of the Treasury published an
interim final rule in 31 CFR Part 30 on October 20, 2008 (October Interim Final Rule)
providing guidance on section 111(b) o f EESA, which requires financial institutions from
which the Treasury is purchasing troubled assets through direct purchases to meet
appropriate standards for executive compensation and corporate governance. This
interim final rule provides one technical amendment and two clarifications to the October
Interim Final Rule and provides reporting and recordkeeping requirements regarding the
executive compensation requirements in the October Interim Final Rule and this interim
final rule.
DATES: Effective Date: These regulations are effective on [INSERT DATE OF
PUBLICATION IN THE FEDERAL REGISTER]. Comment due date: [INSERT
DATE THAT IS THIRTY DAYS AFTER DATE OF PUBLICATION IN THE
FEDERAL REGISTER].
ADDRESSES: The Treasury requests comments on the topics addressed in this interim
final rule. Comments may be submitted to the Treasury by any of the following methods:
Submit electronic comments through the federal government e-rulemaking portal,
www.regulations.gov or by email to executivecompensationcomments@do.treas.gov or
send paper comments in triplicate to Executive Compensation Comments, Office of
Financial Institutions Policy, Room 1418, Department o f the Treasury, 1500
Pennsylvania Avenue, NW, Washington, DC 20220.
In general, the Treasury will post all comments to www.regulations.gov without
change, including any business or personal information provided such as names,
addresses, e-mail addresses, or telephone numbers. The Treasury will also make such
comments available for public inspection and copying in the Treasury’s Library, Room
1428, Main Department Building, 1500 Pennsylvania Avenue, NW, Washington, DC
20220, on official business days between the hours of 10:00 a.m. and 5:00 p.m. Eastern
Time. You can make an appointment to inspect comments by telephoning (202) 6220990. All comments, including attachments and other supporting materials, received are
part of the public record and subject to public disclosure. You should submit only
information that you wish to make available publicly.
2
FOR FURTHER INFORMATION CONTACT: For further information regarding
this interim rule contact the Office of Domestic Finance, the Treasury, at .(202) 927-6618.
SUPPLEMENTARY INFORMATION:
I. Background.
In general, section 111(b) of the Emergency Economic Stabilization Act of 2008,
Div. A of Pub. Law No. 110-343 (EES A) requires financial institutions from which the
Treasury is purchasing troubled assets through direct purchases to meet appropriate
standards for executive compensation and corporate governance. On October 20, 2008
(73 FR 62205), the Department of the Treasury (Treasury) published an interim final rule
(October Interim Final Rule) in 31 CFR Part 30, promulgated pursuant to sections 101(a),
101(c)(5), and 111(b) of EES A, providing guidance on the executive compensation
provisions applicable to participants in the Troubled Asset Relief Program (TARP)
Capital Purchase Program (CPP).
Section 111(b)(2)(A) of EES A requires “limits on compensation that exclude
incentives for senior executive officers o f a financial institution to take unnecessary and
excessive risks that threaten the value of the financial institution during the period that
the Secretary holds an equity or debt position in the financial institution.” With respect to
section 111(b)(2)(A) of EES A for purposes of participation in the CPP, the October
Interim Final Rule requires the financial institution’s compensation committee to identify
the features in the financial institution’s senior executive officer (SEO) incentive
compensation arrangements that could lead SEOs to take unnecessary and excessive risks
that could threaten the value of the financial institution. The October Interim Final Rule
requires that the compensation committee review the SEO incentive compensation
3
arrangements with the financial institution’s senior risk officers, or other personnel acting
in a similar capacity, to ensure that SEOs are not encouraged to take such risks. The
October Interim Final Rule requires such review promptly, and in no case more than 90
days, after the purchase under the CPP.
The October Interim Final Rule also requires that the compensation committee
meet at least annually with the financial institution’s senior risk officers to discuss and
review the relationship between the financial institution’s risk management policies and
practices and the SEO incentive compensation arrangements.
In addition, the October Interim Final Rule requires the compensation committee
to certify that it has completed the reviews of the SEO incentive compensation
arrangements as outlined above. The October Interim Final Rule also provides that
financial institutions with securities registered with the Securities and Exchange
Commission (SEC) pursuant to the federal securities laws should provide these
certifications in the Compensation Discussion and Analysis required pursuant to Item
402(b) of Regulation S-K under the federal securities laws (17 CFR 229.402). Those
financial institutions that do not have securities registered with the SEC pursuant to the
federal securities laws are required to provide the certifications to their primary
regulatory agency.
Section 111(b)(2)(B) of EES A requires “a provision for the recovery by the
financial institution of any bonus or incentive compensation paid to a senior executive
officer based on statements o f earnings, gains, or other criteria that are later proven to be
materially inaccurate.” With respect to section 111(b)(2)(B) of EES A for purposes of
participation in the CPP, the October Interim Final Rule provides that the SEO bonus and
incentive compensation paid during the period that the Treasury holds an equity or debt
position acquired under the CPP must be subject to recovery or “clawback” by the
financial institution if the payments were based on materially inaccurate financial
statements and any other materially inaccurate performance metric criteria.
Section 111(b)(2)(C) of EES A requires “a prohibition on the financial institution
making any golden parachute payment to its senior executive officer during the period
that the Secretary holds an equity or debt position in the financial institution.” With
respect to section 111(b)(2)(C) of EES A for purposes of participation in the CPP, the
October Interim Final Rule prohibits a financial institution from making any golden
parachute payment to a SEO during the period the Treasury holds an equity or debt
position acquired under the CPP. A golden parachute payment means any payment in the
nature of compensation to (or for the benefit of) a SEO made on account o f an applicable
severance from employment to the extent the aggregate present value o f such payments
equals or exceeds an amount equal to three times the SEO’s base amount.
The October Interim Final Rule sets forth an additional standard for executive
compensation and corporate governance under section 111(b)(1) of EES A. Under this
standard, the financial institution must agree, as a condition to participate in the CPP, that
no deduction will be claimed for remuneration for federal income tax purposes in excess
of $500,000 for each SEO that would not be deductible if section 162(m)(5) of the
Internal Revenue Code applied to the financial institution.
II. This Interim Rule.
This interim final rule provides further guidance on the executive compensation
and corporate governance provisions of section 111(b) of EES A with respect to the CPP.
5
Specifically, this interim final rule provides a technical amendment and two clarifications
to the October Interim Final Rule and provides reporting and recordkeeping requirements
regarding the executive compensation requirements in the October Interim Final Rule and
this interim final rule. They are written in question and answer format.
This interim final rule amends § 30.5(b) o f the October Interim Final Rule to
require that the certifications required under the October Interim Final Rule of the
compensation committee of a financial institution whose securities are registered with the
SEC under the federal securities laws be provided in the Compensation Committee
Report required pursuant to Item 407(e) o f Regulation S-K under the federal securities
laws (17 CFR 229.407). The October Interim Final Rule had required that these
certifications be provided in the Compensation Discussion and Analysis required
pursuant to Item 402 of Regulation S-K under the federal securities laws (17 CFR
229.402). Two comments on the October Interim Final Rule suggested that these
certifications be provided in the Compensation Committee Report rather than the
Compensation Discussion and Analysis. The Treasury believes this amendment is
appropriate because the compensation committee prepares the Compensation Committee
Report and is making the required certifications. Management o f the financial institution
prepares the Compensation Discussion and Analysis, which does not directly address the
operations and functions of the compensation committee.
This interim final rule clarifies § 30.6, which requires that SEO bonus and
incentive compensation paid during the period that the Treasury holds an equity or debt
position acquired under the CPP be subject to recovery or “clawback” by the financial
institution if the payments were based on materially inaccurate financial statements and
6
any other materially inaccurate performance metric criteria. One comment on the
October Interim Final Rule sought clarification on the application of this provision to
SEO bonus and incentive compensation earned, but not paid, during the Treasury holding
period. The Treasury believes that it is appropriate that any bonus and incentive
compensation earned during the Treasury holding period should be subject to clawback
and this interim final rule clarifies that bonus and incentive compensation is considered
paid to a SEO during the Treasury holding period when the SEO obtains a legally binding
right to that payment during the Treasury holding period.
This interim final rule clarifies § 30.7, which compares the clawback provision
under section 111(b)(2)(B) of EES A with the clawback provision in section 304 o f the
Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) (Pub. Law No. 107-204). This interim
final rule clarifies that the comparison to the Sarbanes-Oxley provision includes both the
statutory provision under EESA as well as the regulations issued under this statutory
provision in the October Interim Final Rule.
In addition, this interim final rule establishes a compliance reporting regime
relating to the executive compensation requirements set forth in the October Interim Final
Rule and this interim final rule. Under this interim final rule, the principal executive
officer of the financial institution must provide the following certifications to the Chief
Compliance Officer (CCO) of the TARP, with copies to the applicable transfer agent
under the CPP. First, within 120 days of the closing date of the Securities Purchase
Agreement between the financial institution and the Treasury, the principal executive
officer of the financial institution is required to certify that the compensation committee
of the financial institution has reviewed the SEO incentive compensation arrangements
7
with the senior risk officers of the financial institution to ensure that the SEO incentive
compensation arrangements do not encourage the SEOs to take unnecessary and
excessive risks that could threaten the value of the financial institution.
Second, within 135 days of the completion of each fiscal year during any part of
which the financial institution has participated in the CPP, the principal executive officer
of the financial institution is required to certify that the compensation committee has met
at least once during the prior fiscal year with the senior risk officers o f the financial
institution to discuss and review the relationship between the risk management policies
and practices of the financial institution and the SEO incentive compensation
arrangements; the compensation committee has certified to this review; the financial
institution has required that SEO bonus and incentive compensation be subject to
recovery or “clawback” by the financial institution if the payments were based on
materially inaccurate financial statements or any other materially inaccurate performance
metric criteria; the financial institution has prohibited any golden parachute payment to a
SEO; the financial institution has instituted procedures to limit the deduction for
remuneration for federal income tax purposes to $500,000 for each SEO for the most
recently ended fiscal year as if section 162(m)(5) of the Internal Revenue Code applied to
the financial institution; and certain named individuals are the SEOs for the current fiscal
year based on the compensation of such individuals during the prior fiscal year.
Third, in addition to the certification required in the paragraph above, within 135
days of the completion of each annual fiscal year o f the financial institution after the first
fiscal year during any part of which the financial institution has participated in the CPP,
the principal executive officer of the financial institution is required to certify that the
8
financial institution in fact has limited the deduction for remuneration for federal income
tax purposes to $500,000 for each SEO for the fiscal year prior to the most recently ended
fiscal year as if section 162(m)(5) of the Internal Revenue Code applied to the financial
institution.
If the principal executive officer is unable to provide any of these certifications in
a timely manner, the principal executive officer is required to provide the CCO an
explanation of the reason such certification has not been provided.
This interim final rule also provides that the financial institution is required to
preserve appropriate documentation and records to substantiate each certification for no
less than six years after the date of the certification, the first two years in an easily
accessible place. This interim final rule provides that the financial institution is required
to furnish promptly to the CCO such documentation and records as requested by the
representative of the CCO.
This interim final rule also affirms that any individual or entity making or
providing false information or certifications to the Treasury relating to a purchase under
section 111 of EES A or required under the October Interim Final Rule or this interim
final rule is subject to the criminal penalties under title 18 o f the U.S. Code or other
provision of federal criminal law.
This interim final rule amends and supplements the provisions o f the October
Interim Final Rule. As such, this rule applies to all financial institutions participating in
the CPP.
III. Procedural Requirements.
Justification for Interim Rulemaking
9
This interim final rule is promulgated pursuant to EESA, the purpose o f which is
to immediately provide authority and facilities that the Secretary of the Treasury can use
to restore liquidity and stability to the financial system of the United States. Specifically,
this interim final rule implements certain provisions of section 111 of EESA, which sets
forth executive compensation standards for financial institutions that sell troubled assets
to the Treasury under EESA. The statute provides that the Secretary may issue guidance
and regulations to carry out these provisions and that such guidance and regulations may
be effective upon issuance.
Financial institutions must have timely and reliable information with respect to
the applicable executive compensation and corporate governance rules that apply under
EESA programs. Accordingly, because EESA authorizes section 111 guidance to be
immediately effective and because of exigencies in the financial markets, the Treasury
finds that it would be contrary to the public interest, pursuant to 5 U.S.C. 553(b)(B), to
delay the issuance of this interim final rule pending an opportunity for public comment,
and good cause exists to dispense with this requirement. For the same reasons, pursuant
to 5 U.S.C. 553(d)(3), the Treasury has determined that there is good cause for the
interim final rule to become effective immediately upon publication. While this
regulation is effective immediately upon publication, the Treasury is inviting public
comment on the regulation during a 30-day period and will consider all comments in
developing a final rule.
Regulatory Planning and Review
10
The interim final rule does not meet the criteria for a “significant regulatory
action” as defined in Executive Order 12866. Therefore, the regulatory review
procedures contained therein do not apply.
Regulatory Flexibility Act
Because no notice of proposed rulemaking is required, this interim final rule is not
subject to the provisions of the Regulatory Flexibility Act (5 U.S.C chapter 6).
Paperwork Reduction Act
The information collection contained in this interim final rule has been reviewed
and approved by the Office of Management and Budget (OMB) under the Paperwork
Reduction Act (44 U.S.C. chapter 35) and assigned OMB control number 1505-0211.
Under the Paperwork Reduction Act, an agency may not conduct or sponsor, and an
individual is not required to respond to, a collection of information unless it displays a
valid OMB control number. Comments on the collection of information should be sent to
the Desk Officer for the Department of Treasury, Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, D.C. 20503 (or by e-mail to
oira_submission@omb.eop.gov ) with a copy to Executive Compensation Comments,
Office of Financial Institutions Policy, Room 1418, Department of the Treasury, 1500
Pennsylvania Avenue, NW, Washington, DC 20220.
List of Subjects in 31 CFR Part 30
Executive compensation, Troubled assets.
For the reasons set out in the preamble, Title 31 o f the CFR is amended as
follows:
PART 30 - TARP CAPITAL PURCHASE PROGRAM
11
1. The authority citation for Part 30 continues to read as follows:
Authority: Section 111(b) of the Emergency Economic Stabilization Act of
2008, Div. A of Pub. L. 110-343; 122 Stat 3765.
2. Revise § 30.5(b) to read as follows:
§ 30.5 Q-5: How should the financial institution comply with the certification
requirements under Q-3 of this section?
(b) Location. For financial institutions with securities registered with the SEC
pursuant to the federal securities laws, the compensation committee, or a committee
acting in a similar capacity, should provide the certifications in the Compensation
Committee Report required pursuant to Item 407(e) of Regulation S-K under the federal
securities laws (17 CFR 229.407).
3. Revise § 30.6, by adding the following sentence at the end of the paragraph to
read as follows:
§ 30.6 Q-6: What actions are necessary for a financial institution participating in
the CPP to comply with section 111(b)(2)(B) of EES A?
* * * . For this purpose, bonus and incentive compensation is paid to a SEO when
the SEO obtains a legally binding right to that payment if the legally binding right occurs
during any period that the Treasury holds an equity or debt position under the CPP.
4. Revise the section heading of §30.7 to read as follows:
12
§ 30.7 0 -7 : How do the standards and regulations under section 111(b)(2)(B) of
EES A differ from section 304 of the Sarbanes-Oxlev Act of 2002 (Sarbanes-Oxlev)
(Pub. Law No. 107-204)?
♦
H®
*
*
*
5. Add § 30.12 to read as follows:
§ 30.12 Q-12: What actions are necessary for a financial institution participating in
the CPP to comply with the executive compensation reporting and recordkeeping
requirements?
(a)
Reporting Requirements. (1) General. The PEO (or person acting in a similar
capacity) of the financial institution participating in the CPP is required to provide to the
Chief Compliance Officer (CCO) of TARP, the following certifications with respect to
the compliance of the financial institution with section 111(b) of EES A as implemented
under this part. The PEO of the financial institution is also required to provide copies of
these certifications to the transfer agent under the CPP. To the extent that the PEO (or
person acting in a similar capacity) of the financial institution is unable to provide any of
these certifications in a timely manner, the PEO is required to provide the CCO an
explanation of the reason such certification has not been provided. These certifications
are in addition to the compensation committee certifications required by § 30.3 (Q-3).
(2)
120 Day Certification. Within 120 days of the closing date of the agreement
between the financial institution and the Treasury under the CPP, the PEO (or person
acting in a similar capacity) of the financial institution is required to provide a
certification similar to the following to the CCO:
13
Ill [identify the principal executive officer of the financial institution], certify, based on
my knowledge, that the compensation committee o f [identify financial institution]
reviewed within 90 days of the Department of the Treasury’s purchase of the [identify
financial instrument] of [identify financial institution] under the Capital Purchase
Program the incentive compensation arrangements o f the senior executive officers, as
defined in subsection 111(b)(3) o f the Emergency Economic Stabilization Act of 2008
and regulations and guidance issued thereunder (SEOs), o f [identify financial institution]
with senior risk officers of [identify financial institution] to ensure that the SEO incentive
compensation arrangements do not encourage the SEOs to take unnecessary and
excessive risks that threaten the value o f [identify financial institution].”
(3)
First Fiscal Year Certification. Within 135 days of the completion of the first
annual fiscal year of the financial institution during any part o f which the financial
institution has participated in the CPP, the PEO (or person acting in a similar capacity) of
the financial institution is required to provide a certification similar to the following to
the CCO:
“I, [identify the principal executive officer of the financial institution], certify, based on
my knowledge, that:
(i) The compensation committee of [identify financial institution] has met at least
once during the most recently ended fiscal year with senior risk officers to discuss
and review the relationship between the risk management policies and practices of
[identify financial institution] and the incentive compensation arrangements of the
senior executive officers, as defined in subsection 111(b)(3) o f the Emergency
Economic Stabilization Act of 2008 (EES A) and regulations and guidance issued
14
thereunder (SEOs), to ensure that the SEO incentive compensation arrangements
do not encourage the SEOs to take unnecessary and excessive risks that threaten
the value of [identify financial institution];
(ii) The compensation committee of [identify financial institution] has certified to
the review of the SEO incentive compensation arrangements required under (i)
above;
(iii) [Identify financial institution] has required that SEO bonus and incentive
compensation be subject to recovery or “clawback” by [identify financial
institution] if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria;
(iv) [Identify financial institution] has prohibited any golden parachute payment,
as defined in the regulations and guidance issued under section 111(b) o f EES A,
to a SEO;
(v) [Identify financial institution] has instituted controls and procedures to limit
the deduction for remuneration for federal income tax purposes to $500,000 for
each SEO for the most recently ended fiscal year as if section 162(m)(5) o f the
Internal Revenue Code applied to [identify financial institution]; and
(vi) The following individuals are the SEOs for the current fiscal year: [identify
names and titles of SEOs o f financial institution].”
(4)
Years Following First Fiscal Year Certification. Within 135 days of the
completion of each annual fiscal year of the financial institution after the first fiscal year
during any part of which the financial institution has participated in the CPP, the PEO (or
15
person acting in a similar capacity) of the financial institution is required to provide a
certification similar to the following to the CCO:
“I, [identify the principal executive officer o f the financial institution], certify, based on
my knowledge, that:
(i) The compensation committee of [identify financial institution] has met at least
once during the most recently ended fiscal year with senior risk officers to discuss
and review the relationship between the risk management policies and practices of
[identify financial institution] and the incentive compensation arrangements of the
senior executive officers, as defined in subsection 111(b)(3) of the Emergency
Economic Stabilization Act of 2008 (EES A) and regulations and guidance issued
thereunder (SEOs), to ensure that the SEO incentive compensation arrangements
do not encourage the SEOs to take unnecessary and excessive risks that threaten
the value of [identify financial institution];
(ii) The compensation committee of [identify financial institution] has certified to
the review of the SEO incentive compensation arrangements required under (i)
above;
(iii) [Identify financial institution] has required that SEO bonus and incentive
compensation be subject to recovery or “clawback” by [identify financial
institution] if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria;
(iv) [Identify financial institution] has prohibited any golden parachute payment,
as defined in the regulations and guidance issued under section 111(b) of EES A,
to a SEO;
16
(v) [Identify financial institution] has instituted controls and procedures to limit
the deduction for remuneration for federal income tax purposes to $500,000 for
each SEO for the most recently ended fiscal year as if section 162(m)(5) of the
Internal Revenue Code applied to [identify financial institution];
(vi) [Identify financial institution] has limited the deduction for remuneration for
federal income tax purposes to $500,000 for each SEO for the fiscal year prior to
the most recently ended fiscal year as if section 162(m)(5) o f the Internal Revenue
Code applied to [identify financial institution]; and
(vii) The following individuals are the SEOs for the current fiscal year: [identify
names and titles of SEOs of financial institution].”
(b) Recordkeeping Requirements. The financial institution is required to preserve
appropriate documentation and records to substantiate each certification required under
paragraph (a) of this § 30.12 (Q-12) for a period of not less than six years after the date of
the certification, the first two years in an easily accessible place. The financial institution
is required to furnish promptly to the TARP CCO legible, true, complete, and current
copies of the documentation and records that are required to be preserved under
paragraph (b) of this § 30.12 (Q-12) that are requested by the representative o f the TARP
CCO.
(c) Penalties for Making or Providing False or Fraudulent Statements. Any
individual or entity which provides information or makes a certification to the Treasury
that is relating to purchases under section 111 of EES A or required pursuant to 31 CFR
Part 30 is subject to 18 U.S.C. 1001, which generally prohibits the making of any false or
fraudulent statement to a federal officer. Upon receipt of information indicating that any
17
individual or entity has violated any provision of title 18 o f the U.S. Code or other
provision of federal law, the Treasury shall refer such information to the Department o f
Justice and the Special Inspector General provided for under EE SA.
Dated:
Neel Kashkari
Interim Assistant Secretary for Financial Stability
18
NOTICE 2008-PSSFI
I.
PURPOSE
This Notice, issued pursuant to sections 101(a)(1), 101(c)(5), and 111 o f the
Emergency Economic Stabilization Act of 2008, Div. A of Pub. Law No. 110-343
(EESA), provides guidance on certain executive compensation provisions applicable to a
financial institution from which the Department of the Treasury (Treasury) acquires
troubled assets through programs for systemically significant failing institutions
(program).
II.
BACKGROUND RELATING TO EESA EXECUTIVE COMPENSATION
PROVISIONS
Section 101(a) of EESA authorizes the Secretary of the Treasury to establish a
Troubled Asset Relief Program (TARP) to “purchase, and to make and fund
commitments to purchase, troubled assets from any financial institution, on such terms
and conditions as are determined by the Secretary, and in accordance with this Act and
policies and procedures developed and published by the Secretary.” Section 120 of
EESA provides that the TARP authorities generally terminate on December 31, 2009,
unless extended upon certification by the Secretary o f the Treasury to Congress, but in no
event later than two years from the date of enactment of EESA (October 3, 2008) (the
TARP authorities period). Thus, the TARP authorities period is the period from October
3, 2008 to December 31, 2009 or, if extended, the period from October 3, 2008 to the
date so extended, but not later than October 3, 2010.
Section 111 of EESA provides that financial institutions that sell assets to the
Treasury may be subject to specified executive compensation standards. In the case of
auction purchases from a financial institution that has sold assets to the Treasury in an
amount that exceeds $300 million in the aggregate (including direct purchases), the
financial institution is prohibited under section 111(c) o f EESA from entering into any
new employment contract with a senior executive officer (SEO) that provides a golden
parachute to the SEO in the event of the SEO’s involuntary termination, or in connection
with the financial institution’s bankruptcy filing, insolvency, or receivership. This
prohibition applies during the TARP authorities period. The Treasury has issued separate
guidance on these provisions (Notice 2008-TAAP).
In addition, for auction purchases, section 302 o f EESA enacted tax provisions as
amendments to sections 162(m) and 280G of the Internal Revenue Code that address
compensation paid to certain executive officers employed by financial institutions that
sell assets under TARP. The Treasury and the Internal Revenue Service have issued
separate guidance on these provisions (I.R.S. Notice 2008-94).
In the case of direct purchases, section 111(b)(1) of EESA requires financial
institutions to meet appropriate standards for executive compensation and corporate
governance, as set forth by the Secretary of the Treasury. The Treasury has issued
guidance on section 111(b) in the form of an interim final rule with respect to the TARP
Capital Purchase Program (CPP) (31 CFR Part 30), which applies the following standards
with respect to the CPP: (a) limits on compensation that exclude incentives for SEOs of
financial institutions to take unnecessary and excessive risks that threaten the value of the
financial institution; (b) required recovery of any bonus or incentive compensation paid
to a SEO based on statements of earnings, gains, or other criteria that are later proven to
be materially inaccurate; (c) prohibition on the financial institution from making any
golden parachute payment to any SEO; and (d) agreement to limit a claim to a federal
income tax deduction for certain executive remuneration. The provisions apply while the
Treasury holds an equity or debt position in the financial institution.
This Notice 2008-PSSFI addresses the direct purchase provisions under section
111(b) of EES A as they pertain to financial institutions participating in the program,
applying similar standards to those set out in the interim final regulations, except for a
more stringent rule with respect to golden parachute payments. Further guidance will be
issued for any additional programs.
Q -l: To what financial institutions does this Notice apply?
A -l : (a) General rule. This Notice applies to any financial institution that
participates in the program.
(b) Controlled group rules. For purposes o f section 111(b) of EES A, two or more
persons who are treated as a single employer under section 414(b) o f the Internal
Revenue Code (employees of a controlled group o f corporations) and section 414(c) of
the Internal Revenue Code (employees of partnerships, proprietorships, etc., that are
under common control) are treated as a single employer. However, for purposes of
section 111(b) of EES A, the rules for brother-sister controlled groups and combined
groups are disregarded (including disregarding the rules in section 1563(a)(2) and (a)(3)
of the Internal Revenue Code with respect to corporations and the parallel rules that are
in section 1.414(c)-2(c) of the Treasury Regulations with respect to other organizations
conducting trades or businesses). See Q&A-l 1 of this Notice for special rules where a
financial institution is acquired.
Q-2: Who is a SEO under section 111 of EES A?
A-2: (a) General definition. A SEO means a “named executive officer” as
defined in Item 402 of Regulation S-K under the federal securities laws who: (1) is
employed by a financial institution that is participating in the program while the Treasury
holds an equity or debt position acquired under the program; and (2)(i) is the principal
executive officer (PEO) (or person acting in a similar capacity) o f such financial
institution (or, in the case of a controlled group, of the parent entity); (ii) the principal
financial officer (PFO) (or person acting in a similar capacity) of such financial
institution (or, in the case of a controlled group, o f the parent entity); or (iii) one of the
three most highly compensated executive officers of such financial institution (or the
financial institution’s controlled group) other than the PEO or the PFO.
2
(b) Determination of three most highly compensated executive officers. For
financial institutions with securities registered with the Securities and Exchange
Commission (SEC) pursuant to the federal securities law, the three most highly
compensated executive officers are determined according to the requirements in Item 402
of Regulation S-K under the federal securities laws. The term “executive officer” has the
same meaning as defined in Rule 3b-7 of the Securities Exchange Act of 1934 (Exchange
Act).1 For purposes of determining the three most highly compensated executive
officers, compensation is determined as it is in Item 402 o f Regulation S-K to include
total compensation for the last completed fiscal year without regard to whether the
compensation is includible in the executive officer’s gross income. Until the
compensation data for the current fiscal year are available, the financial institution should
make its best efforts to identify the three most highly compensated executive officers for
the current fiscal year.
(c) Application to private employers. Rules analogous to the rules in paragraphs
(a) and (b) of this Q&A-2 apply to financial institutions that are not subject to the federal
securities laws, rules, and regulations, including financial institutions that do not have
securities registered with the SEC pursuant to the federal securities laws.
Q-3: What actions are necessary for a financial institution participating in the
program to comply with section 111(b)(2)(A) of EES A?
A-3: In order to comply with section 111(b)(2)(A) of EES A for purposes of
participation in the program, a financial institution must comply with the following rules:
(1) promptly, and in no case more than 90 days, after the purchase under the program, the
financial institution’s compensation committee, or a committee acting in a similar
capacity, must review the SEO incentive compensation arrangements with such financial
institution’s senior risk officers, or other personnel acting in a similar capacity, to ensure
that the SEO incentive compensation arrangements do not encourage SEOs to take
unnecessary and excessive risks that threaten the value o f the financial institution; (2)
thereafter, the compensation committee, or a committee acting in a similar capacity, must
meet at least annually with senior risk officers, or individuals acting in a similar capacity,
to discuss and review the relationship between the financial institution’s risk management
policies and practices and the SEO incentive compensation arrangements; and (3) the
compensation committee, or a committee acting in a similar capacity, must certify that it
has completed the reviews of the SEO incentive compensation arrangements required
under (1) and (2) above. These rules apply while the Treasury holds an equity or debt
position acquired under the program.
'Exchange Act Rule 3b-7: “The term ‘executive officer,’ when used with reference to a registrant, means its
president, any vice president of the registrant in charge of a principal business unit, division or function
(such as sales, administration or finance), any other officer who performs a policy-making function or any
other person who performs similar policy-making functions for the registrant. Executive officers of
subsidiaries may be deemed executive officers of the registrant if they perform such policy-making
function for the registrant.”
3
Q-4: How should the financial institution comply with the standard under Q&A-3
of this Notice that the compensation committee, or a committee acting in a similar
capacity, review the SEO incentive compensation arrangements to ensure that the SEO
incentive compensation arrangements do not encourage the SEOs to take unnecessary
and excessive risks that threaten the value o f the financial institution?
A-4: Because each financial institution faces different material risks given the
unique nature of its business and the markets in which it operates, the compensation
committee, or a committee acting in a similar capacity, should discuss with the financial
institution’s senior risk officers, or other personnel acting in a similar capacity, the risks
(including long-term as well as short-term risks) that such financial institution faces that
could threaten the value of the financial institution. The compensation committee, or a
committee acting in a similar capacity, should identify the features in the financial
institution’s SEO incentive compensation arrangements that could lead SEOs to take such
risks. Any such features should be limited in order to ensure that the SEOs are not
encouraged to take risks that are unnecessary or excessive.
Q-5: How should the financial institution comply with the certification
requirements under Q&A-3 of this Notice?
A-5: (a) Certification. The compensation committee, or a committee acting in a
similar capacity, of the financial institution must provide the certifications required by
Q&A-3 of this Notice stating that it has reviewed, with such financial institution’s senior
risk officers, the SEO incentive compensation arrangements to ensure that the incentive
compensation arrangements do not encourage SEOs to take unnecessary and excessive
risks. Providing a statement similar to the following and in the manner provided in
subparagraphs (b) and (c) of this Q&A-5, as applicable, would satisfy this standard: “The
compensation committee certifies that it has reviewed with senior risk officers the SEO
incentive compensation arrangements and has made reasonable efforts to ensure that such
arrangements do not encourage SEOs to take unnecessary and excessive risks that
threaten the value of the financial institution.”
(b) Location. For financial institutions with securities registered with the SEC
pursuant to the federal securities law, the compensation committee, or a committee acting
in a similar capacity, should provide this certification in the Compensation Committee
Report required pursuant to Item 407(e) of Regulation S-K under the federal securities
laws.
(c) Application to private financial institutions. The rules provided in this Q&A-5
are also applicable to financial institutions that are not subject to the federal securities
laws, rules, and regulations, including financial institutions that do not have securities
registered with the SEC pursuant to the federal securities laws. A private financial
institution should file the certification of the compensation committee, or a committee
acting in a similar capacity, with its primary regulatory agency.
4
Q-6: What actions are necessary for a financial institution participating in the
program to comply with section 111(b)(2)(B) of EES A?
A-6: In order to comply with section 111 (b)(2)(B) of EES A for purposes of
participation in the program, a financial institution must require that SEO bonus and
incentive compensation paid during the period that the Treasury holds an equity or debt
position acquired under the program are subject to recovery or “clawback” by the
financial institution if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria. For this
purpose, bonus and incentive compensation is paid to a SEO when the SEO obtains a
legally binding right to that payment if the legally binding right occurs during any period
that the Treasury holds an equity or debt position under the program.
Q-7: How do the standards and regulations under section 111(b)(2)(B) o f EES A
differ from section 304 of the Sarbanes-Oxley Act o f 2002 (Sarbanes-Oxley) (Pub. Law
No. 107-204)?
A-7: Section 304 of Sarbanes-Oxley requires the forfeiture by a public
company’s chief executive officer and the chief financial officer o f any bonus, incentivebased compensation, or equity-based compensation received and any profits from sales of
the company’s securities during the twelve-month period following a materially noncompliant financial report. Section 111(b)(2)(B) of EES A differs from section 304 of
Sarbanes-Oxley in several ways. The standard under section 111(b)(2)(B) of EES A:
applies to the three most highly compensated executive officers in addition to the PEO
and the PFO; applies to both public and private financial institutions; is not exclusively
triggered by an accounting restatement; does not limit the recovery period; and covers not
only material inaccuracies relating to financial reporting but also material inaccuracies
relating to other performance metrics used to award bonuses and incentive compensation.
Q-8: What actions are necessary for a financial institution participating in the
program to comply with section 111(b)(2)(C) of EES A?
A-8: In order to comply with section 111(b)(2)(C) of EES A for purposes of
participation in the program, a financial institution must prohibit any golden parachute
payment to a SEO during the period the Treasury holds an equity or debt position
acquired under the program.
Q-9: What is a golden parachute payment under section 111(b) o f EES A?
A-9: (a) Definition. For purposes of applying section 111(b) of EES A with
respect to the program, a “golden parachute payment” means any payment in the nature
of compensation to (or for the benefit of) a SEO made on account of an applicable
severance from employment.
(b) Applicable severance from employment. (1) Definition. An applicable
severance from employment means any SEO’s severance from employment with the
5
financial institution (i) by reason of involuntary termination of employment with the
financial institution or with an entity that is treated as the same employer as the financial
institution under Q&A-l of this Notice; or (ii) in connection with any bankruptcy filing,
insolvency, or receivership of the financial institution or of an entity that is treated as the
same employer as the financial institution under Q&A-l of this Notice.
(2) Involuntary termination, (i) An involuntary termination from employment
means a termination from employment due to the independent exercise of the unilateral
authority of the employer to terminate the SEO’s services, other than due to the SEO’s
implicit or explicit request to terminate employment, where the SEO was willing and able
to continue performing services. An involuntary termination from employment may
include the financial institution’s failure to renew a contract at the time such contract
expires, provided that the SEO was willing and able to execute a new contract providing
terms and conditions substantially similar to those in the expiring contract and to
continue providing such services. In addition, a SEO’s voluntary termination from
employment constitutes an involuntary termination from employment if the termination
from employment constitutes a termination for good reason due to a material negative
change in the SEO’s employment relationship. See section 1.409A-l(n)(2) of the
Treasury Regulations.
(ii)
A severance from employment by a SEO is by reason of involuntary
termination even if the SEO has voluntarily terminated employment in any case where
the facts and circumstances indicate that absent such voluntary termination the financial
institution would have terminated the SEO’s employment and the SEO had knowledge
that he or she would be so terminated.
(c) Payments on account of an applicable severance from employment. (1)
Definition. A payment on account of an applicable severance from employment means a
payment that would not have been payable if no applicable severance from employment
had occurred (including amounts that would otherwise have been forfeited if no
applicable severance from employment had occurred) and amounts that are accelerated
on account of the applicable severance from employment. See section 1.280G-1, Q&A24(b), of the Treasury Regulations for rules regarding the determination of the amount
that is on account of an acceleration.
(2) Excluded amounts. Payments on account o f an applicable severance from
employment do not include amounts paid to a SEO under a tax qualified retirement plan.
Q-10: Are there other conditions that are required under the executive
compensation and corporate governance standards in section 111(b)(1) of EES A?
A -10: The financial institution must agree, as a condition to participate in the
program, that no deduction will be claimed for federal income tax purposes for
remuneration that would not be deductible if section 162(m)(5) of the Internal Revenue
Code were to apply to the financial institution. For this purpose, during the period that
the Treasury holds an equity or debt position in the financial institution acquired under
6
the program: (i) the financial institution (including entities in its controlled group) is
treated as an “applicable employer,” (ii) its SEOs are treated as “covered executives,”
and (iii) any taxable year that includes any portion of that period is treated as an
“applicable taxable year,” each as defined in section 162(m)(5) of the Internal Revenue
Code, except that the dollar limitation and the remuneration for the taxable year are
prorated for the portion of the taxable year that the Treasury holds an equity or debt
position in the financial institution under the program.
Q-l 1: How does section 111(b) of EES A operate in connection with an
acquisition, merger, or reorganization?
A-11: (a) Special rules for acquisitions, mergers, or reorganizations. In the event
that a financial institution (target) that had sold troubled assets to the Treasury through
the program is acquired by an entity that is not related to target (acquirer) in an
acquisition of any form, acquirer will not become subject to section 111(b) o f EES A
merely as a result of the acquisition. For this purpose, an acquirer is related to target if
stock or other interests of target are treated (under section 318(a) o f the Internal Revenue
Code other than paragraph (4) thereof) as owned by acquirer. With respect to the target,
any employees of target who are SEOs prior to the acquisition will be subject to section
111(b)(2)(C) of EES A until after the first anniversary following the acquisition.
(b) Example. In 2008, financial institution A sells $100 million of troubled assets
to the Treasury through the program. In January 2009, financial institution B, which is
not otherwise subject to section 111(b) of EES A, acquires financial institution A in a
stock purchase transaction, with the result that financial institution A becomes a wholly
owned subsidiary o f financial institution B. Based on the rules in paragraph (a) o f this
Q&A-l 1, the SEOs of financial institution B are not subject to section 111(b) of EES A
solely as a result of the acquisition of financial institution A in January 2009. The SEOs
of financial institution A at the time o f the acquisition are subject to section 111(b)(2)(C)
of EES A until January 2010, the first anniversary following the acquisition.
Q -l2: What actions are necessary for a financial institution participating in the
program to comply with the executive compensation reporting and recordkeeping
requirements?
(a) Reporting Requirements. (1) General. The PEO (or person acting in a similar
capacity) of the financial institution participating in the program is required to provide to
the Chief Compliance Officer (CCO) of TARP, the following certifications with respect
to the compliance of the financial institution with section 111(b) of EES A as
implemented under this Notice. The PEO of the financial institution is also required to
provide copies of these certifications to the transfer agent under the program. To the
extent that the PEO (or person acting in a similar capacity) of the financial institution is
unable to provide any of these certifications in a timely manner, the PEO is required to
provide the CCO an explanation of the reason such certification has not been provided.
These certifications are in addition to the compensation committee certifications required
by Q&A-3 of this Notice.
7
(2) 120 Day Certification. Within 120 days o f the closing date of the agreement
between the financial institution and the Treasury under the program, the PEO (or person
acting in a similar capacity) o f the financial institution is required to provide a
certification similar to the following to the CCO:
“I, [identify the principal executive officer of the financial institution], certify, based on
my knowledge, that the compensation committee of [identify financial institution]
reviewed within 90 days of the Department o f the Treasury’s purchase of the [identify
financial instrument] of [identify financial institution] under the program the incentive
compensation arrangements of the senior executive officers, as defined in subsection
111(b)(3) of the Emergency Economic Stabilization Act o f 2008 and regulations and
guidance issued thereunder (SEOs), of [identify financial institution] with senior risk
officers of [identify financial institution] to ensure that the SEO incentive compensation
arrangements do not encourage the SEOs to take unnecessary and excessive risks that
threaten the value of [identify financial institution].”
(3) First Fiscal Year Certification. Within 135 days of the completion of the first
annual fiscal year of the financial institution during any part of which the financial
institution has participated in the program, the PEO (or person acting in a similar
capacity) of the financial institution is required to provide a certification similar to the
following to the CCO:
“I, [identify the principal executive officer of the financial institution], certify, based on
my knowledge, that:
(i)
The compensation committee of [identify financial institution] has met at
least once during the most recently ended fiscal year with senior risk
officers to discuss and review the relationship between the risk
management policies and practices o f [identify financial institution] and
the incentive compensation arrangements o f the senior executive officers,
as defined in subsection 111(b)(3) of the Emergency Economic
Stabilization Act of 2008 (EESA) and regulations and guidance issued
thereunder (SEOs), to ensure that the SEO incentive compensation
arrangements do not encourage the SEOs to take unnecessary and
excessive risks that threaten the value o f [identify financial institution];
(ii)
The compensation committee o f [identify financial institution] has
certified to the review of the SEO incentive compensation arrangements
required under (i) above;
(iii)
[Identify financial institution] has required that SEO bonus and incentive
compensation be subject to recovery or “clawback” by [identify financial
institution] if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria;
8
(iv)
[Identify financial institution] has prohibited any golden parachute
payment, as defined in the regulations and guidance issued under section
111(b) of EES A, toaS E O ;
(v)
[Identify financial institution] has instituted controls and procedures to
limit the deduction for remuneration for federal income tax purposes to
$500,000 for each SEO for the most recently ended fiscal year as if section
162(m)(5) of the Internal Revenue Code applied to [identify financial
institution]; and
(vi)
The following individuals are the SEOs for the current fiscal year:
[identify names and titles of SEOs o f financial institution].”
(4)
Years Following First Fiscal Year Certification. Within 135 days o f the
completion of each annual fiscal year of the financial institution after the first fiscal year
during any part of which the financial institution has participated in the program, the PEO
(or person acting in a similar capacity) of the financial institution is required to provide a
certification similar to the following to the CCO:
“I, [identify the principal executive officer of the financial institution], certify, based on
my knowledge, that:
(i)
The compensation committee of [identify financial institution] has met at
least once during the most recently ended fiscal year with senior risk
officers to discuss and review the relationship between the risk
management policies and practices o f [identify financial institution] and
the incentive compensation arrangements of the senior executive officers,
as defined in subsection 111(b)(3) o f the Emergency Economic
Stabilization Act of 2008 (EESA) and regulations and guidance issued
thereunder (SEOs), to ensure that the SEO incentive compensation
arrangements do not encourage the SEOs to take unnecessary and
excessive risks that threaten the value of [identify financial institution];
(ii)
The compensation committee o f [identify financial institution] has
certified to the review o f the SEO incentive compensation arrangements
required under (i) above;
(iii)
[Identify financial institution] has required that SEO bonus and incentive
compensation be subject to recovery or “clawback” by [identify financial
institution] if the payments were based on materially inaccurate financial
statements or any other materially inaccurate performance metric criteria;
(iv)
[Identify financial institution] has prohibited any golden parachute
payment, as defined in the regulations and guidance issued under section
111(b) of EESA, to a SEO;
9
(v)
[Identify financial institution] has instituted controls and procedures to
limit the deduction for remuneration for federal income tax purposes to
$500,000 for each SEO for the most recently ended fiscal year as if section
162(m)(5) o f the Internal Revenue Code applied to [identify financial
institution];
(vi)
[Identify financial institution] has limited the deduction for remuneration
for federal income tax purposes to $500,000 for each SEO for the fiscal
year prior to the most recently ended fiscal year as if section 162(m)(5) of
the Internal Revenue Code applied to [identify financial institution]; and
(vii)
The following individuals are the SEOs for the current fiscal year:
[identify names and titles of SEOs of financial institution].”
(b) Recordkeeping Requirements. The financial institution is required to preserve
appropriate documentation and records to substantiate each certification required under
paragraph (a) of this Q&A-12 for a period of not less than six years after the date o f the
certification, the first two years in an easily accessible place. The financial institution is
required to furnish promptly to the TARP CCO legible, true, complete, and current copies
of the documentation and records that are required to be preserved under paragraph (b) of
this Q&A-12 that are requested by the representative o f the TARP CCO.
(c) Penalties for Making or Providing False or Fraudulent Statements. Any
individual or entity which provides information or makes a certification to the Treasury
that is relating to purchases under section 111 of EES A or required pursuant to these
guidelines is subject to 18 U.S.C. 1001, which generally prohibits the making of any false
or fraudulent statement to a federal officer. Upon receipt of information indicating that
any individual or entity has violated any provision o f title 18 of the U.S. Code or other
provision of federal law, the Treasury shall refer such information to the Department of
Justice and the Special Inspector General provided for under EESA.
REQUEST FOR COMMENTS
The Treasury requests comments on the topics addressed in this Notice.
Comments may be submitted to the Treasury by any of the following methods: Submit
electronic comments by email to executivecompensationcomments@do.treas.gov: or
send paper comments in triplicate to Executive Compensation Comments, Office of
Financial Institutions Policy, Room 1418, Department o f the Treasury, 1500
Pennsylvania Avenue, NW, Washington, DC 20220.
In general, the Treasury will post all comments to www.regulations.gov without
change, including any business or personal information provided such as names,
addresses, e-mail addresses, or telephone numbers. The Treasury will also make such
comments available for public inspection and copying in the Treasury’s Library, Room
1428, Main Department Building, 1500 Pennsylvania Avenue, NW, Washington, DC
20220, on official business days between the hours of 10:00 a.m. and 5:00 p.m. Eastern
10
Time. You can make an appointment to inspect comments by telephoning (202) 6220990. All comments, including attachments and other supporting materials, received are
part of the public record and subject to public disclosure. You should submit only
information that you wish to make available publicly.
EFFECTIVE DATE
Financial institutions may rely on rules in this Notice for purposes of compliance
with section 111(b) of EES A effective from October 3, 2008 (the date of enactment of
EESA).
CONTACT INFORMATION
For further information regarding this guidance, contact the Office of Domestic
Finance, the Treasury, at (202) 927-6618.
11
Frequently Asked Questions (FAQs)
Executive Compensation Requirements under the Capital Purchase Program (CPP)
For what period do the executive compensation requirements set forth in 31 C.F.R.
Part 30 promulgated under EES A section 111(b) (CPP executive compensation
requirements) apply to the financial institution?
The executive compensation requirements apply to the financial institution for as long as
Treasury holds any equity or debt position in the financial institution under the CPP,
including the Warrant or any equity acquired under the Warrant.
How are senior executive officers (SEOs) identified for purposes of compliance with
the CPP executive compensation requirements?
(a) Non-tax-related standards. For purposes of the non-tax-related executive
compensation standards (no unnecessary and excessive risk taking, clawbacks of certain
bonus or incentive compensation, and prohibition on golden parachute payments), the
SEOs for a year are the “named executive officers” who are identified in the financial
institution’s annual report on Form 10-K or annual meeting proxy statement for that year
(reporting the executive’s compensation for the immediately preceding year). These
executive officers are considered the SEOs throughout that entire year.
Prior to the identification of the named executive officers in the financial institution’s
annual report on Form 10-K or annual meeting proxy statement, the financial institution
must make its best efforts to identify the year’s SEOs for purposes of the applicability of
the non-tax related executive compensation standards for the year. If any executive is a
potential SEO and terminates employment in an involuntary termination prior to the
identification of the year’s named executive officers, the financial institution should
refrain from making any golden parachute payment until the year’s named executive
officers are identified in either the annual report on Form 10-K or annual meeting proxy
statement so that it can be determined whether the executive is a named executive officer
and, therefore, is a SEO who is not entitled to the golden parachute payment for the year.
(b) Tax-related standard. The tax-related executive compensation standard requires
financial institutions to agree not to claim a tax deduction for compensation paid to each
SEO in an amount that exceeds $500,000. Because the contractual limitation on the
amount of the tax deduction is based on current year compensation, the SEOs are
determined based on compensation for that year, rather than compensation paid in the
preceding year as described above. This means that for the purposes o f the tax-related
standard, SEOs are determined based on the financial institution’s annual report on Form
10-K or annual meeting proxy statement for the year subsequent to the year in which the
contractual limitation on the tax deduction applies.
(c) Private financial institutions. Rules analogous to those in paragraph (a) and (b) apply
to financial institutions that do not have securities registered with the Securities and
Exchange Commission (SEC) pursuant to the federal securities laws.
How must a financial institution that is defined as a “smaller reporting company ”
pursuant to Item 10 of Regulation S-K under the federal securities laws identify
SEOs for purposes of compliance with the CPP executive compensation
requirements?
A financial institution that is a “smaller reporting company” must identify SEOs pursuant
to the rules set forth in section 30.2 of 31 C.F.R. Part 30 and the previous FAQ. Note that
such a financial institution must identify at least five SEOs, even if only three SEOs are
provided in the disclosure pursuant to section 402 of Regulation S-K under the federal
securities laws.
How should a financial institution that is defined as a “smaller reporting company”
pursuant to Item 10 of Regulation S-K under the federal securities laws provide the
certifications of the compensation committee for purposes of compliance with the
CPP executive compensation requirements?
A financial institution that is a “smaller reporting company” should provide the
certifications of the compensation committee, or a committee acting in a similar capacity,
to its primary regulatory agency.
To what primary regulatory agency should a state-chartered bank that does not
have securities registered with the SEC pursuant to the federal securities laws
provide the certifications of the compensation committee for purposes of compliance
with the CPP executive compensation requirements?
In the case of a state-chartered bank that does not have securities registered with the SEC
pursuant to the federal securities laws, the primary regulatory agency is its primary
federal banking regulator.
For purposes of compliance with the CPP executive compensation requirements
relating to the clawback provision, must a financial institution recover bonuses and
incentive compensation based on financial statements that become materially
inaccurate because of revisions to generally accepted accounting principles where
the financial statements were accurate based on generally accepted accounting
principles applicable when the payment was made?
No.
Are payments on account of involuntary termination of employment that are made
after the period that the Treasury holds an equity or debt position under the CPP
taken into account for purposes of the rules prohibiting golden parachute payments
under the CPP executive compensation requirements?
Y es. A golden parachute payment is the aggregate present value of all payments made on
account of an applicable severance of employment that equals or exceeds three times the
2
SEO’s base amount. Thus, the determination of a golden parachute payment includes
amounts paid during or after the period the Treasury holds an equity or debt position
under the CPP. ([See § 1.280G-1, Q&A-38, o f the Treasury Regulations for how to
allocate the base amount to a series of payments made over multiple years.])
Please check back regularly for postings of additional Q&As.
3
Assistant Secretary of the Office of Economic Policy Mark J. Warshawsky
Statement
5/1/2006
hp-1365
For the Treasury Borrowing Advisory Committee of the Bond M arket Association
A much more buoyant economy has emerged in the three months since the Committee last met. On Friday, the
Bureau of Economic Analysis (BEA) announced that real GDP grew at the fastest rate in two and a half years. Payroll
employment has rebounded strongly from hurricane-depressed levels last fall and the unemployment rate has
receded further. Core inflation remains benign.
Real GDP grew at a 4.8 percent annual rate in the first quarter, according to the BEA’s advance estimate. This
followed a 1.7 percent pace of growth in the fourth quarter and was the strongest performance since the Jobs and
Growth Act boosted real GDP to a 7.2 percent annual rate of growth in the third quarter of 2003.
The favorable showing comes as no surprise. By early February, the consensus of private forecasters was already
predicting first-quarter growth in excess of 4 percent. In part, this represented the reasonable expectation of a
rebound after a series of special factors had depressed fourth-quarter growth. Among those factors were a decline in
motor vehicle sales following an outsized gain in the third quarter, a sharp rise in oil imports to offset the fall in
production caused by Hurricane Katrina, and an anomalous drop in Federal spending.
In addition, it was evident that the stage was being set late last year for a stronger pace of growth at the beginning of
2006. In particular, personal consumption expenditures rose sharply in November and December, starting the first
quarter off at a high level, and solid gains continued into the new year. As a result, real personal consumption
expenditures rose at a healthy 5.5 percent annual rate in the first quarter of this year. The trade deficit continued to
widen but by less than in the fourth quarter, as domestic oil production was restored and imports of petroleum
products fell. Finally, Federal government spending rebounded in the first quarter after a decline in the fourth quarter.
Other apparently temporary restraints on growth in the fourth quarter turned around in the first quarter. For instance,
investment in transportation equipment soared in the first quarter after falling in the fourth, contributing to a 16.4
percent annual rate gain in investment in equipment and software in the first quarter - a six-year record. Business
investment in structures, which had been a laggard throughout the expansion, also firmed, growing at an 8.6 percent
pace.
Residential investment in the first quarter rose at a 2.6 percent pace, little different from its fourth-quarter
performance. Despite widespread predictions of a softening, this segment of the economy continues to hold its own
after a considerable run-up over the past several years.
Overall, real GDP growth in the first quarter was very strong but because it follows on the heels of the statistically
weak performance of the fourth quarter, it is reasonable to average the two quarters together to get a view of trend
growth. That yields a solid real GDP increase of more than 3 percent at an annual rate.
Further evidence of an economy expanding at a solid pace is provided by labor market behavior. Employment growth
stalled last fall in the wake of the hurricanes but has since bounced back strongly. Payroll job gains during the past
two quarters have averaged 188,000 a month and the unemployment rate has fallen to 4.7 percent - the lowest since
July 2001. Claims data from the state unemployment insurance programs suggest that labor markets remained
robust through April.
Equity markets have also performed well this year, as corporate profits have continued to rise strongly. These gains
are helping to boost household wealth, providing additional support for personal consumption spending.
The economy appears to be running at cruising speed, with GDP growth and job opportunities expanding at a pace
that can be accommodated without inflationary pressures. Although the hike in oil prices has contributed to consumer
price growth of 3.4 percent over the past year, core cpr inflation (excluding food and energy) remained at 2.1 percent
in March, about where it was during 2004 and 2005.
In sum, the overall economy appears to be in a good position to continue growing at a moderate pace -likely around 3
percent - for the remaining quarters of the year. Recent developments in energy markets remind us, however, that
these prospects are not without hazards. Among the most visible is the fact that consumers are once again facing
gasoline prices in excess of $3 a gallon, just as they head into the summer driving season.
High gasoline prices are caused by global competition for oil, the effects of Hurricane Katrina on US. refinery
capacity, as well as the rapid transition from the fuel additive MTBE to ethanol, which will entail additional costs.
Exacerbating these problems is the complex system of different blends of gasoline, or "boutique fuels," required by
US. localities
Last week, President Bush presented a four-part plan that 1) ensures that American consumers are treated fairly at
the pump, 2) promotes greater fuel efficiency, 3) boosts the supply of crude oil and gasoline, and 4) supports
investment in alternative fuels to reduce US. demand for gasoline. Among the measures included in the President's
program are a suspension of oil deposits to the Strategic Petroleum Reserve, temporary waivers to local fuel
requirements, and a call for a better coordinated set of local fuel mix requirements in order to minimize the number of
boutique fuels that refiners must produce. The program will help address the immediate needs of the American
people by preventing fraud and price manipulation, assuring ample supplies of crude oil and gasoline from available
sources, and promoting energy efficiency and improved production for the future.
January 21,2009
2009-1-21-16-8-20-22799
U.S. international Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $76,580 million as of the end of that week, compared to $77,315 million as of the end of the
prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
1
II
—
||january 16, 2009
4
A. Official reserve assets (in US millions unless otherwise specified)
Euro
Yen
[ ( I ) Foreign currency reserves (in convertible foreign currencies)
Total
3 7 6 ,5 8 0
|(a) Securities
||9,165
114,319
||23,484
" lb
|of which: issuer headquartered in reporting country but located abroad
□ □
|(b) total currency and deposits with:
10,541
|(i) other national central banks, BIS and IMF
|ii) banks headquartered in the reporting country
|7,011
||17,522
I
lb
lb
Ilo
Ilo
|of which: located abroad
I
I
|(iii) banks headquartered outside the reporting country
{[of which: located in the reporting country
o
¡(2) IMF reserve position ^
7,554
9,184
(3) SDRs 2
(4) gold (including gold deposits and, if appropriate, gold swapped)
o
11,041
°
-volum e in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,765
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
7,765
B. Other foreign currency assets (specify)
[-securities not included in official reserve assets
|-deposits not included in official reserve assets
l-lo a n s not included in official reserve assets
|—-financial derivatives
not included in official reserve assets
|—gold not included in official reserve assets
Il
| -o th e r
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
I
II
Maturity breakdown (residual maturity)
ll
I
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
| 1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/20091211682022799.htm
8/3/2010
-outflow s (-)
||Principal
||lnterest
-in flow s (+)
||Principal
Interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-468,696
-184,489
-284,207
(b) Long positions (+)
3. Other (specify)
-outflow s related to repos (-)
-in flow s related to reverse repos (+)
-tra d e credit (-)
-tra d e credit (+)
-o th e r accounts payable (-)
-o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominal value)
il
___________________________________________ II_ _ _ _ _ _ _ _ _ _ _ _ _
ii
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt failing due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
¡headquartered in the reporting country (+)
"(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
[-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(ii) Written calls
I
I
|(b) Long positions
i
(i) Bought puts
http://www.treas.gov/press/releases/20091211682022799.htm
8/3/2010
|(i) Bought calls
I
1
|(ii) Written puts
1
1
PRO MEMORIA: In-the-money options |(1 ) At current exchange rate
1
|(a) Short position
1
|(b) Long position
1
|(2) + 5 % (depreciation of 5%)
1
|(a) Short position
|(b) Long position
1
1
1
1
II
II
II
II
____ I
|(3) - 5 % (appreciation of 5%)
1
1
|(a) Short position
1
1
|(b) Long position
|(4) +10 % (depreciation of 10%)
||
Il
1
II
II
I
|{a) Short position
II
II
II
II
I
|(b) Long position
|(5) -10 % (appreciation of 10%)
1
1
||
Il
II
II
I
|(a) Short position
1
1
|(b) Long position
i
1
j|(6) Other (specify)
I
1
|(a) Short position
I
|(b) Long position
1
1
IV. Memo items
||
(1) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
II
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
Pnondeiiverable forwards
| --short positions
| --long positions
p-other instruments
|(c) pledged assets
|--inc!uded in reserve assets
Pincluded in other foreign currency assets
|(d) securities lent and on repo
7,919
||—lent or repoed and included in Section !
--lent or repoed but not included in Section I
--borrowed or acquired and included in Section I
—borrowed or acquired but not included in Section I
7,919
(e) financial derivative assets (net. marked to market)
-forwards
-futures
-swaps
-options
-other
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions (+)
-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
http://www.treas.gov/press/releases/20091211682022799.htm
I
I
8/3/2010
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/20091211682022799.htm
8/3/2010
I o
v ie w
o r p r in t th e
H U h
c o n te n t o n
t h is p a g e ,
d o w n lo a d
th e
tre e
A d o b e ®
A c ro b a t®
H e a d e r® .
January 22, 2009
ts-01
Treasury Provides TARP Funds to Local Banks
Washington- The U.S. Treasury Department announced details this week of a $1.5
billion investment in 39 banks made through its Capital Purchase Program.
Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief
Program, to help to stabilize and strengthen the U.S. financial system. Treasury
allocated $250 billion under TARP's Capital Purchase Program to invest in U.S.
financial institutions. To date, the Department has made $193.8 billion of
investments, receiving preferred stock and warrants from participating institutions.
Investments have ranged from as small as $1 million to as large as $25 billion,
financing community banking and Community Development Financial Institutions in
43 states and Puerto Rico.
Institutions that sell shares to the government must comply with restrictions on
executive compensation during the period that Treasury holds equity issued
through this program and agree to limitations on dividends and stock repurchases.
Information about Treasury's Troubled Asset Relief Program can be found at
http://www.treas.gov/initiatives/eesa/.
Following are the transaction details:
Seller
Name of Institution
City
State
Conway
AR
$50,000,000
Oak Harbor
WA
$26,380,000
New Hampshire Thrift Bancshares,
Inc.
Newport
NH
$10,000,000
Bar Harbor Bankshares/Bar Harbor
Bank & Trust
Bar Harbor
ME
$18,751,000
Bernardsville
NJ
$7,414,000
Columbia
SC
$64,779,000
Indiana
PA
$108,676,000
ECB Bancorp, lnc./East Carolina
Bank
Engelhard
NC
$17,949,000
First BanCorp
San Juan
PR
$400,000,000
Dallas
TX
$75,000,000
Home Bancshares, Inc.
Washington Banking
Company/Whidbey Island Bank
Somerset Hills Bancorp
SCBT Financial Corporation
S&T Bancorp
Texas Capital Bancshares, Inc.
http://www.treas.gov/press/releases/ts01.htm
Price Paid
8/3/2010
Elkin
NC
$36,000,000
Carver Bancorp, Inc
New York
NY
$18,980,000
Citizens & Northern Corporation
Wellsboro
PA
$26,440,000
Greensburg
IN
$57,000,000
Houston
TX
$45,000,000
Tecumseh
Ml
$20,600,000
Aurora
IL
$73,000,000
Pulaski Financial Corp
Creve Coeur
MO
$32,538,000
OceanFirst Financial Corp.
Toms River
NJ
$38,263,000
Roseville
CA
$2,550,000
The Woodlands
TX
$11,730,000
Morgantown
WV
$15,000,000
First Bankers Trustshares, Inc.
Quincy
IL
$10,000,000
Pacific Coast National Bancorp
San Clemente
CA
$4,120,000
Community Bank of the Bay
Oakland
CA
$1,747,000
Redwood Capital Bancorp
Eureka
CA
$3,800,000
Syringa Bancorp
Boise
ID
$8,000,000
Idaho Bancorp
Boise
ID
$6,900,000
Bellevue
WA
$4,500,000
Vienna
VA
$5,658,000
Kansas City
MO
$146,053,000
The Baraboo Bancorporation
Baraboo
Wl
$20,749,000
Bank of Commerce
Charlotte
NC
$3,000,000
Fargo
ND
$50,000,000
Bismarck
ND
$20,093,000
Manitowoc
Wl
$12,000,000
Southern Bancorp, Inc.
Arkadelphia
AR
$11,000,000
Morrill Bancshares, Inc.
Merriam
KS
$13,000,000
Yadkin Valley Financial Corporation
MainSource Financial Group, Inc.
MetroCorp Bancshares, Inc.
United Bancorp, Inc.
Old Second Bancorp, Inc.
Community 1st Bank
TCB Holding Company, Texas
Community Bank
Centra Financial Holdings,
lnc./Centra Bank, Inc.
Puget Sound Bank
United Financial Banking
Companies, Inc.
Dickinson Financial Corporation II
State Bankshares, Inc.
BNCCORP, Inc.
First Manitowoc Bancorp, Inc.
http://www.treas.gov/press/releases/tsO 1.htm
8/3/2010
[Treaty Oak Bancorp, Inc.
Austin
TX
$3,268,000
-30REPORTS
*
Chart
http://www.treas.gov/press/releases/ts01.htm
8/3/2010
U .S. Treasury Department
O ffice o f Financial Stability
Troufried Asset Relief Program
Transactions Report
For Period Ending January 16, 2009
CAPITAL PURCHASE PROGRAM
Seller
Date
Name of Institution
10/28/2008 Bank of America Corporation
10/28/2008 Bank of New York Mellon Corporation
10/28/2008 Citigroup Inc.
10/28/2008 The Goldman Sachs Group, Inc.
10/28/2008 JPMorqan Chase & Co.
10/28/2008 Morqan Stanley
10/28/2008 State Street Corporation
10/28/2008 Wells Farqo & Company
11/14/2008 Bank of Commerce Holdings
11/14/2008 1st FS Corporation
11/14/2008 UCBH Holdings, Inc.
11/14/2008 Northern Trust Corporation
11/14/2008 SunTrust Banks, Inc.
11/14/2008 Broadway Financial Corporation
11/14/2008 Washinqton Federal Inc.
11/14/2008 BB&T Corp.
11/14/2008 Provident Bancshares Corp.
11/14/2008 Umpqua Holdings Corp.
11/14/2008 Comerica Inc.
11/14/2008 Regions Financial Corp.
11/14/2008 Capital One Financial Corporation
11/14/2008 First Horizon National Corporation
11/14/2008 Huntinqton Bancshares
11/14/2008 KeyCorp
11/14/2008 Valley National Bancorp
11/14/2008 Zions Bancorporation
11/14/2008 Marshall & llsley Corporation
11/14/2008 U.S. Bancorp
11/14/2008 TCF Financial Corporation
11/21/2008 First Niaqara Financial Group
11/21/2008 HF Financial Corp.
11/21/2008 Centerstate Banks of Florida Inc.
11/21/2008 City National Corporation
11/21/2008 First Community Bankshares Inc.
11/21/2008 Western Alliance Bancorporation
11/21/2008 Webster Financial Corporation
11/21/2008 Pacific Capital Bancorp
11/21/2008 Heritaqe Commerce Corp.
11/21/2008 Ameris Bancorp
11/21/2008 Porter Bancorp Inc.
City
Charlotte
New York
New York
New York
New York
New York
Boston
San Francisco
Redding
Hendersonville
San Francisco
Chicago
Atlanta
Los Angeles
Seattle
Winston-Salem
Baltimore
Portland
Dallas
Birmingham
McLean
Memphis
Columbus
Cleveland
Wayne
Salt Lake City
Milwaukee
Minneapolis
Wayzata
Lockport
Sioux Falls
Davenport
Beverly Hills
Bluefield
Las Vegas
Waterbury
Santa Barbara
San Jose
Moultrie
Louisville
State
NC
NY
NY
NY
NY
NY
MA
CA
CA
NC
CA
IL
GA
CA
WA
NC
MD
OR
TX
AL
VA
TN
OH
OH
NJ
UT
Wl
MN
MN
NY
SD
FL
CA
VA
NV
CT
CA
CA
GA
KY
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Price Paid
$15,000,000,000
$3,000,000,000
$25,000,000,000
$10,000,000,000
$25,000,000,000
$10,000,000,000
$2,000,000,000
$25,000,000,000
$17,000,000
$16,369,000
$298,737,000
$1,576,000,000
$3,500,000,000
$9,000,000
$200,000,000
$3,133,640,000
$151,500,000
$214,181,000
$2,250,000,000
$3,500,000,000
$3,555,199,000
$866,540,000
$1,398,071,000
$2,500,000,000
$300,000,000
$1,400,000,000
$1,715,000,000
$6,599,000,000
$361,172,000
$184,011,000
$25,000,000
$27,875,000
$400,000,000
$41,500,000
$140,000,000
$400,000,000
$180,634,000
$40,000,000
$52,000,000
$35,000,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
|
Seller
Date
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
11/21/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/5/2008
12/12/2008
12/12/2008
12/12/2008
12/12/2008
Name of Institution
Banner Corporation
Cascade Financial Corporation
Columbia Banking System, Inc.
Heritaqe Financial Corporation
First PacTrust Bancorp, Inc.
Severn Bancorp, Inc.
Boston Private Financial Holdings, Inc.
Associated Banc-Corp
Trustmark Corporation
First Community Corporation
Taylor Capital Group
Nara Bancorp, Inc.
Midwest Banc Holdings, Inc.
MB Financial Inc.
First Midwest Bancorp, Inc.
United Community Banks, Inc.
Wesbanco Bank Inc.
Encore Bancshares Inc.
Manhattan Bancorp
Iberiabank Corporation
Eagle Bancorp, Inc.
Sandy Spring Bancorp, Inc.
Coastal Banking Company, Inc.
East West Bancorp
South Financial Group, Inc.
Great Southern Bancorp
Cathay General Bancorp
Southern Community Financial Corp.
CVB Financial Corp
First Defiance Financial Corp.
First Financial Holdings Inc.
Superior Bancorp Inc.
Southwest Bancorp, Inc.
Popular, Inc.
Blue Valley Ban Corp
Central Federal Corporation
Bank of Marin Bancorp
Bank of North Carolina
Central Bancorp, Inc.
Southern Missouri Bancorp, Inc.
State Bancorp, Inc.
TIB Financial Corp
Unity Bancorp, Inc.
Old Line Bancshares, Inc.
FPB Bancorp, Inc.
Sterling Financial Corporation
Oak Valley Bancorp
Old National Bancorp
Capital Bank Corporation
Pacific International Bancorp
SVB Financial Group
State
City
WA
Walla Walla
WA
Everett
WA
Tacoma
WA
Olympia
CA
Chula Vista
MD
Annapolis
MA
Boston
Wl
Green Bay
MS
Jackson
Lexington
SC
Rosemont
IL
CA
Los Angeles
IL
Melrose Park
IL
Chicago
IL
Itasca
GA
Blairsville
Wheeling
WV
Houston
TX
CA
El Segundo
LA
Lafayette
MD
Bethesda
MD
Olney
Fernandina Beach FL
CA
Pasadena
Greenville
SC
Springfield
MO
CA
Los Angeles
Winston-Salem
NC
CA
Ontario
OH
Defiance
Charleston
SC
AL
Birmingham
OK
Stillwater
PR
San Juan
Overland Park
KS
OH
Fairlawn
CA
Novato
Thomasville
NC
MA
Somerville
Poplar Bluff
MO
NY
Jericho
FL
Naples
NJ
Clinton
MD
Bowie
FL
Port St. Lucie
WA
Spokane
CA
Oakdale
IN
Evansville
Raliegh
NC
WA
Seattle
CA
Santa Clara
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Price Paid
$124,000,000
$38,970,000
$76,898,000
$24,000,000
$19,300,000
$23,393,000
$154,000,000
$525,000,000
$215,000,000
$11,350,000
$104,823,000
$67,000,000
$84,784,000
$196,000,000
$193,000,000
$180,000,000
$75,000,000
$34,000,000
$1,700,000
$90,000,000
$38,235,000
$83,094,000
$9,950,000
$306,546,000
$347,000,000
$58,000,000
$258,000,000
$42,750,000
$130,000,000
$37,000,000
$65,000,000
$69,000,000
$70,000,000
$935,000,000
$21,750,000
$7,225,000
$28,000,000
$31,260,000
$10,000,000
$9,550,000
$36,842,000
$37,000,000
$20,649,000
$7,000,000
$5,800,000
$303,000,000
$13,500,000
$100,000,000
$41,279,000
$6,500,000
$235,000,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
Name of institution
Date
12/12/2008 LNB Bancorp Inc.
12/12/2008 Wilminqton Trust Corporation
12/12/2008 Susquehanna Bancshares, Inc
12/12/2008 Siqnature Bank
12/12/2008 HopFed Bancorp
12/12/2008 Citizens Republic Bancorp, Inc.
12/12/2008 Indiana Community Bancorp
12/12/2008 Bank of the Ozarks, Inc.
12/12/2008 Center Financial Corporation
12/12/2008 NewBridqe Bancorp
12/12/2008 Sterlinq Bancshares, Inc.
12/12/2008 The Bancorp, Inc.
12/12/2008 TowneBank
12/12/2008 Wilshire Bancorp, Inc.
12/12/2008 Valley Financial Corporation
12/12/2008 Independent Bank Corporation
12/12/2008 Pinnacle Financial Partners, Inc.
12/12/2008 First Litchfield Financial Corporation
12/12/2008 National Penn Bancshares, Inc.
12/12/2008 Northeast Bancorp
12/12/2008 Citizens South Banking Corporation
12/12/2008 Virqinia Commerce Bancorp
12/12/2008 Fidelity Bancorp, Inc.
12/12/2008 LSB Corporation
12/19/2008 Intermountain Community Bancorp
12/19/2008 Community West Bancshares
12/19/2008 Synovus Financial Corp.
12/19/2008 Tennessee Commerce Bancorp, Inc.
12/19/2008 Community Bankers Trust Corporation
12/19/2008 BancTrust Financial Group, Inc.
12/19/2008 Enterprise Financial Services Corp.
12/19/2008 Mid Penn Bancorp, Inc.
12/19/2008 Summit State Bank
12/19/2008 VIST Financial Corp.
12/19/2008 Wainwright Bank & Trust Company
12/19/2008 Whitney Holdinq Corporation
12/19/2008 The Connecticut Bank and Trust Company
12/19/2008 CoBiz Financial Inc.
12/19/2008 Santa Lucia Bancorp
12/19/2008 Seacoast Banking Corporation of Florida
12/19/2008 Horizon Bancorp
12/19/2008 Fidelity Southern Corporation
12/19/2008 Community Financial Corporation
12/19/2008 Berkshire Hills Bancorp, Inc.
12/19/2008 First California Financial Group, Inc
12/19/2008 AmeriServ Financial, Inc
12/19/2008 Security Federal Corporation
12/19/2008 Wintrust Financial Corporation
12/19/2008 Flushing Financial Corporation
12/19/2008 Monarch Financial Holdings, Inc.
12/19/2008 StellarOne Corporation
City
! State
Lorain
IOH
DE
Wilmington
PA
Lititz
NY
New York
KY
Hopkinsville
Ml
Flint
IN
Columbus
AR
Little Rock
CA
Los Angeles
NC
Greensboro
TX
Houston
DE
Wilmington
VA
Portsmouth
CA
Los Angeles
VA
Roanoke
Ml
Ionia
TN
Nashville
CT
Litchfield
PA
Boyertown
ME
Lewiston
NC
Gastonia
VA
Arlington
PA
Pittsburgh
MA
North Andover
ID
Sandpoint
CA
Goleta
GA
Columbus
TN
Franklin
VA
Glen Allen
AL
Mobile
MO
St. Louis
PA
Millersburg
CA
Santa Rosa
PA
Wyomissing
MA
Boston
LA
New Orleans
CT
Hartford
Denver
CO
CA
Atascadero
FL
Stuart
IN
Michigan City
GA
Atlanta
VA
Staunton
MA
Pittsfield
Westlake Village CA
PA
Johnstown
Aiken
SC
IL
Lake Forest
NY
Lake Success
VA
Chesapeake
Charlottesville
VA
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Price Paid
$25,223,000
$330,000,000
$300,000,000
$120,000,000
$18,400,000
$300,000,000
$21,500,000
$75,000,000
$55,000,000
$52,372,000
$125,198,000
$45,220,000
$76,458,000
$62,158,000
$16,019,000
$72,000,000
$95,000,000
$10,000,000
$150,000,000
$4,227,000
$20,500,000
$71,000,000
$7,000,000
$15,000,000
$27,000,000
$15,600,000
$967,870,000
$30,000,000
$17,680,000
$50,000,000
$35,000,000
$10,000,000
$8,500,000
$25,000,000
$22,000,000
$300,000,000
$5,448,000
$64,450,000
$4,000,000
$50,000,000
$25,000,000
$48,200,000
$12,643,000
$40,000,000
$25,000,000
$21,000,000
$18,000,000
$250,000,000
$70,000,000
$14,700,000
$30,000,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
2/
2/
2/
3/
2/
2/
2/
2/
2/
2/
2/
2/
21
2/
2/
2/
2/
2/
3/
2/
Name of Institution
Date
12/19/2008 Union Bankshares Corporation
12/19/2008 Tideiands Bancshares, Inc
12/19/2008 Bancorp Rhode Island, Inc.
12/19/2008 Hawthorn Bancshares, Inc.
12/19/2008 The Elmira Savinqs Bank, FSB
12/19/2008 Alliance Financial Corporation
12/19/2008 Heartland Financial USA, Inc.
12/19/2008 Citizens First Corporation
12/19/2008 FFW Corporation
12/19/2008 Plains Capital Corporation
12/19/2008 Tri-Countv Financial Corporation
12/19/2008 OneUnited Bank
12/19/2008 Patriot Bancshares, Inc.
12/19/2008 Pacific Citv Finacial Corporation
12/19/2008 Marquette National Corporation
12/19/2008 Exchanqe Bank
12/19/2008 Monadnock Bancorp, Inc.
12/19/2008 Bridqeview Bancorp, Inc.
12/19/2008 Fidelity Financial Corporation
12/19/2008 Patapsco Bancorp, Inc.
12/19/20Ö81NCAL Bancorp
12/19/2008 FCB Bancorp, Inc.
12/23/2008 First Financial Bancorp
12/23/2008 Bridqe Capital Holdings
12/23/2008 International Bancshares Corporation
12/23/2008 First Sound Bank
12/23/2008 M&T Bank Corporation
12/23/2008 Emclaire Financial Corp.
12/23/2008 Park National Corporation
12/23/2008 Green Bankshares, Inc.
12/23/2008 Cecil Bancorp, Inc.
12/23/2008 Financial Institutions, Inc.
12/23/2008 Fulton Financial Corporation
12/23/2008 United Bancorporation of Alabama, Inc.
12/23/2008 MutualFirst Financial, Inc.
12/23/2008 BCSB Bancorp, Inc.
12/23/2008 HMN Financial, Inc.
12/23/2008 First Community Bank Corporation of America
12/23/2008 Sterlinq Bancorp
12/23/2008 Intervest Bancshares Corporation
12/23/2008 Peoples Bancorp of North Carolina, Inc.
12/23/2008 Parkvale Financial Corporation
12/23/2008 Timberland Bancorp, Inc.
12/23/2008 1st Constitution Bancorp
12/23/2008 Central Jersey Bancorp
12/23/2008 Western Illinois Bancshares Inc.
12/23/2008 Saiqon National Bank
12/23/2008 Capital Pacific Bancorp
12/23/2008 Uwharrie Capital Corp
12/23/2008 Mission Valley Bancorp
12/23/2008 The Little Bank, Incorporated
City
Bowling Green
Mt. Pleasant
Providence
Lee's Summit
Elmira
Syracuse
Dubuque
Bowling Green
Wabash
Dallas
Waldorf
Boston
Houston
Los Angeles
Chicago
Santa Rosa
Peterborough
Bridgeview
Wichita
Dundalk
Los Angeles
Louisville
Cincinnati
San Jose
Laredo
Seattle
Buffalo
Emlenton
Newark
Greeneville
Elkton
Warsaw
Lancaster
Atmore
Muncie
Baltimore
Rochester
Pinellas Park
New York
New York
Newton
Monroeville
Hoquiam
Cranbury
Oakhurst
Monmouth
Westminster
Portland
Albemarle
Sun Valley
Kinston
State
VA
SC
Rl
MO
NY
NY
IA
KY
IN
TX
MD
MA
TX
CA
IL
CA
NH
IL
KS
MD
CA
KY
OH
CA
TX
WA
NY
PA
OH
TN
MD
NY
PA
AL
IN
MD
MN
FL
NY
NY
NC
PA
WA
NJ
NJ
IL
CA
OR
NC
CA
NC
Description
Transaction Type !
Preferred Stock W/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Price Paid
$59,000,000
$14,448,000
$30,000,000
$30,255,000
$9,090,000
$26,918,000
$81,698,000
$8,779,000
$7,289,000
$87,631,000
$15,540,000
$12,063,000
$26,038,000
$16,200,000
$35,500,000
$43,000,000
$1,834,000
$38,000,000
$36,282,000
$6,000,000
$10,000,000
$9,294,000
$80,000,000
$23,864,000
$216,000,000
$7,400,000
$600,000,000
$7,500,000
$100,000,000
$72,278,000
$11,560,000
$37,515,000
$376,500,000
$10,300,000
$32,382,000
$10,800,000
$26,000,000
$10,685,000
$42,000,000
$25,000,000
$25,054,000
$31,762,000
$16,641,000
$12,000,000
$11,300,000
$6,855,000
$1,549,000
$4,000,000
$10,000,000
$5,500,000
$7,500,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
2/
2/
21
2/
21
21
2/
2/
2/
2/
2/
2/
2/
2/
2/
1/
2/
21
21
Name of Institution
Date
12/23/2008 Pacific Commerce Bank
12/23/2008 Citizens Community Bank
12/23/2008 Seacoast Commerce Bank
12/23/2008 TCNB Financial Corp.
12/23/2008 Leader Bancorp, Inc.
12/23/2008 Nicolet Bankshares, Inc.
12/23/2008 Magna Bank
12/23/2008 Western Community Bancshares, Inc.
12/23/2008 Community Investors Bancorp, Inc.
12/23/2008 Capital Bancorp, Inc.
12/23/2008 Cache Valley Bankinq Company
12/23/2008 Citizens Bancorp
12/23/2008 Tennessee Valley Financial Holdings, Inc.
12/23/2008 Pacific Coast Bankers' Bancshares
12/31/2008 SunTrust Banks, Inc.
12/31/2008 The PNC Financial Services Group Inc.
12/31/2008 Fifth Third Bancorp
12/31/2008 Hampton Roads Bankshares, Inc.
12/31/2008 CIT Group Inc.
12/31/2008 West Bancorporation, Inc.
12/31/2008 First Banks, Inc.
1/9/2009 Bank of America Corporation
1/9/2009 FirstMerit Corporation
1/9/2009 Farmers Capital Bank Corporation
1/9/2009 Peapack-Gladstone Financial Corporation
1/9/2009 Commerce National Bank
1/9/2009 The First Bancorp, Inc.
1/9/2009 Sun Bancorp, Inc.
1/9/2009 Crescent Financial Corporation
1/9/2009 American Express Company
1/9/2009 Central Pacific Financial Corp.
1/9/2009 Centrue Financial Corporation
1/9/2009 Eastern Virqinia Bankshares, Inc.
1/9/2009 Colony Bankcorp, Inc.
1/9/2009 Independent Bank Corp.
1/9/2009 Cadence Financial Corporation
1/9/2009 LCNB Corp.
1/9/2009 Center Bancorp, Inc.
1/9/2009 F.N.B. Corporation
1/9/2009 C&F Financial Corporation
1/9/2009 North Central Bancshares, Inc.
1/9/2009 Carolina Bank Holdings, Inc.
1/9/2009 First Bancorp
1/9/2009 First Financial Service Corporation
1/9/2009 Codorus Valley Bancorp, Inc.
1/9/2009 MidSouth Bancorp, Inc.
1/9/2009 First Security Group, Inc.
1/9/2009 Shore Bancshares, Inc.
1/9/2009 The Queensborough Company
1/9/2009 American State Bancshares, Inc.
1/9/2009 Security California Bancorp
City
Los Angeles
South Hill
Chula Vista
Dayton
Arlington
Green Bay
Memphis
Palm Desert
Bucyrus
Rockville
Logan
Nevada City
Oak Ridge
San Francisco
Atlanta
Pittsburgh
Cincinnati
Norfolk
New York
West Des Moines
Clayton
Charlotte
Akron
Frankfort
Gladstone
Newport Beach
Damariscotta
Vineland
Cary
New York
Honolulu
St. Louis
Tappahannock
Fitzgerald
Rockland
Starkville
Lebanon
Union
Hermitage
West Point
Fort Dodge
Greensboro
Troy
Elizabethtown
York
Lafayette
Chattanooga
Easton
Louisville
Great Bend
Riverside
State
CA
VA
CA
OH
MA
Wl
TN
CA
OH
MD
UT
CA
TN
CA
GA
PA
OH
VA
NY
IA
MO
NC
OH
KY
NJ
CA
ME
NJ
NC
NY
HI
MO
VA
GA
MA
MS
OH
NJ
PA
VA
IA
NC
NC
KY
PA
LA
TN
MD
GA
KS
CA
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Pricing
Mechanism
Price Paid
$4,060,000 Par
$3,000,000 Par
$1,800,000 Par
$2,000,000 Par
$5,830,000 Par
$14,964,000 Par
$13,795,000 Par
$7,290,000 Par
$2,600,000 Par
$4,700,000 Par
$4,767,000 Par
$10,400,000 Par
$3,000,000 Par
$11,600,000 Par
$1,350,000,000 Par
$7,579,200,000 Par
$3,408,000,000 Par
$80,347,000 Par
$2,330,000,000 Par
$36,000,000 Par
$295,400,000 Par
$10,000,000,000 Par
$125,000,000 Par
$30,000,000 Par
$28,685,000 Par
$5,000,000 Par
$25,000,000 Par
$89,310,000 Par
$24,900,000 Par
$3,388,890,000 Par
$135,000,000 Par
$32,668,000 Par
$24,000,000 Par
$28,000,000 Par
$78,158,000 Par
$44,000,000 Par
$13,400,000 Par
$10,000,000 Par
$100,000,000 Par
$20,000,000 Par
$10,200,000 Par
$16,000,000 Par
$65,000,000 Par
$20,000,000 Par
$16,500,000 Par
$20,000,000 Par
$33,000,000 Par
$25,000,000 Par
$12,000,000 Par
$6,000,000 Par
$6,815,000 Par
r
27
2/
3/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
3/
2/
2/
2/
2/
2/
3/
2/
2/
2/
2/
21
2/
2/
2/
2/
2/
2/
3/
2/
Seller
Date
Name o f Institution
1/9/2009 (Security Business Bancorp
1/9/2009 Sound Banking Company
1/9/2009 Mission Community Bancorp
1/9/2009 Redwood Financial Inc.
1/9/2009 Surrey Bancorp
1/9/2009 Independence Bank
1/9/2009 Valley Community Bank
1/9/2009 Rising Sun Bancorp
1/9/2009 Community Trust Financial Corporation
1/9/2009 GrandSouth Bancorporation
1/9/2009 Texas National Bancorporation
1/9/2009 Congaree Bancshares, Inc.
1/9/2009 New York Private Bank & Trust Corporation
1/16/2009 Home Bancshares, Inc.
1/16/2009 Washington Banking Company/ Whidbey Island Bank
1/16/2009 New Hampshire Thrift Bancshares, Inc.
1/16/2009 Bar Harbor Bankshares/Bar Harbor Bank & Trust
1/16/2009 Somerset Hills Bancorp
1/16/2009 SCBT Financial Corporation
1/16/2009 S&T Bancorp
1/16/2009 ECB Bancorp, Inc./East Carolina Bank
1/16/2009 First BanCorp
1/16/2009 Texas Capital Bancshares, Inc.
1/16/2009 Yadkin Valley Financial Corporation
1/16/2009 Carver Bancorp, Inc
1/16/2009 Citizens & Northern Corporation
1/16/2009 MainSource Financial Group, Inc.
1/16/2009 MetroCorp Bancshares, Inc.
1/16/2009 United Bancorp, Inc.
1/16/2009 Old Second Bancorp, Inc.
1/16/2009 Pulaski Financial Corp
1/16/2009 OceanFirst Financial Corp.
1/16/2009 Community 1st Bank
1/16/2009 TCB Holding Company, Texas Community Bank
1/16/2009 Centra Financial Holdings, Inc./Centra Bank, Inc.
1/16/2009 First Bankers Trustshares, Inc.
1/16/2009 Pacific Coast National Bancorp
1/16/2009 Community Bank of the Bay
1/16/2009 Redwood Capital Bancorp
1/16/2009 Syringa Bancorp
1/16/2009 Idaho Bancorp
1/16/2009 Puget Sound Bank
1/16/2009 United Financial Banking Companies, Inc.
1/16/2009 Dickinson Financial Corporation II
1/16/2009 The Baraboo Bancorporation
1/16/2009 Bank of Commerce
1/16/2009 State Bankshares, Inc.
1/16/2009 BNCCORP, Inc.
1/16/2009 First Manitowoc Bancorp, Inc.
1/16/2009 Southern Bancorp, Inc.
1/16/2009 Morrill Bancshares, Inc.
City
San Diego
Morehead City
San Luis Obispo
Redwood Falls
Mount Airy
East Greenwich
Pleasanton
Rising Sun
Ruston
Greenville
Jacksonville
Cayce
New York
Conway
Oak Harbor
Newport
Bar Harbor
Bernardsville
Columbia
Indiana
Engelhard
San Juan
Dallas
Elkin
New York
Wellsboro
Greensburg
Houston
Tecumseh
Aurora
Creve Coeur
Toms River
Roseville
The Woodlands
Morgantown
Quincy
San Clemente
Oakland
Eureka
Boise
Boise
Bellevue
Vienna
Kansas City
Baraboo
Charlotte
Fargo
Bismarck
Manitowoc
Arkadelphia
Merriam
State
CA
NC
CA
MN
NC
Rl
CA
MD
LA
SC
TX
SC
NY
AR
WA
NH
ME
NJ
SC
PA
NC
PR
TX
NC
NY
PA
IN
TX
Ml
IL
MO
NJ
CA
TX
WV
IL
CA
CA
CA
ID
ID
WA
VA
MO
Wl
NC
ND
ND
Wl
AR
KS
Transaction Type
Description
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w / Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w / Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w / Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Pricing
Price Paid
Mechanism
$5,803,000 Par
$3,070,000 Par
$5,116,000 Par
$2,995,000 Par
$2,000,000 Par
$1,065,000 Par
$5,500,000 Par
$5,983,000 Par
$24,000,000 Par
$9,000,000 Par
$3,981,000 Par
$3,285,000 Par
$267,274,000 Par
$50,000,000 Par
$26,380,000 Par
$10,000,000 Par
$18,751,000 Par
$7,414,000 Par
$64,779,000 Par
$108,676,000 Par
$17,949,000 Par
$400,000,000 Par
$75,000,000 Par
$36,000,000 Par
$18,980,000 Par
$26,440,000 Par
$57,000,000 Par
$45,000,000 Par
$20,600,000 Par
$73,000,000 Par
$32,538,000 Par
$38,263,000 Par
$2,550,000 Par
$11,730,000 Par
$15,000,000 Par
$10,000,000 Par
$4,120,000 Par
$1,747,000 Par
$3,800,000 Par
$8,000,000 Par
$6,900,000 Par
$4,500,000 Par
$5,658,000 Par
$146,053,000 Par
$20,749,000 Par
$3,000,000 Par
$50,000,000 Par
$20,093,000 Par
$12,000,000 Par
$11,000,000 Par
$13,000,000 Par
■
Seller
Date
2/
Name of Institution
1/16/2009 Treaty Oak Bancorp, Inc.
Austin
State Transaction Type
TX
Purchase
Description
Preferred Stock w/ Exercised Warrants
TOTAL
Price Paid
Pricing
Mechanism
$3,268,000 Par
$193,791,036,000
1/ This transaction was included in previous Transaction Reports with Merrill Lynch & Co., Inc. listed as the qualifying institution and a 10/28/2008 transaction date, footnoted to indicate that settlement was
deferred pending merger. The purchase of Merrill Lynch by Bank of America was completed on 1/1/2009, and this transaction under the CPP was funded on 1/9/2009.
2/ Privately-held qualified financial institution; Treasury received a warrant to purchase additional shares of preferred stock, which it exercised immediately.
3/ To promote community development financial institutions (CDFIs), Treasury did not require warrants as part of its investment.
SYSTEMICALLY SIGNIFICANT FAILING INSTITUTIONS
Seller
Date
Name of Institution
11/25/2008 AIG
City
New York
State
NY
Transaction Type
Purchase
Description
Preferred Stock w/ Warrants
Price Paid
Pricing
Mechanism
$40,000,000,000 Par
AUTOMOTIVE INDUSTRY FINANCING PROGRAM
Seller
Date
1/
21
3/
12/29/2008
12/29/2008
12/31/2008
1/2/2009
1/16/2009
Name of Institution
City
GMAC LLC
General Motors Corporation
General Motors Corporation
Chrysler Holding LLC
Detroit
Detroit
Detroit
Auburn Hills
Chrysler Financial Services Americas LLC
Farmington Hills
State
Ml
Ml
Ml
Ml
Ml
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/ Exercised Warrants
Debt Obligation
Debt Obligation w/ Warrants and Additional Note
Debt Obligation w/ Additional Note
Debt Obligation w/ Additional Note
TOTAL
Amount
$5,000,000,000
$884,024,131
$9,400,000,000
$4,000,000,000
$1,500,000,000
Pricing
Mechanism
Liquidation
Preference
N/A
N/A
N/A
N/A
$20,784,024,131
1/ Treasury committed to lend General Motors Corporation up to $1,000,000,000. The ultimate level of funding was dependent upon the level of investor participation in GMAC LLC's rights offering.
The Amount has been updated to reflect the final level of funding.
2/ The Amount includes $4,000,000,000 funded on December 31, 2008, and $5,400,000,000 funded on January 21, 2009; it does not include an additional loan of $4,000,000,000, which is contingent
on Treasury's authority under section 115(a) of EESA.
3/ The loan was funded through Chrysler LB Receivables Trust, a special purpose vehicle created by Chrysler Financial. The Amount of $1,500,000,000 represents the maximum loan amount. The loan
will be incrementally funded.
TARGETED INVESTMENT PROGRAM
Seller
Date
Name of Institution
12/31/2008 Citigroup Inc.
1/16/2009 Bank of America Corporation
City
New York
Charlotte
State
NY
NC
Transaction Type
Purchase
Purchase
Description
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
TOTAL
Price Paid
Pricing
Mechanism
$20,000,000,000 Par
$20,000,000,000 Par
$40,000,000,000
ASSET GUARANTEE PROGRAM
Seller
Date
Name of Institution
1/16/2009 Citigroup ine.
City
New York
State
NY
Transaction Type
Guarantee
Description
Second-Loss Guarantee on Asset Pool
TOTAL
Guarantee Limit
Premium
Received
Preferred Stock
$5,000,000,000 and Warrants
$5,000,000,000
January 26, 2009
TG-01
Remarks o f Secretary Timothy Geithner
Swearing-In Ceremony
January 26, 2009
Thank you Mr. President.
Thank you Mr. Vice President.
And thanks to my many friends and colleagues for being here this evening.
My wife, Carole, stood beside me as I took this oath of office, as she has before in
this building. I want to thank her for extraordinary grace and support. She has a
remarkable capacity for calm wisdom and empathy. Our children Elise and
Benjamin are back at school in New York doing their mid term exams. I miss them
and am proud of them.
I am very pleased that my father, Peter Geithner, and my brother David are here,
representing my terrific family. My father gave me, among many wonderful things,
the important gift of showing me the world as a child. He took us to live in Zambia
and Rhodesia, then to India and Thailand, and from those places I saw America
through the eyes of others. It was that experience - seeing first hand the
extraordinary influence of American policy on the world - that led me to work in
government.
I first walked into this building about 20 years ago.
I had at Treasury the wonderful experience of working with smart and dedicated
people working for their country, with the shared goal of making government more
effective, improving the results produced by policy, in an environment where our
obligation was to debate the merits, to do what was right not what was expedient,
drawing on the best ideas and expertise.
Treasury's tradition is to defend the integrity of policy, to respect the constraints
imposed by limited resources, and to limit government intervention to where it is
essential to protect our financial system and improve the lives of the American
people.
That tradition is important today, but because it is that tradition of credibility that
makes it possible for governments to do what is necessary to resolve a crisis. In
the world we confront today, Treasury has to be a source of initiative, not just a
reminder of the constraints of reality.
We are at a moment of maximum challenge for our economy and our country.
Our agenda is to move quickly to help you do what the country asked you to do.
To launch the programs that will bring economic recovery sooner, to make our
economy more productive, to restore trust in our financial system with fundamental
reform, to make our tax system better at rewarding work and investment, more fair
and more simple.
http://www.treas.gov/press/releases/tgO 1.htm
8/3/2010
And to restore confidence in America's economic leadership around the world.
I pledge all of my ability to help you meet that challenge and to restore to all
Americans the promise of a better future.
Mr. President, I am deeply grateful for your trust and confidence.
We will work our hearts out for you.
Thank you for giving me this great privilege of working for you.
-30-
http://www.treas.gov/press/releases/tgO 1.htm
8/3/2010
January 27, 2009
tg-02
Treasury Secretary Opens Term Opens With New Rules
To Bolster Transparency, Limit
Lobbyist Influence in Federal investment Decisions
Washington, DC - In light of President Barack Obama's firm commitment to
transparency, accountability and oversight in our government's approach to
stabilizing the financial system, U.S. Treasury Secretary Tim Geithner today
announced several key reforms to the Emergency Economic Stabilization Act
(EESA). As one of his first acts as the 75th Treasury Secretary, Secretary Geithner
outlined new, stepped up rules designed to limit the influence of lobbyists and
special interests in the EESA process and ensure that investment decisions are
guided by objective assessments in the best interest of the health and stability of
the financial system.
"American taxpayers deserve to know that their money is spent in the most
effective way to stabilize the financial system. Today's actions reaffirm our
commitment toward that goal," said Secretary Geithner.
Today's announcement builds on several reforms to the EESA previously outlined
by President Obama, including monitoring and tracking lending patterns by financial
institutions, limiting executive compensation, and preventing shareholders from
being unduly rewarded at taxpayer expense. These new rules go beyond the
approach taken under the EESA to date and will help ensure a new level of
openness and accountability going forward.
The new rules include:
Combating lobbyist influence in the EESA process: The Treasury Department
will implement safeguards to prevent lobbyist influence over the program, including
restricting contacts with lobbyists in connection with applications for, or
disbursements of, EESA funds.
Keeping politics out of funding decisions: The Treasury Department will ensure
that political influence does not interfere with EESA decision making, using as a
model for these protections the limits on political influence over tax matters.
Certification to Congress on objective decision making: In reporting to
Congress, the Office of Financial Stability (OFS) will certify that each investment
decision is based only on investment criteria and the facts of the case.
The investment process will be transparent and based on objective criteria:
* Only banks recommended by the primary bank regulator will be eligible for
capital investments.
* OFS will publish a detailed description of the investment review process
undertaken by the regulators and OFS.
* The Treasury Department will ensure adequate resources exist to process
applications as quickly as possible with priority to the date of the application
as received by OFS and will formulate procedures to ensure integrity and
regularity in the application process.
-30-
http://www.treas.gov/press/releases/tg02.htm
8/3/2010
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January 27, 2009
tg-03
Treasury Provides Funding to Bolster Healthy, Local Banks
Capital Purchase Program Funds 23 Banks
to Help Meet Lending Needs o f Local Consumers, Businesses
Washington, DC - The U.S. Treasury Department today announced investments of
approximately $386 million in 23 banks across the nation as part of its Capital
Purchase Program (CPP), a means to directly infuse capital into healthy, viable
banks with the goal of increasing the flow of financing available to small businesses
and consumers. With additional capital, banks are better able to meet the
lending needs of their customers, and businesses have greater access to the credit
that they need to keep operating and growing.
Since its inception in October 2008, Treasury has strengthened regional, small and
large financial institutions as well as Community Development Financial Institutions
through total CPP investments of $194.2 billion in 317 institutions in 43 states and
Puerto Rico. To date, the largest investment was $25 billion and the smallest
investment was approximately $1 million.
Among the most recent banks to receive Treasury funding through the CPP is the
United Labor Bank, which provides cash management services to unions, multi
family lending and small commercial real estate loans throughout California.
"With the addition of this capital, we will expand our branch network from five
branches to seven or eight in the Pacific Northwest. We also plan to expand our
lending platform with the addition of residential loan products. Our lending goals for
the 2009 business year will exceed $50 million of new loan growth," said Malcolm
Hotchkiss, President and Chief Executive Officer, First ULB Corp and United Labor
Bank.
Under the CPP, Treasury is purchasing up to a total of $250 billion of senior
preferred shares from viable U.S. financial institutions such as those announced
today. Institutions that participate in the CPP must comply with restrictions on
executive compensation during the period that Treasury holds equity issued
through the CPP and agree to limitations on dividends and stock repurchases.
Banks participating in the CPP will pay the Treasury a five percent dividend on
senior preferred shares for the first five years following the investment and a rate of
nine percent per year thereafter. Banks may repay Treasury under the conditions
established in the purchase agreements, and Treasury may sell these shares when
market conditions stabilize. Further information about the terms of the program,
including weekly transactions, can be found at
http://www.treas.gov/initiatives/eesa/.
The following is a complete list of banks receiving funding on January 23, 2009:
Arkansas
Liberty Bancshares, Inc.
California
California Oaks State Bank
Calwest Bancorp/South County Bank
Commonwealth Business Bank
http://www.treas.gov/press/releases/tg03.htm
$57,500,000
$3,300,000
$4,656,000
$7,701,000
8/3/2010
First ULB Corp.
Fresno First Bank
Delaware
WSFS Financial Corporation
Florida
Alarion Financial Services, Inc.
Seaside National Bank & Trust
Illinois
Midland States Bancorp, Inc.
Princeton National Bancorp, Inc.
Southern Illinois Bancorp, Inc.
Indiana
1st Source Corporation
Louisiana
FPB Financial Corp
Minnesota
Crosstown Holding Company/21st Century Bank
Missouri
Calvert Financial Corporation
Mississippi
BankFirst Capital Corporation
North Carolina
AB&T Financial Corporation
Ohio
First Citizens Banc Corp
Pennsylvania
Stonebridge Financial Corp.
Tennessee
Moscow Bancshares, Inc.
Virginia
Farmers Bank
Washington
Pierce County Bancorp
$4,900,000
$1,968,000
$52,625,000
$6,514,000
$5,677,000
$10,189,000
$25,083,000
$5,000,000
$111,000,000
$3,240,000
$10,650,000
$1,037,000
$15,500,000
$3,500,000
$23,184,000
$10,973,000
$6,216,000
$8,752,000
$6,800,000
i i ¡ I ii
TTTrrr
REPORTS
* Transaction Report (1 /27/2Q09)
http://www.treas.gov/press/releases/tg03.htm
8/3/2010
U.S. Treasury Department
Office of Financial Stability
Troubled Asset Relief Program
Transactions Report
For Period Ending January 23, 2009
CAPITAL PURCHASE PROGRAM
Seller
Date
Name of Institution
10/28/2008 Bank of America Corporation
10/28/2008 Bank of New York Mellon Corporation
10/28/2008 Citigroup Inc.
10/28/2008 The Goldman Sachs Group, Inc.
10/28/2008 JPMorgan Chase & Co.
10/28/2008 Morqan Stanley
10/28/2008 State Street Corporation
10/28/2008 Wells Farqo & Company
11/14/2008 Bank of Commerce Holdings
11/14/2008 1st FS Corporation
11/14/2008 UCBH Holdings, Inc.
11/14/2008 Northern Trust Corporation
11/14/2008 SunTrust Banks, Inc.
11/14/2008 Broadway Financial Corporation
11/14/2008 Washington Federal Inc.
11/14/2008 BB&T Corp.
11/14/2008 Provident Bancshares Corp.
11/14/2008 Umpqua Holdings Corp.
11/14/2008 Comerica Inc.
11/14/2008 Reqions Financial Corp.
11/14/2008 Capital One Financial Corporation
11/14/2008 First Horizon National Corporation
11/14/2008 Huntinqton Bancshares
11/14/2008 KeyCorp
11/14/2008 Valley National Bancorp
11/14/2008 Zions Bancorporation
11/14/2008 Marshall & llsley Corporation
11/14/2008 U.S. Bancorp
11/14/2008 TCF Financial Corporation
11/21/2008 First Niaqara Financial Group
11/21/2008 HF Financial Corp.
11/21/2008 Centerstate Banks of Florida Inc.
11/21/2008 City National Corporation
11/21/2008 First Community Bankshares Inc.
11/21/2008 Western Alliance Bancorporation
11/21/2008 Webster Financial Corporation
11/21/2008 Pacific Capital Bancorp
11/21/2008 Heritage Commerce Corp.
11/21/2008 Ameris Bancorp
11/21/2008 Porter Bancorp Inc.
City
Charlotte
New York
New York
New York
New York
New York
Boston
San Francisco
Redding
Hendersonville
San Francisco
Chicago
Atlanta
Los Angeles
Seattle
Winston-Salem
Baltimore
Portland
Dallas
Birmingham
McLean
Memphis
Columbus
Cleveland
Wayne
Salt Lake City
Milwaukee
Minneapolis
Wayzata
Lockport
Sioux Falls
Davenport
Beverly Hills
Bluefield
Las Vegas
Waterbury
Santa Barbara
San Jose
Moultrie
Louisville
State
NC
NY
NY
NY
NY
NY
MA
CA
CA
NC
CA
IL
GA
CA
WA
NC
MD
OR
TX
AL
VA
TN
OH
OH
NJ
UT
Wl
MN
MN
NY
SD
FL
CA
VA
NV
CT
CA
CA
GA
KY
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Preferred Stock w/Warrants
Price Paid
$15,000,000,000
$3,000,000,000
$25,000,000,000
$10,000,000,000
$25,000,000,000
$10,000,000,000
$2,000,000,000
$25,000,000,000
$17,000,000
$16,369,000
$298,737,000
$1,576,000,000
$3,500,000,000
$9,000,000
$200,000,000
$3,133,640,000
$151,500,000
$214,181,000
$2,250,000,000
$3,500,000,000
$3,555,199,000
$866,540,000
$1,398,071,000
$2,500,000,000
$300,000,000
$1,400,000,000
$1,715,000,000
$6,599,000,000
$361,172,000
$184,011,000
$25,000,000
$27,875,000
$400,000,000
$41,500,000
$140,000,000
$400,000,000
$180,634,000
$40,000,000
$52,000,000
$35,000,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
Date
Name of Institution
11/21/2008 Banner Corporation
11/21/2008 Cascade Financial Corporation
11/21/2008 Columbia Banking System, Inc.
11/21/2008 Heritage Financial Corporation
11/21/2008 First PacTrust Bancorp, Inc.
11/21/2008 Severn Bancorp, Inc.
11/21/2008 Boston Private Financial Holdings, Inc.
11/21/2008 Associated Banc-Corp
11/21/2008 Trustmark Corporation
11/21/2008 First Community Corporation
11/21/2008 Taylor Capital Group
11/21/2008 Nara Bancorp, Inc.
12/5/2008 Midwest Banc Holdings, Inc.
12/5/2008 MB Financial Inc.
12/5/2008 First Midwest Bancorp, Inc.
12/5/2008 United Community Banks, Inc.
12/5/2008 Wesbanco Bank Inc.
12/5/2008 Encore Bancshares Inc.
12/5/2008 Manhattan Bancorp
12/5/2008 Iberiabank Corporation
12/5/2008 Eagle Bancorp, Inc.
12/5/2008 Sandy Spring Bancorp, Inc.
12/5/2008 Coastal Banking Company, Inc.
12/5/2008 East West Bancorp
12/5/2008 South Financial Group, Inc.
12/5/2008 Great Southern Bancorp
12/5/2008 Cathay General Bancorp
12/5/2008 Southern Community Financial Corp.
12/5/2008 CVB Financial Corp
12/5/2008 First Defiance Financial Corp.
12/5/2008 First Financial Holdings Inc.
12/5/2008 Superior Bancorp Inc.
12/5/2008 Southwest Bancorp, Inc.
12/5/2008 Popular, Inc.
12/5/2008 Blue Valley Ban Corp
12/5/2008 Central Federal Corporation
12/5/2008 Bank of Marin Bancorp
12/5/2008 Bank of North Carolina
12/5/2008 Central Bancorp, Inc.
12/5/2008 Southern Missouri Bancorp, Inc.
12/5/2008 State Bancorp, Inc.
12/5/2008 TIB Financial Corp
12/5/2008 Unity Bancorp, Inc.
12/5/2008 Old Line Bancshares, Inc.
12/5/2008 FPB Bancorp, Inc.
12/5/2008 Sterling Financial Corporation
12/5/2008 Oak Valley Bancorp
12/12/2008 Old National Bancorp
12/12/2008 Capital Bank Corporation
12/12/2008 Pacific International Bancorp
12/12/2008 SVB Financial Group
City
State
Walla Walla
WA
Everett
WA
Tacoma
WA
Olympia
WA
CA
Chula Vista
MD
Annapolis
Boston
MA
Green Bay
Wl
Jackson
MS
Lexington
SC
Rosemont
IL
Los Angeles
CA
Melrose Park
IL
Chicago
IL
Itasca
IL
Blairsville
GA
Wheeling
WV
Houston
TX
El Segundo
CA
Lafayette
LA
Bethesda
MD
Olney
MD
Fernandina Beach FL
Pasadena
CA
Greenville
SC
Springfield
MO
CA
Los Angeles
Winston-Salem
NC
Ontario
CA
Defiance
OH
Charleston
SC
Birmingham
AL
Stillwater
OK
San Juan
PR
Overland Park
KS
Fairlawn
OH
CA
Novato
NC
Thomasville
Somerville
MA
Poplar Bluff
MO
Jericho
NY
Naples
FL
Clinton
NJ
Bowie
MD
Port St. Lucie
FL
Spokane
WA
Oakdale
CA
Evansville
IN
Raliegh
NC
Seattle
WA
Santa Clara
CA
Transaction Type
Description
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Price Paid
$124,000,000
$38,970,000
$76,898,000
$24,000,000
$19,300,000
$23,393,000
$154,000,000
$525,000,000
$215,000,000
$11,350,000
$104,823,000
$67,000,000
$84,784,000
$196,000,000
$193,000,000
$180,000,000
$75,000,000
$34,000,000
$1,700,000
$90,000,000
$38,235,000
$83,094,000
$9,950,000
$306,546,000
$347,000,000
$58,000,000
$258,000,000
$42,750,000
$130,000,000
$37,000,000
$65,000,000
$69,000,000
$70,000,000
$935,000,000
$21,750,000
$7,225,000
$28,000,000
$31,260,000
$10,000,000
$9,550,000
$36,842,000
$37,000,000
$20,649,000
$7,000,000
$5,800,000
$303,000,000
$13,500,000
$100,000,000
$41,279,000
$6,500,000
$235,000,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
Date
Name of Institution
12/12/2008 LNB Bancorp Inc.
12/12/2008 Wilmington Trust Corporation
12/12/2008 Susquehanna Bancshares, Inc
12/12/2008 Signature Bank
12/12/2008 HopFed Bancorp
12/12/2008 Citizens Republic Bancorp, Inc.
12/12/2008 Indiana Community Bancorp
12/12/2008 Bank of the Ozarks, Inc.
12/12/2008 Center Financial Corporation
12/12/2008 NewBridge Bancorp
12/12/2008 Sterling Bancshares, Inc.
12/12/2008 The Bancorp, Inc.
12/12/2008 TowneBank
12/12/2008 Wilshire Bancorp, Inc.
12/12/2008 Valley Financial Corporation
12/12/2008 Independent Bank Corporation
12/12/2008 Pinnacle Financial Partners, Inc.
12/12/2008 First Litchfield Financial Corporation
12/12/2008 National Penn Bancshares, Inc.
12/12/2008 Northeast Bancorp
12/12/2008 Citizens South Banking Corporation
12/12/2008 Virginia Commerce Bancorp
12/12/2008 Fidelity Bancorp, Inc.
12/12/2008 LSB Corporation
12/19/2008 Intermountain Community Bancorp
12/19/2008 Community West Bancshares
12/19/2008 Synovus Financial Corp.
12/19/2008 Tennessee Commerce Bancorp, Inc.
12/19/2008 Community Bankers Trust Corporation
12/19/2008 BancTrust Financial Group, Inc.
12/19/2008 Enterprise Financial Services Corp.
12/19/2008 Mid Penn Bancorp, Inc.
12/19/2008 Summit State Bank
12/19/2008 VIST Financial Corp.
12/19/2008 Wainwright Bank & Trust Company
12/19/2008 Whitney Holding Corporation
12/19/2008 The Connecticut Bank and Trust Company
12/19/2008 CoBiz Financial Inc.
12/19/2008 Santa Lucia Bancorp
12/19/2008 Seacoast Banking Corporation of Florida
12/19/2008 Horizon Bancorp
12/19/2008 Fidelity Southern Corporation
12/19/2008 Community Financial Corporation
12/19/2008 Berkshire Hills Bancorp, Inc.
12/19/2008 First California Financial Group, Inc
12/19/2008 AmeriServ Financial, Inc
12/19/2008 Security Federal Corporation
12/19/2008 Wintrust Financial Corporation
12/19/2008 Flushing Financial Corporation
12/19/2008 Monarch Financial Holdings, Inc.
12/19/2008 StellarOne Corporation
City
State
Lorain
OH
Wilmington
DE
Lititz
PA
New York
NY
Hopkinsville
KY
Flint
Ml
Columbus
IN
Little Rock
AR
Los Angeles
CA
Greensboro
NC
Houston
TX
Wilmington
DE
Portsmouth
VA
Los Angeles
CA
Roanoke
VA
Ionia
Ml
Nashville
TN
Litchfield
CT
Boyertown
PA
Lewiston
ME
Gastonia
NC
Arlington
VA
Pittsburgh
PA
North Andover
MA
Sandpoint
ID
Goleta
CA
Columbus
GA
Franklin
TN
Glen Allen
VA
Mobile
AL
St. Louis
MO
Millersburg
PA
Santa Rosa
CA
Wyomissing
PA
Boston
MA
New Orleans
LA
Hartford
CT
Denver
CO
Atascadero
CA
Stuart
FL
Michigan City
IN
Atlanta
GA
Staunton
VA
Pittsfield
MA
Westlake Village CA
Johnstown
PA
Aiken
SC
_ake Forest
IL
Lake Success
NY
Chesapeake
VA
Charlottesville
VA
Transaction Type
Description
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
3urchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Price Paid
$25,223,000
$330,000,000
$300,000,000
$120,000,000
$18,400,000
$300,000,000
$21,500,000
$75,000,000
$55,000,000
$52,372,000
$125,198,000
$45,220,000
$76,458,000
$62,158,000
$16,019,000
$72,000,000
$95,000,000
$10,000,000
$150,000,000
$4,227,000
$20,500,000
$71,000,000
$7,000,000
$15,000,000
$27,000,000
$15,600,000
$967,870,000
$30,000,000
$17,680,000
$50,000,000
$35,000,000
$10,000,000
$8,500,000
$25,000,000
$22,000,000
$300,000,000
$5,448,000
$64,450,000
$4,000,000
$50,000,000
$25,000,000
$48,200,000
$12,643,000
$40,000,000
$25,000,000
$21,000,000
$18,000,000
$250,000,000
$70,000,000
$14,700,000
$30,000,000
------------------ 1
Pricing
Mechanism
Par
Par
Par
Par
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Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
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Par
Par
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—
Seller
P ric in g
2/
21
2/
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Name of Institution
Date
12/19/2008 Union Bankshares Corporation
12/19/2008 Tidelands Bancshares, Inc
12/19/2008 Bancorp Rhode Island, Inc.
12/19/2008 Hawthorn Bancshares, Inc.
12/19/2008 The Elmira Savings Bank, FSB
12/19/2008 Alliance Financial Corporation
12/19/2008 Heartland Financial USA, Inc.
12/19/2008 Citizens First Corporation
12/19/2008 FFW Corporation
12/19/2008 Plains Capital Corporation
12/19/2008 Tri-County Financial Corporation
12/19/2008 OneUnited Bank
12/19/2008 Patriot Bancshares, Inc.
12/19/2008 Pacific City Finacial Corporation
12/19/2008 Marquette National Corporation
12/19/2008 Exchange Bank
12/19/2008 Monadnock Bancorp, Inc.
12/19/2008 Bridgeview Bancorp, Inc.
12/19/2008 Fidelity Financial Corporation
12/19/2008 Patapsco Bancorp, Inc.
12/19/2008 NCAL Bancorp
12/19/2008 FCB Bancorp, Inc.
12/23/2008 First Financial Bancorp
12/23/2008 Bridge Capital Holdings
12/23/2008 International Bancshares Corporation
12/23/2008 First Sound Bank
12/23/2008 M&T Bank Corporation
12/23/2008 Emclaire Financial Corp.
12/23/2008 Park National Corporation
12/23/2008 Green Bankshares, Inc.
12/23/2008 Cecil Bancorp, Inc.
12/23/2008 Financial Institutions, Inc.
12/23/2008 Fulton Financial Corporation
12/23/2008 United Bancorporation of Alabama, Inc.
12/23/2008 MutualFirst Financial, Inc.
12/23/2008 BCSB Bancorp, Inc.
12/23/2008 HMN Financial, Inc.
12/23/2008 First Community Bank Corporation of America
12/23/2008 Sterling Bancorp
12/23/2008 Intervest Bancshares Corporation
12/23/2008 Peoples Bancorp of North Carolina, Inc.
12/23/2008 Parkvale Financial Corporation
12/23/2008 Timberland Bancorp, Inc.
12/23/2008 1st Constitution Bancorp
12/23/2008 Central Jersey Bancorp
12/23/2008 Western Illinois Bancshares Inc.
12/23/2008 Saigon National Bank
12/23/2008 Capital Pacific Bancorp
12/23/2008 Uwharrie Capital Corp
12/23/2008 Mission Valley Bancorp
12/23/2008 The Little Bank, Incorporated
City
Bowling Green
Mt. Pleasant
Providence
Lee's Summit
Elmira
Syracuse
Dubuque
Bowling Green
Wabash
Dallas
Waldorf
Boston
Houston
Los Angeles
Chicago
Santa Rosa
Peterborough
Bridgeview
Wichita
Dundalk
Los Angeles
Louisville
Cincinnati
San Jose
Laredo
Seattle
Buffalo
Emlenton
Newark
Greeneville
Elkton
Warsaw
Lancaster
Atmore
Muncie
Baltimore
Rochester
Pinellas Park
New York
New York
Newton
Monroeville
Hoquiam
Cranbury
Oakhurst
Monmouth
Westminster
Portland
Albemarle
Sun Valley
Kinston
State
VA
SC
Rl
MO
NY
NY
IA
KY
IN
TX
MD
MA
TX
CA
IL
CA
NH
IL
KS
MD
CA
KY
OH
CA
TX
WA
NY
PA
OH
TN
MD
NY
PA
AL
IN
MD
MN
FL
NY
NY
NC
PA
WA
NJ
NJ
IL
CA
OR
NC
CA
NC
Transaction Type
Description
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock
Purchase
Preferred Stock w/ Exercised Warrants
Price Paid
$59,000,000
$14,448,000
$30,000,000
$30,255,000
$9,090,000
$26,918,000
$81,698,000
$8,779,000
$7,289,000
$87,631,000
$15,540,000
$12,063,000
$26,038,000
$16,200,000
$35,500,000
$43,000,000
$1,834,000
$38,000,000
$36,282,000
$6,000,000
$10,000,000
$9,294,000
$80,000,000
$23,864,000
$216,000,000
$7,400,000
$600,000,000
$7,500,000
$100,000,000
$72,278,000
$11,560,000
$37,515,000
$376,500,000
$10,300,000
$32,382,000
$10,800,000
$26,000,000
$10,685,000
$42,000,000
$25,000,000
$25,054,000
$31,762,000
$16,641,000
$12,000,000
$11,300,000
$6,855,000
$1,549,000
$4,000,000
$10,000,000
$5,500,000
$7,500,000
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Seller
2/
2/
2/
2/
2/
2/
2/
2/
2/
21
2/
2/
2/
21
21
1/
2/
2/
2/
Date
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/23/2008
12/31/2008
12/31/2008
12/31/2008
12/31/2008
12/31/2008
12/31/2008
12/31/2008
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
1/9/2009
Name of Institution
Pacific Commerce Bank
Citizens Community Bank
Seacoast Commerce Bank
TCNB Financial Corp.
Leader Bancorp, Inc.
Nicolet Bankshares, Inc.
Magna Bank
Western Community Bancshares, Inc.
Community Investors Bancorp, Inc.
Capital Bancorp, Inc.
Cache Valley Banking Company
Citizens Bancorp
Tennessee Valley Financial Holdings, Inc.
Pacific Coast Bankers' Bancshares
SunTrust Banks, Inc.
The PNC Financial Services Group Inc.
Fifth Third Bancorp
Hampton Roads Bankshares, Inc.
CIT Group Inc.
West Bancorporation, Inc.
First Banks, Inc.
Bank of America Corporation
FirstMerit Corporation
Farmers Capital Bank Corporation
Peapack-Gladstone Financial Corporation
Commerce National Bank
The First Bancorp, Inc.
Sun Bancorp, Inc.
Crescent Financial Corporation
American Express Company
Central Pacific Financial Corp.
Centrue Financial Corporation
Eastern Virginia Bankshares, Inc.
Colony Bankcorp, Inc.
Independent Bank Corp.
Cadence Financial Corporation
LCNB Corp.
Center Bancorp, Inc.
F.N.B. Corporation
C&F Financial Corporation
North Central Bancshares, Inc.
Carolina Bank Holdings, Inc.
First Bancorp
First Financial Service Corporation
Codorus Valley Bancorp, Inc.
MidSouth Bancorp, Inc.
First Security Group, Inc.
Shore Bancshares, Inc.
The Queensborough Company
American State Bancshares, Inc.
Security California Bancorp
City
Los Angeles
South Hill
Chula Vista
Dayton
Arlington
Green Bay
Memphis
Palm Desert
Bucyrus
Rockville
Logan
Nevada City
Oak Ridge
San Francisco
Atlanta
Pittsburgh
Cincinnati
Norfolk
New York
West Des Moines
Clayton
Charlotte
Akron
Frankfort
Gladstone
Newport Beach
Damariscotta
Vineland
Cary
New York
Honolulu
St. Louis
Tappahannock
Fitzgerald
Rockland
Starkville
Lebanon
Union
Hermitage
West Point
Fort Dodge
Greensboro
Troy
Elizabethtown
York
Lafayette
Chattanooga
Easton
Louisville
Great Bend
Riverside
State
CA
VA
CA
OH
MA
Wl
TN
CA
OH
MD
UT
CA
TN
CA
GA
PA
OH
VA
NY
IA
MO
NC
OH
KY
NJ
CA
ME
NJ
NC
NY
HI
MO
VA
GA
MA
MS
OH
NJ
PA
VA
IA
NC
NC
KY
PA
LA
TN
MD
GA
KS
CA
Transaction Type
Description
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Purchase
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Purchase
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Purchase
Preferred Stock w/ Exercised Warrants
Price Paid
$4,060,000
$3,000,000
$1,800,000
$2,000,000
$5,830,000
$14,964,000
$13,795,000
$7,290,000
$2,600,000
$4,700,000
$4,767,000
$10,400,000
$3,000,000
$11,600,000
$1,350,000,000
$7,579,200,000
$3,408,000,000
$80,347,000
$2,330,000,000
$36,000,000
$295,400,000
$10,000,000,000
$125,000,000
$30,000,000
$28,685,000
$5,000,000
$25,000,000
$89,310,000
$24,900,000
$3,388,890,000
$135,000,000
$32,668,000
$24,000,000
$28,000,000
$78,158,000
$44,000,000
$13,400,000
$10,000,000
$100,000,000
$20,000,000
$10,200,000
$16,000,000
$65,000,000
$20,000,000
$16,500,000
$20,000,000
$33,000,000
$25,000,000
$12,000,000
$6,000,000
$6,815,000
Pricing
Mechanism
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
■
2/
2/
3/
2/
2/
2/
2/
2/
2/
2/
2/
2/
2/
3/
2/
2/
2/
2/
2/
3/
2/
2/
2/
2/
2/
21
2/
2/
2/
2/
2/
3/
2/
T~
Seller
Date
Name of Institution
1/9/2009 Security Business Bancorp
1/9/2009 Sound Banking Company
1/9/2009 Mission Community Bancorp
1/9/2009 Redwood Financial Inc.
1/9/2009 Surrey Bancorp
1/9/2009 Independence Bank
1/9/2009 Valley Community Bank
1/9/2009 Rising Sun Bancorp
1/9/2009 Community Trust Financial Corporation
1/9/2009 GrandSouth Bancorporation
1/9/2009 Texas National Bancorporation
1/9/2009 Congaree Bancshares, Inc.
1/9/2009 New York Private Bank & Trust Corporation
1/16/2009 Home Bancshares, Inc.
1/16/2009 Washington Banking Company/ Whidbey Island Bank
1/16/2009 New Hampshire Thrift Bancshares, Inc.
1/16/2009 Bar Harbor Bankshares/Bar Harbor Bank & Trust
1/16/2009 Somerset Hills Bancorp
1/16/2009 SCBT Financial Corporation
1/16/2009 S&T Bancorp
1/16/2009 ECB Bancorp, Inc./East Carolina Bank
1/16/2009 First BanCorp
1/16/2009 Texas Capital Bancshares, Inc.
1/16/2009 Yadkin Valley Financial Corporation
1/16/2009 Carver Bancorp, Inc
1/16/2009 Citizens & Northern Corporation
1/16/2009 MainSource Financial Group, Inc.
1/16/2009 MetroCorp Bancshares, Inc.
1/16/2009 United Bancorp, Inc.
1/16/2009 Old Second Bancorp, Inc.
1/16/2009 Pulaski Financial Corp
1/16/2009 OceanFirst Financial Corp.
1/16/2009 Community 1st Bank
1/16/2009 TCB Holding Company, Texas Community Bank
1/16/2009 Centra Financial Holdings, Inc./Centra Bank, Inc.
1/16/2009 First Bankers Trustshares, Inc.
1/16/2009 Pacific Coast National Bancorp
1/16/2009 Community Bank of the Bay
1/16/2009 Redwood Capital Bancorp
1/16/2009 Syringa Bancorp
1/16/2009 daho Bancorp
1/16/2009 Puget Sound Bank
1/16/2009 United Financial Banking Companies, Inc.
1/16/2009 Dickinson Financial Corporation II
1/16/2009 The Baraboo Bancorporation
1/16/2009 Bank of Commerce
1/16/2009 State Bankshares, Inc.
1/16/2009 3NCCORP, Inc.
1/16/2009 rirst Manitowoc Bancorp, Inc.
1/16/2009 Southern Bancorp, Inc.
1/16/2009 Vlorrill Bancshares, Inc.
City
San Diego
Morehead City
San Luis Obispo
Redwood Falls
Mount Airy
East Greenwich
Pleasanton
Rising Sun
Ruston
Greenville
Jacksonville
Cayce
New York
Conway
Oak Harbor
Newport
Bar Harbor
Bernardsville
Columbia
Indiana
Engelhard
San Juan
Dallas
Elkin
New York
Wellsboro
Greensburg
Houston
Tecumseh
Aurora
Creve Coeur
Toms River
Roseville
The Woodlands
Morgantown
Quincy
San Clemente
Oakland
Eureka
Boise
Boise
Bellevue
Vienna
Kansas City
Baraboo
Charlotte
Fargo
Bismarck
Manitowoc
Arkadelphia
Merriam
State Transaction Type
Description
jCA
Purchase
Preferred Stock w/ Exercised Warrants
NC
Purchase
Preferred Stock w/ Exercised Warrants
CA
Purchase
Preferred Stock
MN
Purchase
Preferred Stock w/ Exercised Warrants
NC
Purchase
Preferred Stock w/ Exercised Warrants
Rl
Purchase
Preferred Stock w/ Exercised Warrants
CA
Purchase
Preferred Stock w/ Exercised Warrants
MD
Purchase
Preferred Stock w/ Exercised Warrants
LA
Purchase
Preferred Stock w/ Exercised Warrants
SC
Purchase
Preferred Stock w/ Exercised Warrants
TX
Purchase
Preferred Stock w/ Exercised Warrants
SC
Purchase
Preferred Stock w/ Exercised Warrants
NY
Purchase
Preferred Stock w/ Exercised Warrants
AR
Purchase
Preferred Stock w/ Warrants
WA
Purchase
Preferred Stock w/ Warrants
NH
Purchase
Preferred Stock w/ Warrants
ME
Purchase
Preferred Stock w/ Warrants
NJ
Purchase
Preferred Stock w/ Warrants
SC
Purchase
Preferred Stock w/ Warrants
PA
Purchase
Preferred Stock w/ Warrants
NC
Purchase
Preferred Stock w/ Warrants
PR
Purchase
Preferred Stock w/ Warrants
TX
Purchase
Preferred Stock w/ Warrants
NC
Purchase
Preferred Stock w/ Warrants
NY
Purchase
Preferred Stock
PA
Purchase
Preferred Stock w/ Warrants
IN
Purchase
Preferred Stock w/ Warrants
TX
Purchase
Preferred Stock w/ Warrants
Ml
Purchase
Preferred Stock w/ Warrants
IL
Purchase
Preferred Stock w/ Warrants
MO
Purchase
Preferred Stock w/ Warrants
NJ
Purchase
Preferred Stock w/ Warrants
CA
Purchase
Preferred Stock w/ Exercised Warrants
TX
Purchase
Preferred Stock w/ Exercised Warrants
wv
Purchase
Preferred Stock w/ Exercised Warrants
IL
Purchase
Preferred Stock w/ Exercised Warrants
CA
Purchase
Preferred Stock w/ Exercised Warrants
CA
Purchase
Preferred Stock
CA
Purchase
Preferred Stock w/ Exercised Warrants
ID
Purchase
Preferred Stock w/ Exercised Warrants
ID
Purchase
Preferred Stock w/ Exercised Warrants
WA
Purchase
Preferred Stock w/ Exercised Warrants
VA
Purchase
Preferred Stock w/ Exercised Warrants
MO
Purchase
Preferred Stock w/ Exercised Warrants
Wl
Purchase
Preferred Stock w/ Exercised Warrants
NC
Purchase
Preferred Stock w/ Exercised Warrants
ND
3urchase
Preferred Stock w/ Exercised Warrants
ND
3urchase
^referred Stock w/ Exercised Warrants
Wl
3urchase
^referred Stock w/ Exercised Warrants
AR
Purchase
Preferred Stock
KS
Purchase
^referred Stock w/ Exercised Warrants
Pricing
Price Paid
Mechanism
$5,803,000 Par
$3,070,000 Par
$5,116,000 Par
$2,995,000 Par
$2,000,000 Par
$1,065,000 Par
$5,500,000 Par
$5,983,000 Par
$24,000,000 Par
$9,000,000 Par
$3,981,000 Par
$3,285,000 Par
$267,274,000 Par
$50,000,000 Par
$26,380,000 Par
$10,000,000 Par
$18,751,000 Par
$7,414,000 Par
$64,779,000 Par
$108,676,000 Par
$17,949,000 Par
$400,000,000 Par
$75,000,000 Par
$36,000,000 Par
$18,980,000 Par
$26,440,000 Par
$57,000,000 Par
$45,000,000 Par
$20,600,000 Par
$73,000,000 Par
$32,538,000 Par
$38,263,000 Par
$2,550,000 Par
$11,730,000 Par
$15,000,000 Par
$10,000,000 Par
$4,120,000 Par
$1,747,000 Par
$3,800,000 Par
$8,000,000 Par
$6,900,000 Par
$4,500,000 Par
$5,658,000 Par
$146,053,000 Par
$20,749,000 Par
$3,000,000 Par
$50,000,000 Par
$20,093,000 Par
$12,000,000 Par
$11,000,000 Par
$13,000,000 3ar
Seller
Date
2/
21
21
21
21
2/
21
2/
2/
21
21
2/
2/
21
2/
2/
2/
2/
2/
Name of Institution
1/16/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
Treaty Oak Bancorp, Inc.
1st Source Corporation
Princeton National Bancorp, Inc.
AB&T Financial Corporation
First Citizens Banc Corp
WSFS Financial Corporation
Commonwealth Business Bank
Seaside National Bank & Trust
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
1/23/2009
CalWest Bancorp
Fresno First Bank
First ULB Corp.
Alarion Financial Services, Inc.
Midland States Bancorp, Inc.
Moscow Bancshares, Inc.
Farmers Bank
California Oaks State Bank
Pierce County Bancorp
Calvert Financial Corporation
Liberty Bancshares, Inc.
Crosstown Holding Company
BankFirst Capital Corporation
Southern Illinois Bancorp, Inc.
FPB Financial Corp.
Stonebridge Financial Corp.
City
Austin
South Bend
Princeton
Gastonia
Sandusky
Wilmington
Los Angeles
Orlando
Rancho Santa
Margarita
Fresno
Oakland
Ocala
Effingham
Moscow
Windsor
Thousand Oaks
Tacoma
Ashland
Jonesboro
Blaine
Macon
Carmi
Hammond
West Chester
State
Transaction Type
Description
Price Paid
Pricing
Mechanism
TX
IN
IL
NC
OH
DE
CA
FL
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
$3,268,000
$111,000,000
$25,083,000
$3,500,000
$23,184,000
$52,625,000
$7,701,000
$5,677,000
Par
Par
Par
Par
Par
Par
Par
Par
CA
CA
CA
FL
IL
TN
VA
CA
WA
MO
AR
MN
MS
IL
LA
PA
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Purchase
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
Preferred Stock w/ Exercised Warrants
$4,656,000
$1,968,000
$4,900,000
$6,514,000
$10,189,000
$6,216,000
$8,752,000
$3,300,000
$6,800,000
$1,037,000
$57,500,000
$10,650,000
$15,500,000
$5,000,000
$3,240,000
$10,973,000
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
Par
TOTAL
$194,177,001,000
1/ This transaction was included in previous Transaction Reports with Merrill Lynch & Co., Inc. listed as the qualifying institution and a 10/28/2008 transaction date, footnoted to indicate that settlement was
deferred pending merger. The purchase of Merrill Lynch by Bank of America was completed on 1/1/2009, and this transaction under the CPP was funded on 1/9/2009.
2/ Privately-held qualified financial institution; Treasury received a warrant to purchase additional shares of preferred stock, which it exercised immediately.
3/ To promote community development financial institutions (CDFIs), Treasury does not require warrants as part of its investment in certified CDFIs when the size of the investment is $50 million or less.
SYSTEMICALLY SIGNIFICANT FAILING INSTITUTIONS
Seller
Date
Name of Institution
11/25/2008 A ÏG
City
New York
State
NY
Transaction Type
Purchase
Description
Preferred Stock w / Warrants
Pricing
Mechanism
Price Paid
$40,000,000,000 Par
AUTOMOTIVE INDUSTRY FINANCING PROGRAM
Seller
Date
1/
2/
3/
12/29/2008
12/29/2008
12/31/2008
1/2/2009
1/16/2009
Name of Institution
GMAC LLC
General Motors Corporation
General Motors Corporation
Chrysler Holding LLC
Chrysler Financial Services Americas LLC
City
Detroit
Detroit
Detroit
Auburn Hills
Farmington Hills
State
Ml
Ml
Ml
Ml
Ml
Transaction Type
Purchase
Purchase
Purchase
Purchase
Purchase
Description
Preferred Stock w/ Exercised Warrants
Debt Obligation
Debt Obligation w/ Warrants and Additional Note
Debt Obligation w / Additional Note
Debt Obligation w/ Additional Note
TOTAL
Pricing
Mechanism
Amount
$5,000,000,000
$884,024,131
$9,400,000,000
$4,000,000,000
$1,500,000,000
Liquidation
Preference
N/A
N/A
N/A
N/A
$20,784,024,131
1/ Treasury committed to lend General Motors Corporation up to $1,000,000,000. The ultimate level of funding was dependent upon the level of investor participation in GMAC LLC's rights offering.
The Amount has been updated to reflect the final level of funding.
21 The Amount includes $4,000,000,000 funded on December 31, 2008, and $5,400,000,000 funded on January 21, 2009; it does not include an additional loan of $4,000,000,000, which is contingent
on Treasury's authority under section 115(a) of EESA.
3/ The loan was funded through Chrysler LB Receivables Trust, a special purpose vehicle created by Chrysler Financial. The Amount of $1,500,000,000 represents the maximum loan amount. The loan
will be incrementally funded.
TARGETED INVESTMENT PROGRAM
Seller
Date
Name of Institution
12/31/2008 Citigroup Inc.
1/16/2009 Bank of America Corporation
City
New York
Charlotte
State
NY
NC
Transaction Type
Purchase
Purchase
Description
Preferred Stock w/ Warrants
Preferred Stock w/ Warrants
TOTAL
Price Paid
Pricing
Mechanism
$20,000,000,000 Par
$20,000,000,000 Par
$40,000,000,000
ASSET GUARANTEE PROGRAM
Seller
Date
Name of Institution
1/16/2009 Citigroup Inc.
City
New York
State
NY
Transaction Type
Guarantee
Description
Second-Loss Guarantee on Asset Pool
TOTAL
Guarantee Limit
Premium
Received
Preferred Stock
$5,000,000,000 and Warrants
$5,000,000,000
January 28, 2009
TG-04
Treasury Announces New Policy
To Increase Transparency in Financial Stability
Program
Secretary Geithner Meets with Outside Experts to Discuss Oversight
o f Troubled Assets Relief Program and Efforts to increase Transparency and
Accountability
Washington, DC - Building on President Barack Obama and Secretary Tim
Geithner's commitment to increase transparency and accountability in the Troubled
Assets Relief Program (TARP), the U.S. Department of the Treasury today
announced a new policy of posting investment contracts for future completed
transactions to the Department’s website within five to 10 business days.
For contracts already completed, documents will be posted on a rolling basis,
beginning today with the first nine contracts completed under the Capital Purchase
Program (CPP), as well as contracts for transactions closed under the Systemically
Significant Failing Institutions (SSFI) program, the Targeted Investment Program
(TIP) and the Automotive Industry Financing Program (AIFP). Treasury will work in
the coming weeks to make public all copies of existing investment agreements.
Confidential and proprietary information will be redacted from the publicly posted
documents at the request of the individual institutions.
"In the coming weeks, we will unveil a series of reforms to help stabilize the nation's
financial system and get credit flowing again to families and businesses. Included
in those reforms will be a commitment to increase transparency and oversight," said
Secretary Geithner. "Today, we are taking a step toward increased transparency
by committing to place all of our TARP investment agreements on the Internet so
that taxpayers can see how their money is being spent and the terms these
institutions must agree to before we invest taxpayer money."
As part of his efforts to reform the TARP, Secretary Geithner today met with
individuals charged with providing outside oversight of the program to review efforts
taken to date to improve transparency and accountability. Participants included
Gene Dodaro, Acting Comptroller General of the Government Accountability Office;
Neil Barofsky, TARP Special Inspector General; and Congressional Oversight
Panel members Elizabeth Warren, Damon Silvers, Richard Neiman, Rep. Jeb
Hensarling and Sen. John Sununu.
Treasury posted the following contracts today to
http://www.treas.gov/initiatives/eesa/agreements/index.shtml:
Capital Purchase Program
Bank of America
The Goldman Sachs Group
Morgan Stanley
Citigroup
JPMorgan Chase
Wells Fargo & Co.
Bank of New York Mellon
State Street
Merrill Lynch
http://www.treas.gov/press/releases/tg04.htm
8/3/2010
Targeted Investment Program
Citigroup
Systematically Significant Failing Institutions
AIG
Automotive Industry Financing Program
GM
GMAC
Chrysler
in
ni
TT t t t T
http://www.treas.gov/press/releases/tg04.htm
8/3/2010
IS IS I ROOM
January 27, 2009
2009-1 -27-16-26-46-12812
U.S, International Reserve P osition
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $75,857 million as of the end of that week, compared to $76,580 million as of the end of the
prior week.
!. Official reserve assets and other foreign currency assets (approximate market value, in US miiiions)
January 23, 2009
A
A. Official reserve assets (in US millions unless otherwise specified) 1
Euro
Yen
Total
|[75,857
|(1) Foreign currency reserves (in convertible foreign currencies)
|(a) Securities
8,893
|of which: issuer headquartered in reporting country but located abroad
|(b) total currency and deposits with:
|(i) other national central banks, BIS and IMF
10,231
||14,577
||23,470
II
II
llo
II
||7,135
||17,366
|ii) banks headquartered in the reporting country
=
II
II
II
|of which: located abroad
|(iii) banks headquartered outside the reporting country
|of which: located in the reporting country
I
9
|(2) IMF reserve position
7,422
|(3) SDRs ^
9,023
o
(4) gold (including gold deposits and, if appropriate, gold swapped) u
11,041
-volum e in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,536
f l
llo
llo
llo
-financial derivatives
-lo an s to nonbank nonresidents
—other (foreign currency assets invested through reverse repurchase
agreements)
7,536
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
l-deposits not included in official reserve assets
|~ioans not included in official reserve assets
|—financial derivatives not included in official reserve assets
I—gold not included in official reserve assets
| -o th e r
II
II
. Predetermined short-term net drains on foreign currency assets (nominal value)
II
II
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200912716264612812.htm
8/3/2010
-outflow s (-)
||Principal
[[interest
-in flow s (+)
|| Principal
||lnterest
2. Aggregate short and long positions In forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-465,322
-289,729
-175,593
(b) Long positions (+)
3. Other (specify)
-outflow s related to repos (-)
-in flow s related to reverse repos (+)
-tra d e credit (-)
-tra d e credit (+)
-o th e r accounts payable (-)
-o th e r accounts receivable (+)
ill. Contingent short-term net drains on foreign currency assets (nominal value)
il
II
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a ) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
(ii) Written calls
(b) Long positions
http://www.treas.gov/press/releases/200912716264612812.htm
8/3/2010
|(i) Bought calls
|(ii) Written puts
ll
I
il
II
ll
II
I
ii
PRO MEMORIA: in-the-money options | |
|{1 ) At current exchange rate
|(a) Short position
|(b) Long position
|(2) + 5 % (depreciation of 5%)
|(a) Short position
|(b) Long position
|(3) - 5 % (appreciation of 5%)
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
|(a) Short position
|(5) -10 % (appreciation of 10%)
|(a) Short position
ii
ii
|(b) Long position
ii
ii
|(a) Short position
Il
Il
il
ii
Il
ll
h
I
II
ll
II
II
II
ll
|(6) Other (specify)
|(b) Long position
I
h
|(b) Long position
II
II
ii
I
I
I
4
I
Il
Il
Il
il
II
ll
ll
II
II
II
II
II
ii
il
i
I
i
I
I
I
i
i
I
ii
!
lÉ É
I
II
II
h
ii
i
i
IV. Memo items
(1) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
--nondeliverable forwards
--short positions
—long positions
--other instruments
(c) pledged assets
--included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
7,687
-lent or repoed and included in Section I
-lent or repoed but not included in Section I
-borrowed or acquired and included in Section I
-borrowed or acquired but not included in Section I
7,687
(e) financial derivative assets (net, marked to market)
-forwards
-futures
-swaps
-options
-other
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions (+)
-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ÏÏ
http://www.treas.gov/press/releases/200912716264612812.htm
8/3/2010
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/200912716264612812.htm
8/3/2010
liv d S u ij' i^^SlgildlSS 1 WU U U lU lllO Tair^ullipalllcs
I 'd
g e 1 01 Z
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January 28, 2009
TG-05
Treasury Designates Two Colombian Companies
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC)
today designated two Colombian companies, Aquilea S.A. and M egaplast S.A, as
Specially Designated Narcotics Traffickers (SDNTs) pursuant to Executive Order
12978. These two companies are controlled by previously designated family
members of drug kingpins Miguel Rodriguez Orejuela and Gilberto Rodriguez
Orejuela, who once led the Cali drug cartel.
"Thanks to Colombian and U.S. efforts, the heads of the Cali cartel today sit in jail
and their family members have agreed to forfeit over $2 billion in tainted assets to
the relevant authorities," said OFAC Director Adam J. Szubin. 'Today's designation
exposes two additional companies that had been hidden by Rodriguez Orejuela
family members and are now subject to sanctions."
Aquilea S.A., which is located in Cali, Colombia, owns pharmaceutical patents and
trademarks. This company is controlled by Amparo Rodriguez Orejuela and her
daughter, Angela Maria Gil Rodriguez, who were designated in 1995 and 2003,
respectively. Amparo Rodriguez Orejuela is the sister of SDNT principals Miguel
and Gilberto Rodriguez Orejuela.
M egaplast S.A., which is located in Palmira, Valle, Colombia, is a manufacturer of
plastic bags. This company is controlled by Humberto Rodriguez Mondragon and
Jaime Rodriguez Mondragon, who were both designated in 1995 and are the sons
of SDNT principal Gilberto Rodriguez Orejuela.
In 2006, Miguel and Gilberto Rodriguez Orejuela pleaded guilty to drug trafficking
charges in the U.S. District Court for the Southern District of Florida and money
laundering charges in the U.S. District Court for the Southern District of New York.
These guilty pleas resulted in 30-year prison sentences for each brother.
In connection with Miguel and Gilberto Rodriguez Orejuelas' guilty pleas, 28 of their
family members who were previously designated as SDNTs entered into an
agreement with the U.S. Department of Justice and the U.S. Department of the
Treasury in September 2006. As part of this agreement, the 28 family members
were obligated to identify ail "forfeitable property" financed in whole or in part with
narcotics proceeds and to identify all other assets of any nature whatsoever that are
owned or controlled by any family member who is a party to the agreement. In
exchange, the U.S. Government agreed to remove the family members from the list
of SDNTs after certain conditions, including final forfeiture and/or divestiture of all
forfeitable property under the agreement, were met.
Amparo Rodriguez Orejeula, Angela Maria Gil Rodriguez, Humberto Rodriguez
Mondragon, and Jaime Rodriguez Mondragon are all parties to this agreement.
Although these four individuals controlled Aquilea S.A. and M egaplast S.A. at the
time of the agreement, they did not identify these entities under the agreement.
OFAC has notified the four family members of this material omission and will
evaluate their response.
This designation is part of the ongoing interagency effort by the Departments of the
Treasury, Justice, State and Homeland Security to implement Executive Order
http://www.treas.gov/press/releases/tg05.htm
8/3/2010
Ig ë
iVJ'VJ.
o
12978 of October 21,1995, which applies financial sanctions against Colombia's
drug cartels. Today's designation action freezes any assets the designated entities
may have that are subject to U.S. jurisdiction and prohibits all financial and
commercial transactions by any U.S. person with those entities.
A detailed look at the program against Colombian drug organizations is provided in
OFAC's March 2007 Im pact Report on Econom ic Sanctions A gainst Colombian
Drug Cartels.
http://www.treas.qov/offices/enforcement/ofac/reports/narco_impact_report_05042007.pdf
Chart: Designation o f Rodriguez Orejuela Companies - January 2009
REPORTS
*
Designation of Rodriquez Orejuela Companies
http://www.treas.gov/press/releases/tg05.htm
8/3/2010
Cali C artel Companies
January 2009
Cali Drug Lords
SONT* Principals since 1995
U.S. D epartm ent of the Treasury
O ffice of Foreign Assets Control
I I
Gilberto RODRIGUEZ OREJUELA
was extradited to the U.S. in 2004.
Miguel RODRIGUEZ OREJUELA
was extradited to the U.S. in 2005.
Both brothers pleaded guilty to drug
trafficking and related charges in
September 2006 and were sentenced
to 30 years in prison.
Miguel
RO DRIG UEZ OREJUELA
G ilberto
RO DRIG UEZ OREJUELA
Cédula 60 95 80 3
(Colom bia)
Cédula 6 0 67 01 5
(Colom bia)
SDNT* RODRIGUEZ OREJUELA Fam ily Mem bers, P arties to S eptem ber 2 0 0 6 A greem ent w ith the U.S.
February 2, 2009
TG-06
Stuart Levey to Remain at Treasury as Under Secretary
for Terrorism and Financial Intelligence
Washington, D.C. - U.S. Treasury Secretary Tim Geithner today announced that
Stuart Levey will continue as the first Under Secretary for Terrorism and Financial
Intelligence (TFI), a role he has held since his Senate confirmation on July 21,
2004.
"Stuart Levey has served with great distinction for several years as Under Secretary
of the Treasury. He has led a global effort to prevent the international banking
system from being used to fund terrorists and proliferation. I believe that it is in the
national interest for Under Secretary Levey to continue his essential work on a
number of the most important policy challenges facing the country and am gratified
that he has agreed to serve as a senior member of the Obama administration," said
Secretary Geithner.
Prior to Secretary Geithner's swearing-in, Levey was acting Secretary of the
Treasury. He returned to his duties as Under Secretary for TFI Monday evening.
As Under Secretary, Levey leads an office that marshals the Treasury Department's
policy, enforcement, regulatory and intelligence functions to sever the lines of
financial support to international terrorists, WMD proliferators, narcotics traffickers
and other threats to our national security. In this capacity he oversees the Office of
Terrorist Finance and Financial Crime (TFFC), the Office of Intelligence and
Analysis (OIA), the Financial Crimes Enforcement Network (FinCEN), the Office of
Foreign Assets Control (OFAC) and the Treasury Executive Office of Asset
Forfeiture (TEOAF).
http ://www.treas.go v/press/releases/tg06 .htm
8/3/2010
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February 2, 2009
TG-07
Treasury Announces Marketable Borrowing Estimates
Washington, D.C. -- The U.S. Department of the Treasury today announced its
current estimates of marketable borrowing for the January - March 2009 and April June 2009 quarters:
*
During the January - March 2009 quarter, Treasury expects to borrow $493
billion of marketable debt, assuming an end-of-March cash balance of $225
billion, which includes $200 billion for the Supplementary Financing
Program (SFP). This borrowing estimate is $125 billion higher than
announced in November 2008. The increase in borrowing is primarily due to
the SFP, lower receipts, and higher outlays.
*
During the April —June 2009 quarter, Treasury expects to borrow $165
billion of marketable debt, assuming an end-of-June cash balance of $45
billion.
During the October - December 2008 quarter, Treasury borrowed $569 billion of
marketable debt, finishing at the end of December with a cash balance of $367
billion, of which $259 billion was attributable to the SFP. In November, Treasury
estimated $550 billion in marketable borrowing, assuming an end-of-December
cash balance of $300 billion. The increase in borrowing was related to lower
receipts offset by lower outlays and adjustments in the cash balance.
Additional financing details relating to Treasury's Quarterly Refunding will be
released at 9:00 a.m. on Wednesday, February 4.
-
30-
LINKS
* Sources and Uses Table
http://www.treas.gov/press/releases/tg07.htm
8/3/2010
Sources and Uses Reconciliation Table
Financing
AllOther
Sources
(3)
1
Memo
Changent I End-Of-Quarter
Cash Balance 1 Cash Balance
( ') (4) (1)
(6)
Financing
Need
(I)
Marketable
Borrowing
(2)
Oct - Dec
2006
Actual
70
46
2
48
Jan - Mar
2007
Actual
159
126
9
134
Apr - Jun
2007
Actual
(153)
(139)
5
(133)
Actual
35
116
(31)
85
Oct - Dec
2007
Actual
91
126
(53)
73
(15)
57
Jan - Mar
2008
Actual
107
244
(68)
176
( I t)
46
Apr - Jun
2008
Actual
(74)
13
(80)
(66)
7
53
Ju l- Sep
2008
179
530
(33)
497
318
372
596.
556
(40)
561
618
56
550
569
19
368
493
125
(26)
08)
8
(31)
(17)
14
524
551
28
337 476
139
(72)
(5)
67
(224)
(142)
83
299
367
67
75
225
150
324
165
(21)
144
(180)
45
Ju l- Sep
2007
Actual
Oct - Dec November 3,2008
2008
Actual
Memo: Forecast Revision
Jan - Mar November 3,2008
2009
February 2,2009
Memo: Forecast Revision
Apr - Jun
2009
February 2,2009
Total
+
Announcement Date
'S
Quarter
31
6
?
25
«38
...... ................
75
February 2, 2009
TG-08
Acting Assistant Secretary for Economic Policy
Ralph M. Monaco
Statement for the Treasury Borrowing Advisory
Committee
Of the Securities Industry and Financial Markets
Association
February 2, 2009
Economic activity slowed sharply in the final few months of 2008, reflecting the
combined effects of the ongoing retrenchment in homebuilding activity and the
additional downdraft from the severe tightening in credit markets that began in midSeptember. The labor market deteriorated notably, with unemployment hitting a 16year high at the end of 2008. Headline inflation dropped, led by a rapid decline in
crude oil and gasoline prices. Although stock market indexes dropped significantly
in the final few months of 2008, credit conditions showed some signs of
improvement very late in 2008 and in early 2009. In early December 2008, the
National Bureau of Economic Research designated December 2007 as the
beginning of the 11th postwar recession.
The economy contracted significantly in the fourth quarter. Real GDP fell by 3.8
percent at an annual rate - the largest quarterly decline since early 1982.
Consumer spending plunged for a second straight quarter, falling by 3.5 percent.
Business spending on plant and equipment plunged 19 percent as outlays for
structures declined for the first time in 3 years and spending on equipment and
software posted the largest quarterly drop since 1958. Residential investment
tumbled by about 24 percent, subtracting 0.8 percentage point from GDP growth.
Exports and imports both fell sharply but net exports declined only slightly and were
essentially neutral for real GDP after adding roughly 1-1/2 percentage points on
average to growth in the previous six quarters. The economy received modest
support from government spending and a much bigger boost from a pickup in
inventory investment, which added 1.3 percentage points to the fourth-quarter
growth rate. Excluding the change in inventories, real final sales of domestic
product fell 5.1 percent on top of a 1.3 percent decline in the third quarter. Private
forecasters anticipate another significant decline in real GDP in the first quarter of
2009, but some pickup in the second half of the year.
Job losses accelerated and the unemployment rate jumped higher at the end of the
year. December marked the twelfth straight month of job losses with 524,000
workers cut from nonfarm payrolls. That brought the total job loss since December
2007 to 2.6 million with 1.5 million lost since September. The unemployment rate
jumped 0.4 percentage point to a 16-year high of 7.2 percent in December.
Including workers who are underemployed and those who are only marginally
attached to the labor force, the unemployment rate was 13.5 percent - a record
high for this measure which dates back to 1994. Private forecasters see the
unemployment rate continuing to rise through most of 2009.
Much of the weakness in the overall economy stems from the continued adjustment
in the housing market. Homebuilder sentiment reached a record low in early 2009.
Housing starts fell 45 percent during 2008, and new and existing home sales fell
almost 7 percent during the 12 months of 2008. Inventories of unsold homes are
shrinking, but relative to sales remain at very high levels, which continue to put
downward pressure on home prices. Measured by the S&P/Case-Shiller 20 city
index, home prices were down 18 percent in the year ended in November 2008.
http://www.treas.gov/press/releases/tg08.htm
8/3/2010
Falling house prices have contributed to the weakness in consumer spending.
House price declines have eroded the value of household real estate holdings while
equity market declines have reduced the value of many financial assets.
Household net worth posted a record decline in the third quarter, bringing the total
loss since its peak in the third quarter of 2007 to $7.1 trillion and pulling net worth
back to late 2005 levels. Household debt outstanding fell in the third quarter for the
first time since the early 1950s, and consumer borrowing declined in October and
November. Given declining home prices and the sharp stock market declines, it is
clear that household wealth continued to shrink in the fourth quarter. This all
contributes to the downdraft in consumer spending. Declining wealth, a pullback in
borrowing and the weak job market all suggest that consumer spending will remain
sluggish in the first half of 2009.
Falling energy prices have provided some relief to households in recent months.
Retail gasoline prices have declined by roughly $2.25 from the all-time high of
$4.11 per gallon recorded in July and now stand at $1.84 per gallon - a level not
seen since early 1994. The benchmark one-month futures price of West Texas
Intermediate crude oil has declined more than 70 percent from a record intraday
high of $147 per barrel in mid July to roughly $42 per barrel.
The retreat in energy prices has contributed to a pronounced moderation in
headline inflation. Consumer prices rose at a 5.5 percent annual rate in the first
half of 2008, and dropped 5.4 percent at an annual rate in the second half of the
year. For the entire year, consumer prices rose just 0.1 percent, the smallest
annual increase since 1955. Core consumer inflation (excluding food and energy
prices) has also eased. Core inflation was just 1.8 percent in 2008, down from 2.4
percent during the twelve months of 2007. The weakening economy helped to hold
core inflation in check in the second half of 2008, a trend that appears likely to
continue in the first half of 2009.
Financial and credit markets remain fragile, further clouding the economic outlook
for early 2009. Equity markets posted steep losses last year, triggered by growing
weakness in the U.S. economy and concerns about the performance and viability of
a wide range of financial assets, as well as the financial institutions holding or
providing contingent guarantees for those assets. The S&P 500 plunged 38
percent during 2008 - the largest annual loss since the 1930s - and was down by
an additional 8.6 percent through January 30. The S&P stock market volatility
index (VIX), often used as a measure of financial market uncertainty, has retreated
from the all-time high of almost 81 percent posted on November 20, 2008 but at
roughly 42 percent remains well above readings near 20 percent in late Auqust of
2008.
Credit market conditions have started to improve but have not yet returned to their
mid 2007 pre-crisis levels. The LIBOR-OIS spread - a measure of what banks
perceive as the credit risk in lending to one another - has eased substantially. It is
currently hovering around 95 basis points, down from a high of 365 basis points in
early October but still significantly wider than the roughly 9 basis point spread that
prevailed prior to mid 2007. Likewise, rates on lower-rated commercial paper have
fallen after spiking in late September.
Corporate lending and the flow of credit from banks remains constrained, however.
The Baa corporate bond rate is roughly 550 basis points above the 10-year
Treasury rate, an improvement compared to the spread of 616 basis points
recorded in early December but still very high by historical standards. Surveys of
bank officers suggest that banks have become much less willing to make both
consumer and business loans.
It will take considerable time to work through the many problems our economy
currently faces. A number of measures have already been taken as part of the
Emergency Economic Stabilization Act (EESA) of 2008 that was enacted in early
October. The Capital Purchase Program has allocated nearly $195 billion in funds
from the Troubled Asset Relief Program (TARP) to a broad array of financial
institutions. Several additional programs have also been put in place to help
normalize credit markets and prevent disruption in financial markets and the
broader economy.
http://www.treas.gov/press/releases/tg08.htm
8/3/2010
The Administration recognizes that more can be done and is now hard at work to
enact legislation to jumpstart job creation and put the economy back on a path
towards long-term growth.
Measures to support the economy coupled with lower revenues as a consequence
of the recession are raising the deficit. In FY2008, the Federal budget deficit
widened by $292 billion to $455 billion (3.2 percent of GDP). The budget deficit will
continue to grow in FY2009 as expenditures rise sharply and receipts are
depressed by falling employment and income and declining asset values. Outlays
to support financial markets and stimulate the economy are expected to push the
federal deficit to a record level in FY2009, both in absolute terms and as a share of
GDP. In early January, the Congressional Budget Office estimated that the deficit
in FY2009 will top $1.2 trillion, more than 8 percent of GDP. Despite the
considerable budgetary cost of these measures, they are necessary to avoid even
far greater losses in jobs and income than have already occurred.
In sum, the economy is currently experiencing one of the longest periods of
recession in the post-war period. While it will take time for conditions to improve,
efforts already underway to restore stability in financial and credit markets, together
with a new injection of fiscal stimulus will put the U.S. economy firmly back on the
path towards long-term, sustainable growth.
http://www.treas.gov/press/releases/tg08.htm
8/3/2010
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D O C U M E N T S R ELE ASE D A T 9 :0 0 AM W E D N E S D A Y , A U G U S T 4 , 2 0 1 0
» Policy Statement IS
•
TBAC R e p o rt to th e S e cre ta ry
« TBAC M in u te s
IS
IS
« TBAC R e co m m e n d e d F in a n cin g T ab le s: Q3 E
•
TBAC R e co m m e n d e d F in a n c in g T ab le s: Q4 H
•
D is c u s s io n C h a rts w ith TB A C H
» T e n ta tive A u c tio n S ch e d u le s: PDF F o rm a t H | XM L F o rm a t f f l
(The next Q uarterly Refunding release is scheduled for November 3, 2010)
D O C U M E N T S R E L E A S E D A T 3 : 0 0 PM M O N D A Y , A U G U S T 2 , 2 0 1 0
•
F in a n c in g E stim a te s
•
E c o n o m ic P o lic y S ta te m e n t to TB A C
(The next release is scheduled for November 1, 2010)
D O C U M E N T R E L E A S E D A T 1 2 : 0 0 N O O N F R ID A Y , J U L Y 1 6 , 2 0 1 0
•
P rim a ry Dea le r Meet i n g A g e n d a s
IS
(The next release is scheduled for October 15, 2010)
Last Updated: August 2, 2010
http://www.treas.gov/offices/domestic-finance/debt-management/quarterly-refunding/
8/3/2010
Treasury Acting Assistant Secretary for Financial Markets Karthik Ramanathan
February 2009 Quarterly Refunding Statement
2/4/2009
TG-09
Washington, DC - Treasury is announcing the following changes to the issuance calendar:
• A new monthly 7-year note, with the first auction occurring in February 2009.
• A regular reopening of the quarterly 30-year bond in the month following the initial new offering, with the first
reopening occurring in March 2009.
Details of the February Refunding
We are offering $67 billion of Treasury securities to refund approximately $36.3 billion of privately held securities
maturing or called on February 15 and to raise approximately $30.7 billion. The securities are:
• A new 3-year note in the amount of $32 billion, maturing February 15, 2012;
• A new 10-year note in the amount of $21 billion, maturing February 15, 2019;
• A new 30-year bond in the amount of $14 billion, maturing February 15, 2039.
The 3-year note will be auctioned on a yield basis at 1:00 p.m. EST on Tuesday, February 10, 2009. The new 10-year
note will be auctioned on a yield basis at 1:00 p.m. EST on Wednesday, February 11,2009, and the new 30-year
bond will be auctioned on a yield basis at 1:00 p.m. EST on Thursday, February 12, 2009.
All of these auctions will settle on Tuesday, February 17, to accommodate the Presidents Day holiday.
The balance of our financing requirements will be met with weekly bills; monthly 52-week bills; monthly 2-year, 3year, 5-year, and 7-year notes; the March 10-year note and 30-year bond reopenings; the April 10-year note
reopening; the April 5-year TIPS; and the April 10-year TIPS reopening.
Treasury also expects to issue cash management bills, some longer dated, during the quarter.
Changes to the Auction Calendar
During the last several months, changes in economic conditions, financial markets, and fiscal policy, as well as a
decline in nonmarketable debt issuance have contributed to an increase in Treasury's marketable borrowing needs.
Treasury has responded to the increase in marketable borrowing requirements by raising issuance sizes of regular
weekly and monthly bills, increasing the frequency and issuance sizes of cash management bills, increasing the
issuance sizes of nominal coupon security offerings, and adjusting the securities offering calendar, including adding
monthly 3-year notes, a second reopening of 10-year notes, and introducing newly issued 30-year bonds on a
quarterly basis.
In response to the continued large increase in projected financing needs and to better manage the overall debt
portfolio, Treasury is instituting the following changes to the auction calendar:
Introduction of a monthly 7-vear note: Treasury is announcing the addition of a monthly new-issue 7-year note. The
monthly 7-year notes will have an end-of-month settlement along with the 2-year and 5-year notes. The first auction
of the 7-year notes will occur on Thursday, February 26, 2009 at 1:00 p.m. EST, for settlement on March 2, 2009.
Note that the 2-year and 5-year note auctions tentatively scheduled to occur at 1:00 p.m. on Wednesday, February
25, 2009 and Thursday, February 26, 2009, respectively, will now take place on Tuesday, February 24, 2009 and
Wednesday, February 25, 2009, at 1:00 p.m. EST, respectively. The settlement date for the 2-year and 5-year notes
will be March 2, 2009.
Introduction of a regular 30-vear bond reopening: Treasury is announcing the addition of a regular reopening of the
30-year bond in the month following the initial quarterly offering. This will result in eight 30-year bond auctions a year.
The first auction of the reopening of 30-year bonds will occur on Thursday, March 12, 2009 at 1:00 p.m. EDT, for
settlement on Monday, March 16, 2009.
See Treasury's complete tentative auction calendar for the next six months at the following link:
hUp://www.treas.gov/offices/domestic-finanee/debt-rnanagernent/auctions/auction$.pd'f
Additional Financing Needs and Portfolio Considerations
In managing the debt portfolio to achieve our objective of lowest cost financing over time, Treasury constantly
reevaluates the nominal and inflation-indexed securities programs. We will continue to monitor projected financing
needs and make adjustments as necessary including, but not limited to, considering a second reopening of the 30year bond in the month following the first reopening, and the réintroduction or establishment of other benchmark
securities.
We will make an announcement at the May 2009 quarterly refunding regarding any changes to the auction calendar,
including any decision regarding a second reopening of the 30-year bond.
Debt Subject to the Limit
Based on current projections, Treasury expects to reach the debt ceiling in the first half of 2009 . Given the
uncertainty surrounding potential borrowing needs, Treasury will continue to keep Congress and the markets
apprised of developments as the debt outstanding approaches the statutory limit.
Please send comments and suggestions on these subjects or others related to Treasury debt management to
debt.rnanagement@treasury.gov.
The next quarterly refunding announcement will take place on Wednesday, April 29, 2009.
Report to the Secretary of the Treasury from the Treasury Borrowing Advisory
Committee of the Securities Industry and Financial Markets Association
2/4/2009
TG-10
February 4, 2009
Dear Mr. Secretary:
Since the Committee last convened in early November, the contraction in economic activity has deepened and
broadened, while financial markets have remained under duress. The unprecedented volatility present in capital
markets when the Committee last met has diminished somewhat but conditions still are exceptionally challenging.
Policy efforts have begun to unlock credit for select high-quality borrowers. But the magnitude of wealth destruction,
the still heightened cost of economy-wide capital and the impaired system of financial intermediation continue to cast
a dark cloud over the economic outlook.
Monetary and fiscal policy action now being implemented will help to prevent an even more serious downturn than
otherwise would be the case. Policymakers' efforts to restore the flow of credit to households and businesses,
backstop critical financial intermediaries through capital injections and loan guarantees, and stimulate economic
activity via lower interest rates, tax cuts and government spending are positives. Nonetheless, the necessary
deleveraging of both the financial and household sector is considerable and has further to run.
Price pressures are receding rapidly. Headline inflation already has collapsed toward zero due in large part to the
steep declines in commodity costs. More notably, core inflation also is cooling quickly amid the slump in demand and
rising unemployment and remains close to the Federal Reserve's comfort range for this series. Moreover, the speed
at which businesses are cutting headcount and reducing compensation is raising the risk of deflation. Given elevated
debt levels, such an outcome would be extremely problematic for the financial sector and real economy.
Federal Reserve officials have dropped the funds rate to effectively zero and are focused on using the bank’s balance
sheet to help to restore the flow of private sector credit. Forthcoming implementation of the TALF program to restart
the flow of credit in the asset-backed securities market is one example of the Fed's efforts, as is its ongoing
purchases of agency and agency-backed mortgage debt. Additional asset purchases - including the buying of
Treasury securities if the FOMC determines that such purchases would be "particularly effective in improving
conditions in private credit markets" - also are possible.
Despite the latest steepening in the yield curve, the curve has flattened since the Committee convened in November.
The spread between the two- and ten-year and two- and thirty-year Treasury yield, for instance, has narrowed by
about 50bp and 25bp, respectively. The flatter curve, despite a lower funds rate, reflects investors' concerns about
deflation. The recent steepening led by the rise in longer-dated yields, however, partly may be a by-product of the
Treasury's outsized funding needs in 2009-2010. Further substantive increases in Treasury yields may prove
counterproductive to policy actions already underway.
Those outsized funding needs reflect the dismal outlook for economic growth and Congress and the Administration’s
efforts to bolster the economy through policy action. Tax receipts are declining at a brisk pace given the climb in
unemployment, reduced wealth and slowing corporate profits. Receipts were down by nearly 10% in the first three
months of the new fiscal year and the pace of decline appears to have accelerated in January. Individual nonwithheld
tax receipts in the month plunged by almost 15% versus a year ago. Meanwhile, outlays are surging at a breakneck
pace as automatic stabilizers (unemployment compensation, food stamps, etc.) kick in and the government puts in
place programs to try and stabilize the financial sector.
The deterioration in the budget outlook, combined with expenditures associated with the TARP, potential FDIC
guarantees, and expected additional stimulus spending have increased private forecasts for total funding needs of
the U.S. government for fiscal year 2009 to approximately $2 trillion. This is likely to stress the existing auction
schedule and consequently warrants tangible adjustments to that schedule.
Faced with an unprecedented increase in net borrowing needs, the Treasury in its first charge to the Committee
sought our advice and recommendation on changes to the auction calendar for debt issuance.
In keeping with past practices, the Committee recommended that the Treasury address its needs by reviewing the
size, frequency and then the elimination, or in this case addition of debt maturity issues.
Furthermore, the Committee also stressed the importance of maintaining focus on the overall average maturity of the
debt to ensure that financing is distributed across the maturity spectrum.
Faced with such extraordinary financing needs, the Committee focused on the optimal potential size of each coupon
issue, while not jeopardizing a successful auction process.
It was the Committee's recommendation that existing monthly 2-year and 3-year notes could be increased by $5
billion in size, to $45 billion and $35 billion, respectively.
Furthermore, the Committee recommends that monthly 5-year notes have the greatest room for expansion given their
liquidity and focus and should be increased by as much as $10 billion per issue. This would bring the monthly
issuance size to as much as $40 billion.
And lastly, the committee recommends that the Treasury increase the size of the newly issued quarterly 10-year
notes by $5 billion and by $4 billion when re-opened the two months following the new issue. In other words, the
sizes of the 10-year issuances would increase from $20 billion, $16 billion and $16 billion each quarter to $25 billion,
$20 billion and $20 billion, respectively.
The Committee also reviewed the frequency of the relevant issues and reiterates its recommendation to Treasury to
issue 30-year bonds monthly, following the pattern of 10-year issuance. In other words, to have a new 30-year bond
auction each quarter in February, May, August and November followed by re-openings of that issue in the two
months following. The Committee recommends that the Treasury size these auctions to $15 billion, $10 billion, and
$10 billion, respectively.
Furthermore, the Committee recognized that the changes were not sufficient to meet its borrowing needs and that the
Treasury must introduce new coupon issues to its calendar.
While the number of new issues discussed by market participants, and the Committee, were a 4-year, 7-year, 20year, and super-long (50-year) maturity issue. Among these choices, the Committee believes that a 7-year issue
would be best accepted by the marketplace.
Consequently, after much discussion, the committee recommends that the Treasury announce a new 7-year maturity
issue monthly. The pattern and size of the issue is recommended to be $15 billion quarterly, with subsequent re
openings of $10 billion over the following two months.
A number of Committee members noted that despite the tremendous growth in proposed coupon issuance, the
average maturity of Treasury debt will likely fall further and that additional changes will need to be discussed by
market participants in coming months.
The average maturity of the debt has already fallen from a range of 60 to 70 months which existed from the mid
1980‘s until 2002 to a level of 48 months more recently.
One member of the Committee suggested that the Treasury consider setting a target or guideline for this measure.
While few agreed with setting a hard target level, most concurred that the Treasury needs to be focused on
distributing its issuance across the maturity spectrum and avoid letting the average maturity fall too low.
In its second charge to the Committee, the Treasury sought our input on factors that might affect the supply and
demand for Treasury securities over the next couple of years.
One member presented a deck of charts and exhibits that were prepared prior to the meeting and are attached.
There is near consensus that Treasury's funding needs during the next two years will be the largest in the post-war
era in dollar terms, and likely also as a percent of GDP. To date, stepped up issuance has been digested well, owing
in part to the rock bottom level of the risk free overnight rate, deflationary concerns, and outsized demand among
global investors for safe and liquid financial instruments amid the contraction in global economic activity.
But the ramp up in debt issuance remains in its early stages. As the US government and also foreign governments
continue their efforts to stabilize their respective economies, the supply of government and quasi-government paper
will grow rapidly. The sheer magnitude of paper set to be issued raises the possibility that investors at some point will
demand a concession of some sort, lifting yields in parts of the term structure beyond those justified by macro
fundamentals. As a country with a current account deficit and a majority of Treasury debt held abroad, the US is more
at risk of such a development than a country such as Japan where the government bond market is primarily
domestically held.
To a certain extent, the supply and demand for Treasury securities in the period ahead are intertwined. The more
pronounced and longer the recession, the larger the budget deficit, (both for economic and policy reasons) and in turn
the greater the supply of debt. At the same time, however, demand for Treasurys would remain elevated, as investors
would be wary of fleeing the safety of government securities for higher yielding but riskier asset classes.
The net supply of Treasurys in 2009 and 2010 combined seems likely to total more than $3 trillion and could climb as
high as $4 trillion. The Congressional Budget Office (CBO) estimates the 2009 Federal budget deficit to be $1.2
trillion. The consensus of private sector analysts is similar to that figure. Yet, neither the CBO estimate nor the private
consensus reflect fully the funding needs associated with the Obama Administration's fiscal stimulus plans, the
implementation of TARP (or another TARP-like program), or the rumored creation of a bad/aggregator bank to help
deal with the underperforming assets weighing down financial institutions. Some of the funding of these government
programs will spill over into 2010, a year in which the “core" budget position also will be weak according to
mainstream expectations for economic performance.
Actual and potential funding needs for financial sector stabilization programs already announced are considerable.
Guarantees made on select assets of systemically critical financial institutions could require Treasury to raise
hundreds of billions of dollars in the event that these assets continue to deteriorate. Similarly, guarantees made by
the FDIC on select bank-issued debt could catapult government borrowing needs further should the issuing bank(s)
default on its FDIC-insured paper. Any additional guarantees on future losses to assets held by financial institutions
would further increase net borrowing needs by Treasury. The size of any such borrowing would hinge on the type and
size of assets backstopped.
The expansion in quasi-government paper contributes to the risk of market saturation. Banks have issued nearly
$150 billion in FDIC-backed paper since the programs introduction. Spreads on this paper have been narrowing over
time with the latest deal, paper offered by Citi, pricing just 30 basis points over Libor. Real money investors have
purchased the bulk of this paper in an attempt to pick up yield over Treasurys while not taking on additional credit
risk. In some respects, this paper has replaced GSE debt as the instrument of choice for real money investors looking
for modestly higher yielding, quasi-government debt.
Surging sovereign debt (and sovereign-insured private sector debt under programs instituted by some European
governments) outside the United States also could compete with Treasury securities but this seems a modest risk at
this point. The dollar remains the world's reserve currency and in periods of uncertainty and volatility typically enjoys
a safe-haven bid. Indeed, the demand for dollar - including US Treasury debt - has been solid in recent months even
though US policymakers have announced their intentions to expand fiscal and monetary policy. Moreover, the ratio of
public sector debt in the US - even with the pending surge - will remain below that of many other developed
countries, as the ratio will be rising from a relatively low base.
Nonetheless, international developments do pose some risk to the Treasury market, especially as the increase in
supply accelerates further. Foreign investors currently hold nearly 55% of the marketable Treasury debt outstanding a percentage that is only modestly higher than some other G10 economies - and a percentage that has been
trending higher since early this decade. For instance, foreigners held about one-third of Treasury debt outstanding in
2000. Japan, China, and the United Kingdom are the three largest holders. Yet, the UK's elevated position reflects
London's status as a global financial center and the large concentration of hedge funds in London, and is less
relevant for debt management issues than Japan and China.
Japan and China both maintain outsized official holdings of Treasurys. The Japanese Ministry of Finance is not
typically a net seller of dollars for anything beyond very minor portfolio rebalancing. In the current environment,
Japanese officials may be more inclined to buy dollars (sell yen) in an effort to stem upward pressure on the yen,
thereby halting Japan's terms of trade deterioration. Of note, however, the Ministry of Finance has not intervened
recently.
China, on the other hand, could slow its accumulation of dollar-denominated debt. Such a trend already has begun to
develop with respect to its accumulation of overall dollar assets as the flow of private capital into China has cooled
alongside the global downturn, alleviating the need to offset capital inflows.
Emerging economies that have been accumulating dollars in recent years amid growing trade surpluses and the
commodity price boom should have a reduced demand for dollars in the period ahead. Yet, foreign exchange
reserves in countries such as Brazil, Mexico, Korea and so forth remain sizeable. These funds likely will diminish due
to an unwinding of the forces that facilitated their rapid accumulation, and the possibility that policymakers in these
countries will tap reserves for domestic initiatives. The net result will be less demand from the emerging world for
dollar assets.
And finally, a larger primary dealer community would help to reduce on the margin the possibility of an
undersubscribed auction(s). There currently are just 17 primary dealers, down from 30 a decade ago. Government
bond trading desks at the dealers also are not immune from sector-wide capital/balance sheet issues and desks at
many dealers are being encouraged to minimize risk.
In the final section of the charge, the committee considered the composition of marketable financing for the JanuaryMarch Quarter to refund the $36.3 billion of privately held notes and bonds maturing February 15, 2009 the
Committee recommends a $35bn 3-year note due February 15, 2012, a $25 billion 10-year note due February 15,
2019 and a $15 billion 30-year bond due February 15, 2039.
For the remainder of the quarter, the Committee recommends a $45 billion 2-year note in February and March, a $35
billion 3 year note in March, a $40 billion 5-year note in February and March, and a $20 billion re-opening of the 10year note and $10 billion re-opening of the 30-year bond in March.
For the April-June quarter, the Committee recommended financing as found in the attached table. Relevant figures
included three 2-year, 3-year and 5-year note issuances monthly, 10-year note and 30-year bond re-openings in
April, followed by a 10-year note and a 30-year bonds in May followed by a re-opening of each in June, as well as a
10-year Tips note in April, and a 20-year TIPS re-opening later that same month.
Respectfully Submitted
Keith T. Anderson
Chairman
Rick Rieder
Vice Chairman
REPORTS
• Financing Tables: Q l
•
Financing Tables: Q2
US TREASURY FINANCING SCHEDULE FOR 1st QUARTER 2009
BILLIONS OF DOLLARS
ISSUE
ANNOUNCEMENT
DATE
4-WEEK AND
12/24
3&6 MONTH BILLS
12/31
1/8
1/15
1/22
1/29
2/5
2/12
2/19
2/26
3/5
3/12
3/19
CASH MANAGEMENT BILLS
70-DAY BILL
AUCTION SETTLEMENT
DATE
DATE
12/29
1/5
1/12
1/20
1/26
2/2
2/9
2/16
2/24
3/2
3/9
3/16
3/23
1/2
1/8
1/15
1/22
1/29
2/5
2/12
2/19
2/26
3/5
3/12
3/19
3/26
4-WK
OFFERED
AMOUNT
3-MO
22.00
24.00
24.00
30.00
34.00
26.00
26.00
26.00
27.00
29.00
28.00
35.00
35.00
35.00
35.00
35.00
25.00
20.00
20.00
30.00
30.00
30.00
30.00
30.00
30.00
30.00
30.00
29.00
29.00
29.00
29.00
29.00
29.00
29.00
29.00
6-MO
27.00
27.00
27.00
27.00
MATURING
AMOUNT
NEW
MONEY
84.00
79.00
73.00
70.00
70.00
75.00
-9.00
-2.00
26.00
14.00
21.00
12-MO
22.00
76.00
84.00
89.00
89.00
87.00
89.00
89.00
19.00
18.00
35.00
5.00
5.00
-3.00
15.00
-10.00
1116.00
1054.00
134.00
25.00
25.00
1/7
1/8
35.00
35.00
0.00
1/14
1/15
30.00
30.00
0.00
1/21
1/22
35.00
35.00
1/28
1/29
35.00
35.00
2/4
2/5
30.00
2/11
2/12
40.00
40.00
2/17
2/18
40.00
40.00
2/25
2/26
25.00
25.00
0.00
3/2
3/3
20.00
20.00
0.00
Matures 3/19
56-DAY BILL
Matures 3/12
70-DAY BILL
Matures 4/2
70-DAY BILL
Matures 4/9
49-DAY BILL
30.00
0.00
Matures 3/26
63-DAY BILL
Matures 4/17
56-DAY BILL
Matures 4/15
18-DAY BILL
Matures 3/16
14-DAY BILL
Matures 3/17
CMB Funds:
150.00
COUPONS
CHANGE
10-Year TIPS
3-Year Note
10-Year Note ®
12/31
1/5
1/5
1/6
1/7
1/8
1/15
1/15
1/15
8.00
30.00
16.00
32.40
21.60
20-Year TIPS
1/22
1/26
1/30
8.00
0.00
8.00
2-Year Note
5-Year Note
1/22
1/22
1/27
1/29
212
212
40.00
30.00
2.00
2.00
20.00
50.00
3-Year Note
10-Year Note
30-Year Bond
2/4
2/4
2/4
2/10
2/11
2/12
2/17
2/17
2/17
35.00
25.00
15.00
5.00
5.00
5.00
36.30
38.70
2/23
2/23
2/25
2/26
3/2
3/2
45.00
40.00
5.00
10.00
18.00
67.00
3-Year Note
3/9
3/10
3/16
35.00
10-Year Note ®
3/9
3/11
3/16
20.00
30-Year Bond ®
3/9
3/12
3/16
10.00
14.90
50.10
2-Year Note
5-year Note
2-Year Note
3/23
3/25
3/31
45.00
5-year Note
3/23
3/26
3/31
40.00
18.00
67.00
442.00
139.60
302.40
E stim a te s are italicized. S h a de d re gio n s in C ash M a n a g e m e n t S ection d enote fu n d s ra is e d fo r S u p p le m e n ta ry F in a n c in g P ro gra m
S F P funds are n o t te ch n ic a lly m a rketab le T re a s ury b orro w in g
R = Reopening
NET CASH RAISED THIS QUARTER:
586.40
US TR EA SU R Y FINANCING SC HEDULE FOR 2nd QUARTER 2009
BILLIONS OF DOLLARS
ANNO UN C EM ENT
ISSUE
DATE
AU CTION SETTLEM ENT
DATE
OFFERED
DATE
AM OUNT
4-W K
3-MO
6-M O
M ATURING
AMOUNT
MONEY
NEW
12-MO
4-W EEK AND
3/26
3/30
4/2
24.00
30.00
29.00
84.00
-1.00
3&6 MONTH BILLS
4/2
4/6
4/9
24.00
30.00
29.00
79.00
4.00
4/9
4/13
4/16
20.00
27.00
27.00
73.00
1.00
4/16
4/20
4/23
10.00
27.00
27.00
70.00
16.00
22.00
4/23
4/27
4/30
10.00
27.00
27.00
72.00
-8.00
4/30
5/4
5/7
28.00
27.00
75.00
5/7
5/14
20.00
30.00
30.00
30.00
30.00
25.00
20.00
20.00
28.00
72.00
28.00
27.00
27.00
30.00
28.00
84.00
84.00
0.00
13.00
46.00
23.00
14.00
2.00
20.00
-5.00
978.00
125.00
M atures 4/2
35.00
-35.00
M atures 4/9
35.00
-35.00
Matures 4/15
40.00
-40.00
Matures 4/17
40.00
-40.00
35.00
0.00
5/14
5/11
5/18
5/21
5/26
5/28
6/4
6/1
5/28
6/4
6/8
6/11
6/11
6/18
6/15
6/22
6/18
6/25
5/21
25.00
64.00
65.00
30.00
28.00
74.00
30.00
29.00
82.00
30.00
30.00
29.00
29.00
25.00
1031.00
CASH M ANAGEMENT BILLS
27-D AY BILL
5/19
5/20
35.00
5/27
5/27
50.00
6/1
6/2
25.00
6/23
6/24
40.00
Matures 6/16
112-DAY BILL
50.00
Matures 9/16
13-DAY BILL
25.00
0.00
Matures 6/15
91-DAY BILL
40.00
Matures 9/23
CMB F unds:
-60.00
COUPONS
CHANGE
IN SIZE
10-Year TIPS
4/2
3-Year Note
4/6
4/7
4/15
35.00
10-Year Note ®
4/6
4/8
4/15
20.00
30-Year Bond ®
4/6
4/9
4/15
10.00
4/6
4/15
6.00
5-Year TIPS
4/20
4/23
4/30
8.00
2-Year Note
4/23
4/27
4/30
45.00
5-Year Note
4/23
4/28
4/30
40.00
15.10
57.90
19.00
74.00
3-Year Note
4/29
5/5
5/15
35.00
10-Year Note
4/29
30-Year Bond
4/29
5/6
5/7
5/15
5/15
25.00
15.00
52.20
22.80
2-Year Note
5/21
5/27
6/1
5-year Note
5/21
5/28
6/1
45.00
40.00
19.00
66.00
3-Year Note
6/8
6/9
6/15
10-Year Note ®
6/8
6/10
6/15
35.00
20.00
30-Year Bond ®
6/8
6/11
6/15
10.00
14.90
50.10
2-Year Note
6/22
6/23
6/30
45.00
5-year Note
6/22
6/25
3/31
35.00
18.00
62.00
469.00
138.20
332.80
E s tim a te s a re ita lic iz ed . S h a d e d re g io n s in C a s h M a n a g e m e n t S e c tio n d e n o te fu n d s ra is e d fo r S u p p le m e n ta ry F in a n c in g P ro g ra m
S F P fu n d s a re n o t te c h n ic a lly m a rk e ta b le T re a s u ry b o rro w in g
R = Reopening
NET CASH RAISED THIS QUARTER:
397.80
February 4, 2009
TG-11
Minutes of the Meeting of the
Treasury Borrowing Advisory Committee
Of the Securities Industry and Financial Markets Association
February 3, 2009
The Committee convened in closed session at the Hay-Adams Hotel at 11:25 a.m.
All Committee members were present except for Susan Estes. Acting Assistant
Secretary for Financial Markets, Karthik Ramanathan welcomed the Committee and
gave them the charge.
The first item on the charge related to Treasury's increasing financing requirements
and the potential need to make further changes to the auction calendar in a manner
that would provide the greatest flexibility to Treasury while minimizing the impact on
markets. Assistant Secretary Ramanathan delivered a presentation to the
Committee which highlighted current fiscal conditions and potential factors to
consider in addressing this issue.
Assistant Secretary Ramanathan stated that market estimates for the FY 2009
deficit averaged $1.6 trillion (vs. dealer estimates of $988 billion in November
2008), and marketable borrowing needs ranged between $1.5 trillion and $2.5
trillion. Highlighting several charts, Ramanathan stated that the fiscal outlook
remained challenging, and potential measures to improve the economy portended
sizeable borrowing requirements for at least FY 2009 and FY2010. Given the
uncertainty regarding various proposals, many market participants have yet to fully
incorporate firm values in their deficit or marketable borrowing estimates.
Specifically, market participants were generally uncertain regarding fiscal
measures, current legislation, and other credit market actions which may serve to
alleviate current conditions.
Ramanathan noted that there has been significant declines are becoming evident in
receipts, stemming from sharp declines in both corporate and individual taxes. In
the last quarter, receipts were lower by 10 percent, with corporate taxes lower by 46
percent year-over-year. Outlays were 45 percent higher, reflecting nearly $320
billion in expenditures related to the Troubled Assets Relief Program (TARP) and
the Housing and Economic Recovery Act of 2008 (Senior Preferred Agreement
investments and Agency MBS purchases related to Government Sponsored
Enterprises) as well as other financial market stabilization efforts. Current trends in
both receipts and outlays, and the lag effects of economic activity, suggest that
financing requirements will remain sizable for the remainder of this year and into
next year.
Ramanathan noted that the rapid disbursement of funds related to TARP required
increases in bill financing and short-dated coupons. As a result, the average
maturity of the overall marketable debt portfolio fell to 49 months. While this
lowered average maturity, Treasury at the same time introduced a second
reopening of the 10 year and moved to quarterly 30-year bonds so that bill issuance
could roll into coupon issuance. Bills currently represent about 33 percent of
outstanding marketable debt, and while demand remains robust, Treasury
recognizes the need to monitor short-term issuance versus longer dated issuance.
As a result, Treasury is balancing the borrowing profile to address these large
financing needs (in the short to medium term) while also preserving flexibility to
address cyclical or structural shifts.
http://www.treas.gov/press/releases/tgl 1.htm
To that end, Ramanathan stated that Treasury will seek to extend the average
maturity and duration of the portfolio with the realization that continued large
issuance from bills and shorter dated coupons will make this extension a gradual
process.
The charts then highlighted constraints to be considered in deciding how to extend
the portfolio, including risk appetite by the market, balance sheet constraints, and
competition by other less liquid yet guaranteed or "effectively guaranteed" products.
Moreover, state and local government securities program has seen redemptions todate of over $10 billion, coming on top of last year's redemptions of $36 billion and
FY 2007 issuance of $58 billion.
Ramanathan noted that gross issuance of Treasuries will potentially reach $6.5
trillion dollars in FY2009. Increases in issuance sizes, issuance frequencies, the
issuance of larger, longer-dated cash management bills, and the introduction of
securities would serve to finance funding needs. Ramanathan stated that issuance
sizes of nominal coupons would be increased while TIPS would continue to grow at
a slower pace based on several studies which show a higher cost relative to
nominal issuance.
Before discussing the first item in the charge the Committee moved on to the
second item in the charge concerning factors that Treasury should consider in fiscal
years 2009 and 2010. A Committee member gave the presentation.
The presenting member began by noting that the trends in unemployment rate
where closely correlated with tax receipts and that the general consensus was that
unemployment rates would rise from current levels, suggesting that Treasury
funding needs would be sizable for some time. The presenting member noted that
FY09 net borrowing could be as high as18 percent of GDP while debt to GDP ratios
were projected to rise above 50 percent.
The presenting member noted that the Fed's stance on monetary policy would likely
be stable at current low rate levels for at least a year and perhaps longer. The
presenting member enumerated several programs that would compete for funding
including several Federal Reserve liquidity facilities, FDIC programs and Agency
programs. Some of these programs, such ds the FDIC insured bank debt program
which has issued $147 billion to date, while illiquid and with varied terms, were
potential alternatives to Treasury debt.
The Committee member then clearly noted that as a percent of debt to GDP,
Treasury was well below other major G7 nations, and its capacity to borrow was
large given the size of GDP. Lower financing rates as well as a deep, active market
also increase Treasury's ability to borrow.
The presenting member then raised the issue that international investment,
particularly from Asia, was an important component to future funding. The member
noted that growth world wide was declining and trade flows were being impacted,
potentially leading to a more domestically- oriented position on investments.
At that point, a discussion followed regarding the best course of action for Treasury.
A member began by noting that liquidity preference was high for Treasuries and
that the ability to fund in bills and shorter-dated coupons remained high. Another
member stated that some money funds were closing to new investors and that
might impair funding capacity.
One member asked if Treasury was publicizing "Treasury Direct", the online system
that allows institutional and retail investors to purchase securities directly from
Treasury at the auction. Ramanathan noted that Treasury explicitly lowered the
minimum denomination on marketable Treasuries to $100 from $1000 to broaden
the scope of potential investors, but also noted that savings bonds investments
have declined for the past 20 consecutive quarters.
http://www.treas.gov/press/releases/tgl 1.htm
8/3/2010
One Committee member raised the issue of lower liquidity in the Treasury market in
the previous quarter, indicating that government trading desks were constrained by
balance sheets. Several members stated that liquidity had improved since the fails
situation in the fourth quarter of 2008, and that the liquidity in the market prior to
2007 was not sustainable. Another member stated that current conditions, while
less liquid, still were attractive to domestic and international capital.
Another member said that if Treasury continued to remain completely transparent
and predictable in its issuance pattern and decisions, demand would appear at a
market price. Most of the Committee stated that Treasury should continue its
transparent decision-making process - despite the high degree of uncertainty - and
that its signaling of potential changes in advance as more information becomes
available has greatly assisted market participants. Given larger benchmark coupon
sizes and the potential need for additional securities, telegraphing these moves as
has been done over the past in a broad manner would enable greater risk taking
and appetite.
The Committee then turned to a discussion of what specific actions should be taken
at this juncture given the uncertainty facing Treasury. There was consensus that
Treasury should extend the maturity of the debt portfolio. Committee members were
reluctant to suggest that Treasury target an average length because such a target
may limit flexibility at some future point.
The Committee stated that benchmark nominal coupon issuance sizes could be
increased over the next few months by at least five billion each in most issues out
to five years with minimal concession, with even greater flexibility for increases in
the 5-year note. Members stated that moving from quarterly to monthly 30-year
bond issuance in which the security is reopened twice in the months following the
initial quarterly offering was appropriate and would help extend average maturity
while addressing borrowing needs in the longer term
There was a general consensus that the market was expecting the réintroduction of
a 7- year note. Committee members felt that monthly issuance was appropriate,
and suggested an initial monthly offering followed by two reopenings. Members
suggested that the 7-year would fit in the auction calendar at the end of the month
after the 2-year and 5-year note auctions. The remaining financing could be done in
bills, both regular and longer dated cash management bills.
Members also discussed the potential to issue other securities if needed including a
réintroduction of a 4-year note, a 20-year bond, and/or longer-dated debt but stated
that it was premature to proceed with any of those options at this time since
nominal sizes could be increased and the additions to the calendar would assist
Treasury in achieving its financing.
Ramanathan noted that calendar issues, including dates for auctions and
settlement dates, needed to be considered if additional securities were introduced.
The meeting adjourned at 12:50 PM.
The Committee reconvened at the Department of the Treasury at 6:00 p.m. All of
the Committee members were present except for Estes. The Chairman presented
the Committee report to Acting Assistant Secretary Ramanathan.
A brief discussion followed the Chairman's presentation but did not raise significant
questions regarding the report's content.
The Committee then reviewed the financing for the remainder of the January
through March quarter and the April through June quarter (see attached).
The meeting adjourned at 6:15 p.m.
Karthik Ramanathan, Director
http://www.treas.gov/press/releases/tgl 1.htm
8/3/2010
Acting Assistant Secretary for Financial Markets
United States Department of the Treasury
February 3, 2009
Certified by:
Keith T. Anderson, Chairman
Treasury Borrowing Advisory Committee
Of The Securities Industry and Financial Markets Association
February 3, 2009
Treasury Borrowing Advisory Committee Quarterly Meeting
Committee Charge - February 3, 2009
Fiscal Outlook
Treasury is expecting to make further changes to the auction calendar as a result of
increased financing needs. What adjustments to the current securities offerings
should Treasury make at this time that would be easily introduced and provide
increased flexibility?
Impacts of Liquidity initiatives on Treasury Borrowing
What factors and/or issues should Treasury be aware of in fiscal years 2009 and
2010? Please discuss the implications for Treasury borrowing of the various
government liquidity programs and loan guarantees as well as other exogenous
factors.
Financing this Quarter
We would like the Committee's advice on the following:
* The composition of Treasury notes and bonds to refund approximately
$36.3 billion of privately held notes maturing on February 15, 2009.
* The composition of Treasury marketable financing for the remainder of the
January - March quarter, including cash management bills.
■ The composition of Treasury marketable financing for the April - June
quarter, including cash management bills.
http://www.treas.gov/press/releases/tgl 1.htm
8/3/2010
February 3, 2009
TG-13
Treasury Provides Funding to Bolster 42 Healthy, Local Banks Nationwide
First banks in Arizona and Nebraska receive capital to increase lending;
Banks in 45 states now participating in Treasury program
Washington, DC - The U.S. Treasury Department today announced investments of
approximately $1.15 billion in 42 banks across the nation as part of its Capital
Purchase Program (CPP), a means to directly infuse capital into healthy, viable
banks with the goal of increasing the flow of financing available to small businesses
and consumers. With additional capital, banks are better able to meet the lending
needs of their customers, and businesses have greater access to the credit that
they need to keep operating and growing.
Since its inception in October 2008, Treasury has strengthened healthy small and
large, regional, and national, financial institutions, as well as Community
Development Financial Institutions (CDFIs), through total CPP investments of
$195.33 billion in 359 institutions in 45 states and Puerto Rico. To date, the largest
investment was $25 billion and the smallest investment was approximately $1
million.
Among the most recent banks to receive Treasury funding was Legacy Bancorp of
Milwaukee, Wisconsin, a CDFI founded by African-American women and one of the
fastest growing community banks in the nation. CDFIs such as Legacy provide vital
credit and financial services to low-income areas that are often unavailable from
commercial banks.
Farmers and Merchants Bank, which primarily serves farms and rural businesses,
became the first Nebraska bank to receive Treasury investments through CPP.
"We believe this investment will enable our institution to take advantage of
opportunities to further strengthen our position in the marketplace. In particular, we
believe the investment will increase Farmers & Merchants Bank's lending capacity,
thereby enhancing our ability to assist our core customers in meeting the
challenges of a recessionary environment while positioning them to take full
advantage of an economic recovery," said Gerry Dunlap, President and Chief
Executive of Country Bankshares, Inc., the bank holding company of Farmers and
Merchants Bank.
Also receiving CPP funding was Firstbank Corporation of Alma, Michigan, which
operates 53 banking offices throughout the state's Lower Penninsula.
"This additional capital will facilitate expanded service to our customers and the
communities we serve in Michigan," said Chief Executive Officer Thomas R.
Sullivan. "We plan to use the additional capital to further increase the capacity of
our banks to make prudent loans to customers, while serving customer and
community needs for deposit and other banking services. This is a time when
economies at all levels - local, state, regional, and national - urgently need
supportive, quality oriented, well-run banks. As a community banking company with
six affiliate banks, we at Firstbank Corporation are excited about the prospects that
this additional capital provides."
Under the CPP, Treasury is purchasing up to a total of $250 billion of senior
preferred shares from healthy U.S. financial institutions such as those announced
today. Institutions that participate in the CPP must comply with restrictions on
http://www.treas.gov/press/releases/tgl 3 .htm
8/3/2010
executive compensation during the period that Treasury holds equity issued
through the CPP and agree to limitations on dividends and stock repurchases.
Banks participating in the CPP will pay the Treasury a five percent dividend on
senior preferred shares for the first five years following the investment and a rate of
nine percent per year thereafter. Banks may repay Treasury under the conditions
established in the purchase agreements, and Treasury may sell these shares when
market conditions stabilize. Further information about the terms of the program,
including weekly transactions, can be found at
httpi//www.treas.gov/initiatives/eesa/.
The following is a complete list of banks receiving funding on January 30, 2009:
Arkansas
Rogers Bancshares, Inc.
Arizona
Goldwater Bank, N.A.
California
Beach Business Bank
Central Valley Community Bancorp
Ojai Community Bank
Peninsula Bank Holding Co.
Plumas Bancorp
Valley Commerce Bancorp
Colorado
Bankers' Bank of the West Bancorp, Inc.
Florida
First Southern Bancorp, Inc.
Georgia
Metro City Bank
Illinois
PrivateBancorp, Inc.
Indiana
AMB Financial Corp.
Kansas
Equity Bancshares, Inc.
UBT Bancshares, Inc.
Maryland
Monument Bank
Annapolis Bancorp, Inc.
First United Corporation
Maine
Katahdin Bankshares Corp.
Michigan
Firstbank Corporation
Flagstar Bancorp, Inc.
Missouri
Guaranty Federal Bancshares, Inc.
North Carolina
Oak Ridge Financial Services, Inc.
Nebraska
Adbanc, Inc
Country Bank Shares, Inc.
New Hampshire
Northway Financial, Inc.
New Jersey
Community Partners Bancorp
Hilltop Community Bancorp, Inc.
Parke Bancorp, Inc.
Stewardship Financial Corporation
Ohio
Peoples Bancorp Inc.
Pennsylvania
http://www.treas.gov/press/releases/tgl3.htm
$25,000,000
$2,568,000
$6 ,000,000
$7,000,000
$2,080,000
$ 6 ,000,000
$11,949,000
7,700,000
$12,639,000
$10,900,000
$7,700,000
$243,815,000
$3,674,000
$8,750,000
$8,950,000
$4,734,000
$8,152,000
$30,000,000
$10,449,000
$33,000,000
$266,657,000
$17,000,000
$7,700,000
$12,720,000
$7,525,000
$ 10,000,000
$9,000,000
$4,000,000
$16,288,000
$ 10,000,000
$39,000,000
8/3/2010
DNB Financial Corporation
First Resource Bank
South Carolina
Greer Bancshares Incorporated
Tennessee
F & M Bancshares, Inc.
Texas
Central Bancshares, Inc.
Virginia
Central Virginia Bankshares, Inc.
Middleburg Financial Corporation
WashingtonFirst Bank
Washington
W.T.B. Financial Corporation
Wisconsin
Anchor BanCorp Wisconsin Inc.
Legacy Bancorp, Inc.
http://www.treas.gov/press/releases/tg 13 .htm
$11,750,000
$2,600,000
9,993,000
$4,609,000
$5,800,000
$11,385,000
$22,000,000
$6,633,000
$110,000,000
$110,000,000
$5,498,000
8/3/2010
February 3, 2009
2009-2-3-18-21-6-26195
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $75,524 million as of the end of that week, compared to $75,857 million as of the end of the
prior week.
L Official reserve assets and other foreign currency assets (approximate market value, in US millions)
1
January 30, 2009
A. Official reserve assets (in US millions unless otherwise specified) ^
Euro
Yen
|(1) Foreign currency reserves (in convertible foreign currencies)
Total
||75,524
|(a) Securities
8,853
|of which: issuer headquartered in reporting country but located abroad
|(b) total currency and deposits with:
|(i) other national central banks, BIS and IMF
10,199
|ii) banks headquartered in the reporting country
|of which: located abroad
|(iii) banks headquartered outside the reporting country
|of which: located in the reporting country
|(2) IMF reserve position 2
7,442
(3) SDRs 2
9,047
(4) gold (including gold deposits and, if appropriate, gold swapped) 2
11,041
|~vo!ume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,511
||14.384
||23,237
II
II
llo
II
||7,047
||l 7,246
II
II
II
II
llo
llo
llo
llo
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
7,511
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
I
I
-lo a n s not included in official reserve assets
-financial derivatives not included in official reserve assets
-g o ld not included in official reserve assets
- ° th e r
....
II
ii
ii
II. Predetermined short-term net drains on foreign currency assets (nominal value)
ll
n
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/2009231821626195.htm
8/3/2010
-outflow s (-)
||Principal
-in flow s (+)
||Principal
Interest
|| Interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
-387,448
(a) Short positions ( - ) ^
-273,934
-113,514
| (b) Long positions (+)
| 3. Other (specify)
| -outflow s related to repos (-)
| -in flow s related to reverse repos (+)
--trade credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominal value)
I
il
•
II
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities
-B IS
-IM F
(+)
(+)
(+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities
(-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
|(i) Bought puts
|(ii) Written calls
|(b) Long positions
http://www.treas.gov/press/releases/2009231821626195.htm
8/3/2010
1(0 Bought calls
jj
11_______________ ||_______________ [1
1
|(ii) Written puts
11
11
1
11
[|
PRO MEMORIA: In-the-money options -■_________ ^__________ .____________________________________________________________
1(1) At current exchange rate
ll
|(a) Short position
ll
||______
||
||________________ ||_______________ |
ll
II
I
|(b) Long position
jj
ll
j|
II
1
1(2) + 5 % (depreciation of 5%)
|f
11
11
11
I
|(a) Short position
11
H
11
11
1
[(b) Long position
|(3) - 5 % (appreciation of 5%)
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
|(a) Short position
|(b) Long position
|(5) -1 0 % (appreciation of 10%)
|(a) Short position
|(b) Long position
l(6) Other (specify)
l(a) Short position ~
l(b) Long position
IV. Memo items
(1) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
--nondeliverable forwards
-s h o rt positions
-lo n g positions
-o th e r instruments
(c) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
7,666
-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
—borrowed or acquired but not included in Section I
7,666
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
-sw aps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
|(b) long positions (+)
|-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
If
http://www.treas.gov/press/releases/2009231821626195.htm
8/3/2010
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/2009231821626195.htm
8/3/2010
February 4, 2009
TG-14
Treasury Designates Free Life Party of Kurdistan a Terrorist Organization
Washington, DC - The U.S. Department of the Treasury today designated the Free
Life Party of Kurdistan (PJAK), a Kurdish group operating in the border region
between Iraq and Iran, under Executive Order 13224 for being controlled by the
terrorist group Kongra-Gel (KGK, aka the Kurdistan Workers Party or PKK).
"With today's action, we are exposing PJAK's terrorist ties to the KGK and
supporting Turkey's efforts to protect its citizens from attack," said Stuart Levey,
Treasury's Under Secretary for Terrorism and Financial Intelligence.
Designated in December 2002 under E.O. 13224, KGK has been involved for more
than 20 years in targeting Turkish government security forces, local Turkish
officials, and villagers who oppose the KGK in Turkey. Turkish authorities have
confirmed or suspect that KGK is also responsible for dozens of bombings since
2004 in western Turkey.
The KGK leadership authorized certain Iranian-Kurdish KGK members to create a
KGK splinter group that would portray itself as independent from but allied with
KGK. PJAK was created to appeal to Iranian Kurds. KGK formally institutionalized
PJAK in 2004 and selected five KGK members to serve as PJAK leaders, including
Hajji Ahmadi, a KGK affiliate who became PJAK's General Secretary. KGK leaders
also selected the members of PJAK's 40-person central committee. Although
certain PJAK members objected to the KGK selecting their leaders, the KGK
advised that PJAK had no choice.
As of April 2008, KGK leadership controlled PJAK and allocated personnel to the
group. Separately, PJAK members have carried out their activities in accordance
with orders received from KGK senior leaders. In one instance, PJAK’s armed wing,
the East Kurdistan Defense Forces, had been acting independently in Iran. KGK
senior leaders immediately intervened, however, and recalled the responsible PJAK
officials to northern Iraq.
Under E.O. 13224, any assets PJAK has under U.S. jurisdiction are frozen, and
U.S. persons are prohibited from engaging in any transactions with PJAK.
Identifying Information
FREE LIFE PARTY OF KURDISTAN
AKAs:
Kurdistan Free Life Party
Party of Free Life of Kurdistan Partiya Jiyana Azad a Kurdistane
PJAK
PEJAK
PEZHAK
Location:
Qandil Mountain, Irbil Governorate, Iraq
Alt, Location:
Razgah, Iran
a it
ifI I ¡1
it
http://www.treas.gov/press/releases/tgl4.htm
8/3/2010
February 4, 2009
TG-15
Treasury Announces New Restrictions On Executive Compensation
Today, the Treasuiy Department is issuing a new set of guidelines on executive pay
for financial institutions that are receiving government assistance to address our
current financial crisis. These measures are designed to ensure that public funds
are directed only toward the public interest in strengthening our economy by
stabilizing our financial system and not toward inappropriate private gain. The
measures announced today are designed to ensure that the compensation of top
executives in the financial community is closely aligned not only with the interests of
shareholders and financial institutions, but with the taxpayers providing assistance
to those companies.
The Treasury guidelines on executive pay seek to strike the correct balance
between the need for strict monitoring and accountability on executive pay and the
need for financial institutions to fully function and attract the talent pool that will
maximize the chances of financial recovery and taxpayers being paid back on their
investments. The proposals below, such as emphasizing restricted stock that vests
as the government is repaid with interest, seek to strike exactly that balance.
The guidelines distinguish between banks participating in any new generally
available capital access program and banks needing "exceptional assistance.”
Generally available programs have the same terms for all recipients, with limits on
the amount each institution may receive and specified returns for taxpayers. The
goal of these programs is to help ensure the financial system as a whole can
provide the credit necessary for recovery, including providing capital to smaller
community banks that play a critical role in lending to small businesses, families
and others. The previously announced Capital Purchase Program is an example of
a generally available capital access program.
If a firm needs more assistance than is allowed under a widely available standard
program, then that is exceptional assistance. Banks falling under the "exceptional
assistance" standard have bank-specific negotiated agreements with Treasury.
Examples include AIG, and the Bank of America and Citi transactions under the
Targeted Investment Program.
As part of President Obama's efforts to promote systemic regulatory reform, the
standards today mark the beginning of a long-term effort to examine both the
degree that executive compensation structures at financial institutions contributed
to our current financial crisis and how corporate governance and compensation
rules can be reformed to better promote long-term value and growth for
shareholders, companies, workers and the economy at large and to prevent such
financial crises from occurring again.
I
COMPLIANCE AND CERTIFICATION:
All Companies Receiving Government Assistance Must Ensure Compliance
with Executive Compensation Provisions: The chief executive officers of all
companies that have to this point received or do receive any form of government
assistance must provide certification that the companies have strictly complied with
statutory, Treasury, and contractual executive compensation restrictions. Chief
executive officers must re-certify compliance with these restrictions on an annual
basis. In addition, the compensation committees of all companies receiving
government assistance must provide an explanation of how their senior executive
compensation arrangements do not encourage excessive and unnecessary risk-
http ://www. treas.gov/press/releases/tg 15 .htm
8/3/2010
II.
ENHANCED CONDITIONS ON EXECUTIVE COMPENSATION
GOING FORWARD:
A.
Companies Receiving Exceptional Financial Recovery Assistance:
■ Limit Senior Executives to $500,000 in Total Annual Compensation Other than Restricted Stock: Current programs providing exceptional
assistance to financial institutions forbid recipients of government funds
from taking a tax deduction for senior executive compensation above
$500,000. Today's guidance takes this restriction further by limiting the total
amount of compensation to no more than $500,000 for these senior
executives except for restricted stock awards.
* Any Additional Pay for Senior Executives Must Be in Restricted Stock
that Vests When the Government Has Been Repaid with Interest: Any
pay to a senior executive of a company receiving exceptional assistance
beyond $500,000 must be made in restricted stock or other similar long
term incentive arrangements. The senior executive receiving such
restricted stock will only be able to cash in either after the government has
been repaid - including the contractual dividend payments that ensure
taxpayers are compensated for the time value of their money - or after a
specified period according to conditions that consider among other factors
the degree a company has satisfied repayment obligations, protected
taxpayer interests or met lending and stability standards. Such a restricted
stock strategy will help assure that senior executives of companies receiving
exceptional assistance have incentives aligned with both the long-term
interests of shareholders as well as minimizing the costs to taxpayers.
* Executive Compensation Structure and Strategy Must be Fully
Disclosed and Subject to a "Say on Pay" Shareholder Resolution: The
senior executive compensation structure and the rationale for how
compensation is tied to sound risk management must be submitted to a
non-binding shareholder resolution. There are no "Say on Pay" provisions in
the existing programs.
* Require Provisions to Clawback Bonuses fo r Top Executives
Engaging in Deceptive Practices: Under the existing programs providing
exceptional assistance, only the top five senior executives were subject to a
clawback provision. Going forward, a company receiving exceptional
assistance must have in place provisions to claw back bonuses and
incentive compensation from any of the next twenty senior executives if they
are found to have knowingly engaged in providing inaccurate information
relating to financial statements or performance metrics used to calculate
their own incentive pay.
* Increase Ban on Golden Parachutes for Senior Executives: The
existing programs providing exceptional assistance to financial institutions
prohibited the top five senior executives from receiving any golden
parachute payment upon severance from employment, a ban that will be
expanded to include the top ten senior executives. In addition, and at a
minimum, the next twenty-five executives will be prohibited from receiving
any golden parachute payment greater than one year's compensation upon
severance from employment.
* Require Board o f Directors' Adoption of Company Policy Relating to
Approval of Luxury Expenditures: The boards of directors of companies
receiving exceptional assistance from the government must adopt a
company-wide policy on any expenditures related to aviation services, office
and facility renovations, entertainment and holiday parties, and conferences
and events. This policy is not intended to cover reasonable expenditures for
sales conferences, staff development, reasonable performance incentives
and other measures tied to a company's normal business operations. These
new rules go beyond current guidelines, and would require certification by
chief executive officers for expenditures that could be viewed as excessive
or luxury items. Companies should also now post the text of the
expenditures policy on their web sites.
B.
Financial Institutions Participating in Generally Available Capital
Access Programs:
http://www.treas.gov/press/releases/tg 15 .htm
The Treasury intends to issue proposed guidance subject to public comment on the
following executive compensation requirements relating to future generally available
capital access programs.
*
Limit Senior Executives to $500,000 in Total Annual Compensation
Plus Restricted Stock - Unless Waived with Full Public Disclosure and
Shareholder Vote: Companies that participate in generally available capital
access programs may waive the $500,000 plus restricted stock rule only by
disclosure of their compensation and, if requested, a non-binding "say on
pay" shareholder resolution. All firms participating in a future capital access
program must review and disclose the reasons that compensation
arrangements of both the senior executives and other employees do not
encourage excessive and unnecessary risk taking. Under the current
Capital Purchase Program, the companies were only required to review and
certify that the top five executives' compensation arrangements did not
encourage excessive and unnecessary risk-taking.
* Require Provisions to Clawback Bonuses for Top Executives
Engaging in Deceptive Practices: The same clawback provision that
applies to companies receiving exceptional assistance will apply to those in
generally available capital access programs. Thus, in addition to the
clawback provision applicable to the top five executives as under the Capital
Purchase Program, a company receiving assistance must have in place
provisions to claw back bonuses and incentive compensation from any of
the next twenty senior executives if they are found to have knowingly
engaged in providing inaccurate information relating to financial statements
or performance metrics used to calculate their own incentive pay.
* Increase Ban on Golden Parachutes for Senior Executives: Even under
generally available capital access programs, the golden parachute ban will
be strengthened: Upon a severance from employment, the top five senior
executives will not be allowed a golden parachute payment greater than one
year's compensation, as opposed to three years under the current Capital
Purchase Program.
3 Require Board of Directors' Adoption of Company Policy Relating to
Approval o f Luxury Expenditures: This policy will be the same for
companies accessing generally available capital programs as it is for those
receiving exceptional assistance. There are no guidelines on luxury
expenditures under the current Capital Purchase Program.
[These new standards will not apply retroactively to existing investm ents o r to
program s already announced such as the Capital Purchase Program and the Term
Asset-Backed Securities Loan Facility .]
III. LONG-TERM REGULATORY REFORM: COMPENSATION STRATEGIES
ALIGNED WITH PROPER RISK MANAGEMENT AND LONG-TERM VALUE AND
GROWTH:
Even as we work to recover from current market events, it is not too early to begin a
serious effort to both examine how company-wide compensation strategies at
financial institutions - not just those related to top executives - may have
encouraged excessive risk-taking that contributed to current market events and to
begin developing model compensation policies for the future. Such steps should
include:
8 Requiring all Compensation Committees o f Public Financial
Institutions to Review and Disclose Strategies for Aligning
Compensation with Sound Risk-Management: The Secretary of the
Treasury and the Chairman of the Securities and Exchange Commission
should work together to require compensation committees of all public
financial institutions - not just those receiving government assistance - to
review and disclose executive and certain employee compensation
arrangements and explain how these compensation arrangements are
consistent with promoting sound risk management and long-term value
creation for their companies and their shareholders.
8 Compensation o f Top Executives Should Include Incentives That
Encourage a Long-Term Perspective: Over the last decade there has
http ://www.treas.gov/press/releases/tg 15 .htm
8/3/2010
been an emerging consensus that top executives should receive
compensation that encourages more of a long-term perspective on creating
economic value for their shareholders and the economy at large. One idea
worthy of serious consideration is requiring top executives at financial
institutions to hold stock for several years after it is awarded before it can be
cashed-out as this would encourage a more long-term focus on the
economic interests of the firm.
•
Pass Say on Pay Shareholder Resolutions on Executive
Compensation: Even beyond companies receiving financial recovery
assistance, owners of financial institutions - the shareholders - should have
a non-binding resolution on both the levels of executive compensation as
well as how the structure of compensation incentives help promote risk
management and long-term value creation for the firm and the economy as
a whole.
*
White House -Treasury Conference on Long-Term Executive Pay
Reform: The Secretary of the Treasury will host a conference with
shareholder advocates, major public pension and institutional investor
leaders, policy-makers, executives, academics, and others on executive pay
reform at financial institutions. Treasury will seek testimony, comment, and
white papers on model executive pay initiatives in the cause of establishing
best practices and guidelines on executive compensation arrangements for
financial institutions.
http ://www. treas.gov/press/releases/tg 15 .htm
8/3/2010
February 8, 2009
tg-16
Statement from Treasury Spokesman Isaac Baker
"With record high job losses and weakening economic forecasts, we're focused on
working with Congress to pass an economic recovery bill so we can create the jobs
and make the investments necessary to get our economy moving again. The
Senate votes on Monday, and economic officials Administration wide will be
working and consulting with senators throughout the day. Secretary Geithner will
postpone the release of the Administration's Financial Stability and Recovery Plan
until Tuesday to allow for that to happen.
'The economic recovery plan is critical to stemming the tide of this economic crisis.
But, it alone won't solve all the problems that led us here. We need to stabilize and
repair our financial system to maintain the flow of credit that families and
businesses depend on to keep our economy strong. The plan that Secretary
Geithner lays out on Tuesday will achieve that goal."
http://www.treas.gov/press/releases/tgl6.htm
8/3/2010
February 10, 2009
tg-17
Treasury Releases Photo from Geithner, Carstens Bilateral Meeting
Washington, DC - Secretary Tim Geithner met with Mexican Finance Minister
Agustin Carstens at the U.S. Department of the Treasury Monday to discuss
strengthening U.S.-Mexican economic and financial cooperation and to exchange
views on the U.S. and Mexican responses to the global financial crisis. Monday's
bilateral meeting was the first between the two secretaries in their current
capacities.
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/tgl7.htm
8/3/2010
/ o view o r p rin t the HL)l- content on this page, download the tree Adobe® Acrobat® Header®.
February 10, 2009
TG-18
Secretary Geithner Introduces Financial Stability Plan
Remarks by Treasury Secretary Timothy Geithner
Introducing the Financial Stability Plan
Tuesday, February 10, 2009
A s prepared for delivery
As President Obama said in his inaugural address, our economic strength is
derived from "the doers, the makers of things."
The innovators who create and expand enterprises; the workers who provide life to
companies; this is what drives economic growth.
The financial system is central to this process. Banks and the credit markets
transform the earnings and savings of American workers into the loans that finance
a first home, a new car or a college education. And this system provides the capital
and credit necessary to build a company around a new idea.
Without credit, economies cannot grow at their potential, and right now, critical parts
of our financial system are damaged. The credit markets that are essential for small
businesses and consumers are not working. Borrowing costs have risen sharply for
state and local governments, for students trying to pay for college, and for
businesses large and small. Many banks are reducing lending, and across the
country they are tightening the terms of loans.
Last Friday we learned that the economy had lost three million jobs last year, and
an additional 600,000 just last month. As demand falls and credit tightens,
businesses around the world are cutting back the investments that are essential to
future growth. Trade among nations has contracted sharply, as trade finance has
dried up. Home prices are still falling, as foreclosures rise and even credit worthy
borrowers are finding it harder to finance the purchase of a first home, or refinance
their mortgage.
Instead of catalyzing recovery, the financial system is working against recovery.
And at the same time, the recession is putting greater pressure on banks. This is a
dangerous dynamic, and we need to arrest it. It is essential for every American to
understand that the battle for economic recovery must be fought on two fronts. We
have to both jumpstart job creation and private investment, and we must get credit
flowing again to businesses and families.
Without a powerful Economic Recovery Act, too many Americans will lose their jobs
and too many businesses will fail. And unless we restore the flow of credit, the
recession will be deeper and longer, causing even more damage to families and
businesses across the country.
Today, as Congress moves to pass an economic recovery plan that will help create
jobs and lay a foundation for stronger economic future, we are outlining a new
http ://www.treas.gov/press/releases/tgl 8 .htm
8/3/2010
Financial Stability Plan.
Our plan will help restart the flow of credit, clean up and strengthen our banks, and
provide critical aid for homeowners and for small businesses. As we do each of
these things, we will impose new, higher standards for transparency and
accountability.
I am going to outline the key elements of this program today. But before I do that, I
want to explain how we got here. The causes of the crisis are many and complex.
They accumulated over time, and will take time to resolve.
Governments and central banks around the world pursued policies that, with the
benefit of hindsight, caused a huge global boom in credit, pushing up housing
prices and financial markets to levels that defied gravity.
Investors and banks took risks they did not understand. Individuals, businesses,
and governments borrowed beyond their means. The rewards that went to financial
executives departed from any realistic appreciation of risk.
There were systematic failures in the checks and balances in the system, by
Boards of Directors, by credit rating agencies, and by government regulators. Our
financial system operated with large gaps in meaningful oversight, and without
sufficient constraints to limit risk. Even institutions that were overseen by our
complicated, overlapping system of multiple regulators put themselves in a position
of extreme vulnerability.
These failures helped lay the foundation for the worst economic crisis in
generations.
When the crisis began, governments around the world were too slow to act. When
action came, it was late and inadequate. Policy was always behind the curve,
always chasing the escalating crisis. As the crisis intensified and more dramatic
government action was required, the emergency actions meant to provide
confidence and reassurance too often added to public anxiety and to investor
uncertainty.
The dramatic failure or near-failure of some of the world's largest financial
institutions, and the lack of clear criteria and conditions applied to government
interventions caused investors to pull back from taking risk. Last fall, as the global
crisis intensified, Congress acted quickly and courageously to provide emergency
authority to help contain the damage. The government used that authority to pull
the financial system back from the edge of catastrophic failure.
The actions your government took were absolutely essential, but they were
inadequate.
The force of government support was not comprehensive or quick enough to
withstand the deepening pressure brought on by the weakening economy. The
spectacle of huge amounts of taxpayer assistance being provided to the same
institutions that help caused the crisis, with limited transparency and oversight,
added to public distrust. This distrust turned to anger as Boards of Directors at
some institutions continued to award rich compensation packages and lavish perks
to their senior executives.
Our challenge is much greater today because the American people have lost faith
in the leaders of our financial institutions, and are skeptical that their government
has - to this point -- used taxpayers' money in ways that will benefit them. This has
to change.
To get credit flowing again, to restore confidence in our markets, and restore the
faith of the American people, we are fundamentally reshaping the government's
program to repair the financial system.
http://www.treas.gov/press/releases/tgl8.htm
8/3/2010
Our work will be guided by the lessons of the last few months and the lessons of
financial crisis throughout history. The basic principles that will shape our strategy
are the following:
We believe that the policy response has to be comprehensive, and forceful. There
is more risk and greater cost in gradualism than in aggressive action.
We believe that action has to be sustained until recovery is firmly established. In the
United States in the 30s, Japan in the 90s, and in other cases around the world,
previous crises lasted longer and caused greater damage because governments
applied the brakes too early. We cannot make that mistake.
We believe that access to public support is a privilege, not a right. When our
government provides support to banks, it is not for the benefit of banks, it is for the
businesses and families who depend on banks... and for the benefit of the country.
Government support must come with strong conditions to protect the tax payer and
with transparency that allows the American people to see the impact of those
investments.
We believe our policies must be designed to mobilize and leverage private capital,
not to supplant or discourage private capital. When government investment is
necessary, it should be replaced with private capital as soon as possible.
We believe that the United States has to send a clear and consistent signal that we
will act to prevent the catastrophic failure of financial institutions that would damage
the broader economy.
Guided by these principles, we will replace the current program with a new
Financial Stability Plan to stabilize and repair the financial system, and support the
flow of credit necessary for recovery.
This new Financial Stability Plan will take a comprehensive approach. The
Department of the Treasury, the Federal Reserve, the FDIC, and all the financial
agencies in our country will bring the full force of the United States Government to
bear to strengthen our financial system so that we get the economy back on track.
We have different authorities, instruments and responsibilities, but we are one
government serving the American people, and I will do everything in my power to
ensure that we act as one.
Our work begins with a new framework of oversight and governance of all aspects
of our Financial Stability Plan.
The American people will be able to see where their tax dollars are going and the
return on their government's investment, they will be able to see whether the
conditions placed on banks and institutions are being met and enforced, they will be
able to see whether boards of directors are being responsible with taxpayer dollars
and how they're compensating their executives, and they will be able to see how
these actions are impacting the overall flow of lending and the cost of borrowing.
These new requirements, which will be available on a new website
FinancialStability.gov, will give the American people the transparency they deserve.
These steps build on what we ve done already. We've acted to ensure the integrity
of the process that provides access to government support, so that it is independent
of influence from lobbyists and politics. We've committed to provide the American
people with information on how their money is spent and under what conditions by
posting contracts on the Internet. And, importantly, we have outlined strong
conditions on executive compensation.
Under this framework, we are establishing three new programs to clean up and
http://www.treas.gov/press/releases/tgl8.htm
8/3/2010
strengthen the nation's banks, bring in private capital to restart lending, and to go
around the banking system directly to the markets that consumers and businesses
depend on.
Let me describe each of these steps:
First, we're going to require banking institutions to go through a carefully designed
comprehensive stress test, to use the medical term. We want their balance sheets
cleaner, and stronger. And we are going to help this process by providing a new
program of capital support for those institutions which need it.
To do this, we are going to bring together the government agencies with authority
over our nation's major banks and initiate a more consistent, realistic, and forward
looking assessment about the risk on balance sheets, and we're going to introduce
new measures to improve disclosure.
Those institutions that need additional capital will be able to access a new funding
mechanism that uses funds from the Treasury as a bridge to private capital. The
capital will come with conditions to help ensure that every dollar of assistance is
used to generate a level of lending greater than what would have been possible in
the absence of government support. And this assistance will come with terms that
should encourage the institutions to replace public assistance with private capital as
soon as that is possible.
The Treasury's investments in these institutions will be placed in a new Financial
Stability Trust.
Second, alongside this new Financial Stability Trust, together with the Fed, the
FDIC, and the private sector, we will establish a Public-Private Investment Fund.
This program will provide government capital and government financing to help
leverage private capital to help get private markets working again. This fund will be
targeted to the legacy loans and assets that are now burdening many financial
institutions.
By providing the financing the private markets cannot now provide, this will help
start a market for the real estate related assets that are at the center of this crisis.
Our objective is to use private capital and private asset managers to help provide a
market mechanism for valuing the assets.
We are exploring a range of different structures for this program, and will seek input
from market participants and the public as we design it. We believe this program
should ultimately provide up to one trillion in financing capacity, but we plan to start
it on a scale of $500 billion, and expand it based on what works.
Third, working jointly with the Federal Reserve, we are prepared to commit up to a
trillion dollars to support a Consumer and Business Lending Initiative. This initiative
will kickstart the secondary lending markets, to bring down borrowing costs, and to
help get credit flowing again.
In our financial system, 40 percent of consumer lending has historically been
available because people buy loans, put them together and sell them. Because this
vital source of lending has frozen up, no financial recovery plan will be successful
unless it helps restart securitization markets for sound loans made to consumers
and businesses - large and small.
This lending program will be built on the Federal Reserve's Term Asset Backed
Securities Loan Facility, announced last November, with capital from the Treasury
and financing from the Federal Reserve.
We have agreed to expand this program to target the markets for small business
lending, student loans, consumer and auto finance, and commercial mortgages.
http ://www. treas.gov/press/releases/tg 18 .htm
8/3/2010
And because small businesses are so important to our economy, we're going to
take additional steps to make it easier for them to get credit from community banks
and large banks. By increasing the federally guaranteed portion of SBA loans, and
giving more power to the SBA to. expedite loan approvals, we believe we can turn
around the dramatic decline in SBA lending we have seen in recent months.
Finally, we will launch a comprehensive housing program. Millions of Americans
have lost their homes, and millions more live with the risk that they will be unable to
meet their payments or refinance their mortgages.
Many of these families borrowed beyond their means. But many others fell victim to
terrible lending practices that left them exposed, overextended, and with no way to
refinance. On top of that, homeowners around the country are seeing the value of
their homes fall because of forces they did not create and cannot control. This crisis
in housing has had devastating consequences, and our government should have
moved more forcefully to limit the damage.
As house prices fall, demand for housing will increase, and conditions will ultimately
find a new balance. But now, we risk an intensifying spiral in which lenders
foreclose, pushing house prices lower and reducing the value of household savings,
and making it harder for all families to refinance.
The President has asked his economic team to come together with a
comprehensive plan to address the housing crisis. We will announce the details of
this plan in the next few weeks.
Our focus will be on using the full resources of the government to help bring down
mortgage payments and to reduce mortgage interest rates. We will do this with a
substantial commitment of resources already authorized by the Congress under the
Emergency Economic Stabilization Act.
Let me add that as we go forward, President Obama is committed to moving quickly
to reform our entire system of financial regulation so that we never again face a
crisis of this severity.
We are consulting closely with Chairman Chris Dodd in the Senate, Chairman
Barney Frank in the House, and their colleagues on both sides of the aisle on the
broad outline of a comprehensive program of reforms. The President's Working
Group on Financial Markets is developing detailed recommendations.
And we will begin working closely with the world's leading economies on a set of
broader reforms to the international financial system in preparation for the G-20
Summit in London on April 2nd.
The success of our financial stability plan is going to require an unprecedented level
of cooperation, here in the United States and around the world. Federal Reserve
Chairman Ben Bernanke, FDIC Chair Sheila Bair, John Dugan, the Comptroller of
the Currency, and John Reich the head of the Office of Thrift Supervision, are here
today. I want to thank them for helping to shape this plan, and their commitment to
making it work.
This program will require a substantial and sustained commitment of public
resources. Congress has already authorized substantial resources for this effort,
and we will use those resources as carefully and effectively as possible. We will
consult closely with Congress as we move forward, and work together to make sure
we have the resources and the authority to make this program work.
Later this week, I will be traveling to meet with the G7 finance ministers and central
bank governors in Italy. There, I'll start the process of working with our international
partners to ensure that we're working together to strengthen recovery and to help
stabilize and repair the global financial system.
http://www.treas.gov/press/releases/tgl8.htm
8/3/2010
And we will work closely with the leadership of the IMF and World Bank so that they
can deploy resources quickly to help those countries around the world that are most
at risk from this crisis.
Many of the programs I've just discussed involve large numbers. But it is important
to recognize that these programs involve loans, guarantees, and investments with
terms and conditions that protect taxpayers and help compensate the government
for risk. Because of these terms and conditions, the risk to taxpayers will be less
than the headline.
Our obligation is to design the programs so that we are achieving the largest benefit
in terms of supporting recovery at least cost to the taxpayer. And we take that
obligation extremely seriously.
But I want to be candid: this strategy will cost money, involve risk, and take time. As
costly as this effort may be, we know that the cost of a complete collapse of our
financial system would be incalculable for families, for businesses and for our
nation.
We will have to adapt our program as conditions change. We will have to try things
we've never tried before. We will make mistakes. We will go through periods in
which things get worse and progress is uneven or interrupted.
We will be guided by the principles of transparency and accountability, dedicated to
the goals of restoring credit to families and businesses, and committed to moving
our nation towards an economic recovery that is as swift and widespread as
possible.
This is a challenge more complex than any our financial system has ever faced,
requiring new programs and persistent attention to solve. But the President, the
Treasury and the entire Administration are committed to see it through because we
know how directly the future of our economy depends on it.
Thank you.
###
LINKS
*
Financial Stability Rian Fact Sheet
http ://www. treas.gov/press/releases/tg 18 .htm
8/3/2010
FACT SHEET
FINANCIAL STABILITY PLAN
The Financial Stability Plan: Deploying our Full Arsenal to Attack the Credit Crisis on All Fronts. Today, our
nation faces the most severe financial crisis since the Great Depression. It is a crisis o f confidence, o f capital, o f
credit, and o f consumer and business demand. Rather than providing the credit that allows new ideas to flourish into
new jobs, or families to afford homes and autos, we have seen banks and other sources o f credit freeze up contributing to and potentially accelerating what already threatens to be a serious recession. Restarting our economy
and job creation requires both jumpstarting economic demand for goods and services through our American
Recovery and Reinvestment Act and simultaneously ensuring through our new Financial Stability Plan that
businesses with good ideas have the credit to grow and expand, and working families can get the affordable loans
they need to meet their economic needs and power an economic recovery.
To address the financial crisis, the Financial Stability Plan is designed to attack our credit crisis on all fronts with
our fu ll arsenal o f financial tools and the resources commensurate to the depth o f the problem. To be successful, we
must address the uncertainty, troubled assets and capital constraints o f our financial institutions as well as the frozen
secondary markets that have been the source o f around half o f our lending for everything from small business loans
to auto loans.
To protect taxpayers and ensure that every dollar is directed toward lending and economic revitalization, the
Financial Stability Plan w ill institute a new era o f accountability, transparency and conditions on the financial
institutions receiving funds. To ensure that we are responding to this crisis as one government, Secretary Timothy
Geithner — working in collaboration and joined by Federal Reserve Chairman Ben Bemanke, FDIC Chair Sheila
Bair, Office o f T hrift Supervision Director John Reich and Comptroller o f the Currency John Dugan - is bringing
the fu ll force and fu ll range o f financial tools available to cleaning up lingering problems in our banking system,
opening up credit and beginning the process o f financial recovery.
Financial Stability Plan
1.
Financial Stability Trust
• A Comprehensive Stress Test for M ajor Banks
• Increased Balance Sheet Transparency and Disclosure
• Capital Assistance Program
2.
Public-Private Investment Fund ($500 Billion - $1 Trillion)
3.
Consumer and Business Lending Initiative (Up to $1 trillion)
4.
Transparency and Accountability Agenda - Including Dividend
Limitation
5.
Affordable Housing Support and Foreclosure Prevention Plan
6.
A Small Business and Community Lending Initiative
1
FINANCIAL STABILITY PLAN
1.
Financial Stability Trust: A key aspect o f the Financial Stability Plan is an effort to strengthen our
financial institutions so that they have the a bility to support recovery. This Financial Stability Trust
includes:
a. A Comprehensive Stress Test: A Forw ard Looking A ssessm ent o f What Banks
N eed to Keep Lending Even Through a Severe Econom ic Downturn: Today,
uncertainty about the real value o f distressed assets and the a bility o f borrowers to
repay loans as w ell as uncertainty as to whether some financial institutions have the
capital required to weather a continued decline in the economy have caused both a
dramatic slowdown in lending and a decline in the confidence required fo r the
private sector to make much needed equity investments in our major financial
institutions. The Financial Stability Plan w ill seek to respond to these challenges
w ith:
•
Increased Transparency and Disclosure: Increased transparency w ill
facilitate a more effective use o f market discipline in financial markets. The
Treasury Department w ill work w ith bank supervisors and the Securities and
Exchange Commission and accounting standard setters in their efforts to
improve public disclosure by banks. This effort w ill include measures to
improve the disclosure o f the exposures on bank balance sheets. In
conducting these exercises, supervisors recognize the need not to adopt an
overly conservative posture or take steps that could inappropriately constrain
lending.
•
Coordinated, Accurate, and Realistic Assessment: A ll relevant financial
regulators — the Federal Reserve, FDIC, OCC, and OTS — w ill work
together in a coordinated way to bring more consistent, realistic and forward
looking assessment o f exposures on the balance sheet o f financial
institutions..
•
Forward Looking: Assessment - Stress Test: A key component o f the Capital
Assistance Program is a forward looking comprehensive “ stress test” that
requires an assessment o f whether major financial institutions have the
capital necessary to continue lending and to absorb the potential losses that
could result from a more severe decline in the economy than projected.
•
Requirement for $100 Billion-Plus Banks: A ll banking institutions w ith
assets in excess o f $100 b illio n w ill be required to participate in the
coordinated supervisory review process and comprehensive stress test.
b.
Capital Assistance Program: W hile banks w ill be encouraged to access private
markets to raise any additional capital needed to establish this buffer, a financial
institution that has undergone a comprehensive “ stress test” w ill have access to a
Treasury provided “ capital buffer” to help absorb losses and serve as a bridge to
receiving increased private capital. W hile most banks have strong capital positions,
the Financial Stability Trust w ill provide a capital buffer that w ill: Operate as a form
o f “ contingent equity” to ensure firm s the capital strength to preserve or increase
2
lending in a worse than expected economic downturn. Firms will receive a preferred
security investment from Treasury in convertible securities that they can convert into
common equity if needed to preserve lending in a worse-than-expected economic
environment. This convertible preferred security will carry a dividend to be specified
later and a conversion price set at a modest discount from the prevailing level of the
institution’s stock price as of February 9, 2009. Banking institutions with
consolidated assets below $100 billion will also be eligible to obtain capital from the
CAP after a supervisory review.
c. Financial Stability Trust: Any capital investments made by Treasury under the CAP
will be placed in a separate entity - the Financial Stability Trust - set up to manage
the government’s investments in US financial institutions.
2.
Public-Private Investment Fund: One aspect of a full arsenal approach is the need to provide
greater means for financial institutions to cleanse their balance sheets of what are often referred to as
“legacy” assets. Many proposals designed to achieve this are complicated both by their sole reliance
on public purchasing and the difficulties in pricing assets. Working together in partnership with the
FDIC and the Federal Reserve, the Treasury Department will initiate a Public-Private Investment
Fund that takes a new approach.
•
Public-Private Capital: This new program will be designed with a public-private financing
component, which could involve putting public or private capital side-by-side and using
public financing to leverage private capital on an initial scale of up to $500 billion, with the
potential to expand up to $1 trillion.
•
Private Sector Pricing o f A ssets: Because the new program is designed to bring private
sector equity contributions to make large-scale asset purchases, it not only minimizes public
capital and maximizes private capital: it allows private sector buyers to determine the price
for current troubled and previously illiquid assets
3.
Consumer & Business Lending Initiative - Up to $1 Trillion: Addressing our credit crisis on all
fronts means going beyond simply dealing with banks. While the intricacies of secondary markets
and securitization - the bundling together and selling of loans - may be complex, they account for
almost half of the credit going to Main Street as well as Wall Street. When banks making loans for
small businesses, commercial real estate or autos are able to bundle and sell those loans into a vibrant
and liquid secondary market, it instantly recycles money back to financial institutions to make
additional loans to other worthy borrowers. When those markets freeze up, the impact on lending for
consumers and businesses - small and large - can be devastating. Unable to sell loans into secondary
markets, lenders freeze up, leading those seeking credit like car loans to face exorbitant rates.
Between 2006 and 2008, there was a net $1.2 trillion decline in securitized lending (outside of the
GSEs) in these markets. That is why a core component of the Financial Stability Plan is:
•
A B old Expansion Up to $ 1 Trillion: This joint initiative with the Federal Reserve builds off,
broadens and expands the resources of the previously announced but not yet implemented
Term Asset-Backed Securities Loan Facility (TALF). The Consumer & Business Lending
3
Initiative will support the purchase of loans by providing the financing to private investors to
help unfreeze and lower interest rates for auto, small business, credit card and other consumer
and business credit. Previously, Treasury was to use $20 billion to leverage $200 billion of
lending from the Federal Reserve. The Financial Stability Plan will dramatically increase the
size by using $100 billion to leverage up to $1 trillion and kick start lending by focusing on
new loans.
•
Protecting Taxpayer Resources by Lim iting Purchases to N ew ly Packaged AAA Loans:
Because these are the highest quality portion of any security — the first ones to be paid — we
will be able to best protect against taxpayer losses and efficiently leverage taxpayer money to
support a large flow of credit to these sectors.
•
E xpand Reach - Including Commercial R eal Estate: The Consumer & Business Lending
Initiative will expand the initial reach of the Term Asset-Backed Securities Loan Facility to
now include commercial mortgage-backed securities (CMBS). In addition, the Treasury will
continue to consult with the Federal Reserve regarding possible further expansion of the
TALF program to include other asset classes, such as non-Agency residential mortgagebacked securities (RMBS) and assets collateralized by corporate debt.
4.
New Era o f Transparency. Accountability, Monitoring and Conditions; A major and legitimate
source of public frustration and even anger with the initial deployment of the first $350 billion of
EESA funds was a lack of accountability or transparency as to whether assistance was being provided
solely for the public interest and a stronger economy, rather than the private gain of shareholders,
bondholders or executives. Going forward, the Financial Stability Plan will call for greater
transparency, accountability and conditionality with tougher standards for firms receiving exceptional
assistance. These will be the new standards going forward and are not retroactive. These stronger
monitoring conditions were informed by recommendations made by formal oversight groups - the
Congressional Oversight Panel, the Special Inspector General, and the Government Accountability
Office — as well as Congressional committees charged with oversight of the banking system.
a. Requiring Firms to Show H ow Assistance from Financial Stability Plan Will Expand
Lending: The core of the new monitoring requirement is to require recipients of
exceptional assistance or capital buffer assistance to show how every dollar of capital
they receive is enabling them to preserve or generate new lending compared to what
would have been possible without government capital assistance.
•
Intended Use o f Government Funds: All recipients of assistance must submit a plan
for how they intend to use that capital to preserve and strengthen their lending
capacity. This plan will be submitted during the application process, and the
Treasury Department will make these reports public upon completion of the capital
investment in the firm.
•
The Impact on Lending Requirement Firms must detail in monthly reports submitted
to the Treasury Department their lending broken out by category, showing how many
new loans they provided to businesses and consumers and how many asset-backed
and mortgage-backed securities they purchased, accompanied by a description of the
4
lending environment in the communities and markets they serve. This report will
also include a comparison to their most rigorous estimate of what their lending would
have been in the absence of government support. For public companies, similar
reports will be filed on an 8K simultaneous with the filing of their 10-Q or 10-K
reports. Additionally, the Treasury Department will —in collaboration with banking
agencies - publish and regularly update key metrics showing the impact of the
Financial Stability Plan on credit markets. These reports will be put on the Treasury
FinancialStability.gov website so that they can be subject to scrutiny by outside and
independent experts.
*
Taxpayers Risht to Know. All information disclosed or reported to Treasury by
recipients of capital assistance will be posted on FinancialStability.gov because
taxpayers have the right to know whether these programs are succeeding in creating
and preserving lending and financial stability.
b. Committing Recipients to M ortgage Foreclosure Mitigation'. All recipients of capital
investments under the new initiatives announced today will be required to commit to
participate in mortgage foreclosure mitigation programs consistent with guidelines
Treasury will release on industry standard best practices.
c. Restricting Dividends, Stock Repurchases and Acquisitions: Limiting common
dividends, stock repurchases and acquisitions provides assurance to taxpayers that all of
the capital invested by the government under the Financial Stability Trust will go to
improving banks’ capital bases and promoting lending. All banks that receive new
capital assistance will be:
•
Restricted from Pavim Quarterly Common Dividend Payments in Excess O f $0.01
Until the Government Investment Is Repaid: Banks that receive exceptional
assistance can only pay $0.01 quarterly. That presumption will be the same for firms
that receive generally available capital unless the Treasury Department and their
primary regulator approve more based on their assessment that it is consistent with
reaching their capital planning objectives.
•
Restricted from Repurchasing Shares: All banks that receive funding from the new
Capital Assistance Program are restricted from repurchasing any privately-held
shares, subject to approval by the Treasury Department and their primary regulator,
until the government’s investment is repaid.
*
Restricted from, Pursuing Acquisitions'. All banks that receive capital assistance are
restricted from pursuing cash acquisitions of healthy firms until the government
investment is repaid. Exceptions will be made for explicit supervisor-approved
restructuring plans.
d< Lim iting Executive Compensation: Firms will be required to comply with the senior
executive compensation restrictions announced February 4th, including those pertaining to
a $500,000 in total annual compensation cap plus restricted stock payable when the
5
government is getting paid back, “say on pay” shareholder votes, and new disclosure and
accountability requirements applicable to luxury purchases.
e.
Prohibiting Political Interference in Investm ent Decisions: The Treasury Department
has announced measures to ensure that lobbyists do not influence applications for, or
disbursements of, Financial Stability Plan funds, and will certify that each investment
decision is based only on investment criteria and the facts of the case.
f.
Posting Contracts and Investm ent Information on the Web: The Treasury Department
will post all contracts under the Financial Stability Plan on FinancialStability.gov within
five to 10 business days of their completion. Whenever Treasury makes a capital
investment under these new initiatives, it will make public the value of the investment, the
quantity and strike price of warrants received, the schedule of required payments to the
government and when government is being paid back. The terms of pricing of these
investments will be compared to terms and pricing of recent market transactions during the
period the investment was made, if available.
5.
Housing Support and Foreclosure Prevention: There is bipartisan agreement today that stemming
foreclosures and restructuring troubled mortgages will help slow the downward spiral harming
financial institutions and the real American economy. Many Congressional leaders, housing
advocates, and ordinary citizens have been disappointed that the Troubled Asset Relief Program was
not aimed at ending the foreclosure crisis. We will soon be announcing a comprehensive plan that
builds on the work of Congressional leaders and the FDIC. Among other things, our plan will:
•
Drive Down Overall M ortgage Rates: The Treasury Department and the Federal Reserve
remain committed to expand as necessary the current effort by the Federal Reserve to help
drive down mortgage rates - freeing up funds for working families - through continuation of
its efforts to spend as much as $600 billion for purchasing of GSE mortgage-backed
securities and GSE debt.
•
Commit $50 Billion to Prevent Avoidable Foreclosures of owner-occupied middle class
homes by helping to reduce monthly payments in line with prudent underwriting and long
term loan performance.
•
H elp Bring Order and Consistency to the various efforts to address the foreclosure crisis by
establishing loan modification guidelines and standards for government and private programs.
•
Require A ll Financial Stability Plan Recipients to Participate in Foreclosure M itigation
Plans consistent with Treasury guidance.
•
B uild Flexibility into H ope f o r H om eowners and the FHA to enable loan modifications for
a greater number of distressed borrowers.
6.
Small Business and Comm unity Lending Initiative: Few aspects of our current financial crisis
have created more justifiable resentment than the specter of hard-working entrepreneurs and small
business owners seeing their companies hurt and even bankrupt because of a squeeze on credit they
played no role in creating. Currently, the increased capital constraints of banks, the inability to sell
6
SBA loans on the secondary market and a weakening economy have combined to dramatically reduce
SBA lending at the very time our economy cannot afford to deny credit to any entrepreneur with the
potential to create jobs and expand markets. Further adding to this frustration is the sense that
community banks - which still engage in relationship lending that serves their local communities —
have been overlooked not just during this crisis, but over the last several years.
Over the next several days, President Obama, the Treasury Department and the SBA will announce
the launch of a Small Business and Community Bank Lending Initiative : This effort will seek to arrest
the precipitous decline in SBA lending - down 57 percent last quarter from the same quarter a year
earlier for the flagship 7(a) loans through:
•
Use o f the Consumer &Business Lending Initiative to finance the purchase of AAA-rated
SBA loans to unfreeze secondary markets for small business loans.
•
Increasing the Guarantee f o r SBA Loans to 90%: The Administration is seeking to pass in
the American Recovery and Reinvestment Act an increase in the guarantee of SBA loans
from as low as 75% to as high as 90%.
•
Reducing Fees f o r SBA 7(a) and 504 Lending and Provide Funds f o r Both Oversight and
Speedier and Less Burdensom e Processing o f Loan Applications.
7
I o view o r p rin t the HUH content on this page, download the tree Adobe <s>Acrobat® Header(s).
February 10, 2009
tg-19
Treasury Targets Financial Network of Fernando Zevailos Gonzales
Washington, DC - The U.S. Department of the Treasury's Office of Foreign Assets
Control (OFAC) today designated 26 companies and 14 individuals tied to Peruvian
drug kingpin Fernando Zevailos Gonzales. This financial network, based in Peru,
Panama and the British Virgin Islands, is now subject to financial sanctions
pursuant to the Foreign Narcotics Kingpin Designation Act ("Kingpin Act").
"Our action demonstrates the importance of following the changing networks of
major drug kingpins, like Fernando Zevailos," said OFAC Director Adam J. Szubin.
"This designation identifies additional front companies and supports the Peruvian
authorities' ongoing efforts to shut down the Fernando Zevailos criminal
organization."
Fernando Zevailos Gonzales, currently imprisoned in Peru, has been a major figure
in Peruvian narcotics trafficking activities since 1980. On June 1, 2004, President
Bush named Femando Zevailos Gonzales as a significant foreign narcotics
trafficker pursuant to the Kingpin Act. At the same time, OFAC blocked, pending
investigation, six companies and six individuals, including the Peruvian airline
Aerocontinente S.A. On November 10, 2004, OFAC formally designated
Aerocontinente S.A., which subsequently changed its name to Nuevo Continente
S.A. Finally, on July 27, 2007, Femando Zevailos Gonzales was indicted on money
laundering and multiple violations of the Kingpin Act in the Southern District of
Florida.
Despite Fernando Zevailos Gonzales's imprisonment, the OFAC sanctions
investigation found that his financial network has continued to function under the
leadership of key family members and close business associates. Key Fernando
Zevailos family members designated today include his sisters Lupe Maritza
Zevailos Gonzales, Sara Marilyn Zevailos Gonzales, Maria del Rosario Zevailos
Gonzales, and Milagros Angelina Zevailos Gonzales; his brother Winston Ricardo
Zevailos Gonzales; and his mother, Sara Maria Gonzales Garbancho de Zevailos.
Key business associates designated today are Maximo Zadi Desme Hurtado, John
Ivan Mejia Magnani, Ricardo Hernandez San Martin, Jose Manuel Mejia Regalado,
Enrique Canaval Landazuri, Luis Miguel Carrillo Rodriguez, Percy Dangello
Aranibar Castellanos, and Jorge Portilla Barraza.
The financial network designated today principally consists of aviation and travel
companies in Peru, including four air transportation service companies - Aviandina
S.A.C., Lasa Peru S.A.C., Vuela Peru S.A.C, and Transportes Aereos Unidos Selva
Am azónica S.A; three travel agencies - Peru Global Tours S.A.C., Orlente Tours
S.R.L., and Representaciones Oriente Tours S.R.L. In addition, two aviation
cleaning service companies - Lucero Im port S.A.C. and Peru Total M arket E.I.R.L.,
and two printing press companies - Editora Transparencia S.A. and Empresa
Editora Continente Press S.A. were designated. Finally, the OFAC investigation
targeted key offshore companies in Panama - Bellosom Enterprise Inc. and B lissey
Panama Inc. and the British Virgin Islands - La Crosse Group Inc. that supported
the Fernando Zevailos financial network.
This action is part of ongoing efforts under the Kingpin Act to apply financial
measures against significant foreign narcotics traffickers worldwide. Including
today's action, 580 entities and individuals associated with 75 drug kingpins have
been designated pursuant to the Kingpin Act since June 2000.
http://www.treas.gov/press/releases/tgl9.htm
Today's designation would not have been possible without key support from the
Drug Enforcement Administration (DEA) Miami Field Division.
Today’s action freezes any assets the designated individuals may have under U.S.
jurisdiction and prohibits U.S. persons from conducting financial or commercial
transactions involving those assets. Penalties for violations of the Kingpin Act
range from civil penalties of up to $1,075,000 per violation to more severe criminal
penalties. Criminal penalties for corporate officers may include up to 30 years in
prison and fines of up to $5 million. Criminal fines for corporations may reach $10
million. Other individuals face up to 10 years in prison for criminal violations of the
Kingpin Act and fines pursuant to Title 18 of the United States Code.
-3 0 REPORTS
*
Zevailos.Tier !! Designation
http ://www. treas.gov/press/releases/tg 19 .htm
8/3/2010
U.S. D epartm ent of the Treasury
Office of Foreign A ssets Control
FERNANDO ZEVALLOS GONZALES
ORGANIZATION
JL *
F o reig n N a rc o tic s K in g p in D e s ig n a tio n A c t
F e b ru a ry 2 0 0 9
2007 U.S. Indictment
Southern District of Florida
AEROCONTINENTE, S.A.
Designated: November 10, 2004
Fernando ZEVALLOS GONZALES
DOB 0 8 Jul 1 95 7
Nam ed as a Kingpin: June 1 ,2 0 0 4
Key Fam ily Members
II
1
M
Sara M aria GONZALES
GARBANCHO DE ZEVALLOS
DOB 0 2 Aug 1 93 6
M ilagros Angelina
ZEVALLOS GONZALES*
DOB 12 Aug 1 9 6 8
Key Business A ssociates
n
=11111
John Yvan
MEJIA M A G N A N I*
DOB 2 0 Apr 1 9 6 6
W inston Ricardo
ZEVALLOS GONZALES*
DOB 11 M ay 1 9 5 9
Lupe M a ritza
ZEVALLOS GONZALES*
DOB 1 7 Sep 1961
Jose M anuel
MEJIA REGALADO
DOB 1 8 M ay 1 9 4 8
Sara M arilyn
ZEVALLOS GONZALES
DOB 01 Jan 1 9 6 3
M aria Del Rosario ZEVALLOS
GONZALES DE ARREDONDO
DOB 2 6 Jun 1 95 6
M a x im o Zadi
DESME HURTADO*
DOB 21 Aug 1 9 5 8
L'.'" J
Luis Miguel
CARRILLO RODRIGUEZ
DOB 0 1 Dec 196 1
IBI
mm
R icardo A rtu ro
HERNANDEZ SAN MARTIN
DOB 0 4 Jul 1 9 5 5
E nrique Antonio
CANAVAL LANDAZURI
DOB 0 6 Jan 1 9 5 3
Percy D angello
ARANIBAR CASTELLANOS
DOB 2 7 M a y 1 9 7 1
Jorg e
PORTILLA BARRAZA
DOB 2 6 Feb 1 9 4 8
N etw ork of Companies.
M P e ru
EMPRESA EDITORA
CONTINENTE PRESS S A .
Lim a, Peru
PERU TOTAL
MARKET E.I.R.L.
Lim a, Peru
AERO CONTINENTE E .LR .L
Lim a, Peru
EDITORA
TRANSPARENCIA S.A.
Lim a, Peru
i
PERUVIAN PRECIOUS
METALS SA .C .
Lim a, Peru
SISTEMA DE DISTRIBUCIO N
MUNDIAL, S.A.C*
Lim a, Peru
Û
ASOCIACION
eon C
aIV IL LOS
PROMOTORES
:S AERONAUTICOS
AER
Limna,
a, Peru
Pe
SERVICIOS SILSA S.A .C
Lim a, Peru
Û
URANTIA SERVICES S.A.
Lim a, Peru
A V IA N D IN A S.A.C.*
Lim a, Peru
TRANSPORTES AEREOS
UN ID O S SELVA AMAZONICA S A .
Lim a, Peru
TALLER DE REPARACIONES DE
AERODINOS SUS PARTES Y
SERVICIOS AEREOS S A .
San M a rtin , Peru___
VUELA PERU SA.C.
Lim a, Peru
LASA PERU S.A.C.
Lim a, Peru
CONTINENTE MOVIL Y
SERVICIOS S .R .L
Callao, Peru
AERO COURIER
CARGO S.A.
Lim a, Peru
LUCERO IM P O R T S.A.C.
Lim a, Peru
REPRESENATQONES
ORIENTE S.R.L.
T ru jillo , Peru
CORPORACION DE
INVERSIONES
EMPRESARIALES S A .
Lim a, Peru
PERU GLOBAL
TOURS S.A.G
Lim a, Peru
Û
EMPRESA DE TRANSPORTES
CHULUCANAS 2 0 0 0 S.A.
Lim a, Peru
ORIENTE TOURS S.R.L.
Lim a, Peru
ORIENTE CONTRATISTAS
GENERALESSA.
T ru jillo , Peru
¡Ü ¡|B rltish V irg in Island s
LA CROSSE GROUP IN C
To rto la , British Virgin Isla n d s
- Previous blocked pending investigation (BPI) on June 1,2004
BUSSEY PANAMA IN C
P ana m a C ity, P anam a
BELLOSOM ENTERPRISE, IN C
P ana m a C ity, P anam a
February 10, 2009
tg-20
Treasury Secretary Tim Geithner Opening Statement Senate Banking
Committee Hearing
Treasury Secretary Tim Geithner
Opening Statement
Senate Banking Committee Hearing
February 10, 2009
As prepared for delivery
Chairman Dodd, Ranking Member Shelby, and Members of the Committee: thank
you for inviting me to be here today.
This morning, as the Senate continues its work on an economic recovery plan to
help create jobs and lay a foundation for stronger economic future, I announced our
Administration's plan to restart the flow of credit, strengthen our financial system,
and provide critical aid for homeowners and for small businesses.
Right now, job losses are accelerating and credit has slowed to a trickle. On top of
the financial and economic challenges we face... there is another; a lack of faith.
The American people have lost faith in the leaders of our financial institutions, and
are skeptical that their government has - to this point - used taxpayers' money in
ways that will benefit them.
Together we can change this.
To get credit flowing again, to restore confidence in our markets, and restore the
faith of the American people, we have proposed a fundamental reshaping of the
government's program to repair the financial system.
It all begins with transparency. We propose to establish a new framework of
oversight and governance of all aspects of our Financial Stability Plan. The
American people will be able to see where their tax dollars are going and the return
on their government's investment. They will be able to see whether the conditions
placed on banks and institutions are being met and enforced. They will be able to
see whether boards of directors are being responsible with taxpayer dollars and
how they're compensating their executives. And they will be able to see how these
actions are impacting the overall flow of lending and the cost of borrowing.
These new requirements, which will be available on a new website
FinancialStability.gov, will give the American people the transparency they
deserve.
Second, we are going to bring together the government agencies with authority
over our nation's major banks and initiate a more consistent, realistic, and forward
looking assessment about the risk on balance sheets. We’re calling it a financial
"stress test." We want banks' balance sheets cleaner, and stronger. And we are
going to help this process by providing a new program of capital support for those
institutions that need it.
Institutions that need additional capital will be able to access a new funding
http://www.treas.gov/press/releases/tg20.htm
8/3/2010
mechanism that uses money from the Treasury as a bridge to private capital. The
capital will come with conditions to help ensure that every dollar of assistance is
used to generate a level of lending greater than what would have been possible in
the absence of government support.
Third, together with the Fed, the FDIC, and the private sector, we propose the
establishment of a Public-Private Investment Fund. This program will provide
government capital and government financing to help leverage private capital and
get private markets working again. This fund will be targeted to the legacy loans
and assets that are now burdening many financial institutions.
By providing the financing the private markets cannot now provide, this will help
start a market for the real estate-related assets that are at the center of this crisis.
Our objective is to use private capital and private asset managers to help provide a
market mechanism for valuing the assets.
We are exploring a range of different structures for this program, and will seek input
from this Committee as we design it.
Fourth, working jointly with the Federal Reserve, we are prepared to commit up to a
trillion dollars to support a Consumer and Business Lending Initiative. This initiative
will kick start the secondary lending markets, to bring down borrowing costs, and to
help get credit flowing again.
In our financial system, 40 percent of consumer lending has historically been
available because people buy loans, put them together and sell them. Because this
vital source of lending has frozen up, no financial recovery plan will be successful
unless it helps restart securitization markets for sound loans made to consumers
and businesses - large and small.
This lending program will be built on the Federal Reserve's Term Asset Backed
Securities Loan Facility, announced last November, with capital from the Treasury
and financing from the Federal Reserve.
And because small businesses are so important to our economy, we're going to
take additional steps to make it easier for them to get credit from community banks
and large banks.
Fifth, we will launch a comprehensive housing program. Just as the name of this
Committee makes a link between banking and housing, so must our efforts to
strengthen the financial system.
The President has asked his economic team to come together with a
comprehensive plan to address the housing crisis. We will announce the details of
this plan in the next few weeks.
Our focus will be on using the full resources of the government to help prevent
avoidable foreclosures and to reduce mortgage interest rates. We will do this with a
substantial commitment of resources already authorized by the Congress under the
Emergency Economic Stabilization Act. We welcome the ideas and input of this
Committee in this important effort.
And finally, President Obama is committed to moving quickly to reform our entire
system of financial regulation so that we never again face a crisis of this severity.
And, again, that effort can only succeed with the collaboration and support of this
Committee and other Members of Congress.
Let me close by saying that our challenges in this financial crisis are more complex
than any our financial system has ever faced, requiring new programs and
persistent attention to solve. But the President, the Treasury, and the entire
Administration are committed to working with you to see it through because we
know how directly the future of our economy depends on it.
http://www.treas.gov/press/releases/tg20.htm
8/3/2010
m
February 10, 2009
TG-21
Joint Statement
BY Secretary of the Treasury Timothy F. Geithner, Chairman of the Board of
Governors o f the Federal Reserve System Ben S. Bernanke, Chairman of the
Federal Deposit Insurance Corporation Sheila Bair, Comptroller o f the
Currency John C. Dugan, and Director Of The Office Of Thrift Supervision
John M. Reich Financial Stability Plan
February 10, 2009
Today, the Department of the Treasury, the Federal Reserve Board, the Federal
Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and
the Office of Thrift Supervision are announcing a comprehensive set of measures to
restore confidence in the strength of U.S. financial institutions and restart the critical
flow of credit to households and businesses. This program will help lay the
groundwork for restoring the flows of credit necessary to support recovery.
The core program elements include:
* A new Capital Assistance Program to help ensure that our banking
institutions have sufficient capital to withstand the challenges ahead, paired
with a supervisory process to produce a more consistent and forwardlooking assessment of the risks on banks' balance sheets and their potential
capital needs.
* A new Public-Private Investment Fund on an initial scale of up to $500
billion, with the potential to expand up to $1 trillion, to catalyze the removal
of legacy assets from the balance sheets of financial institutions. This fund
will combine public and private capital with government financing to help
free up capital to support new lending.
* A new Treasury and Federal Reserve initiative to dramatically expand - up
to $1 trillion - the existing Term Asset-Backed Securities Lending Facility
(TALF) in order to reduce credit spreads and restart the securitized credit
markets that in recent years supported a substantial portion of lending to
households, students, small businesses, and others.
* An extension of the FDIC's Temporary Liquidity Guarantee Program to
October 31,2009.
* A new framework of governance and oversight to help ensure that banks
receiving funds are held responsible for appropriate use of those funds
through stronger conditions on lending, dividends and executive
compensation along with enhanced reporting to the public.
Alongside this program, the Administration will launch a comprehensive program to
help address the housing crisis.
We will begin immediately a process of consultation designed to solicit further input
from key public and private stakeholders. Details on all programs will be posted on
F in a n c ia lS ta b ility .g o v over the course of the next several weeks.
Congress has already allocated substantial resources and authority for this program
through the Emergency Economic Stabilization Act (EESA). We will move ahead
quickly and carefully to use the authorities provided. As we do so, we will continue
to consult closely with Congress to ensure we have the resources to make this
program work effectively over time. We anticipate adapting the program as we
move forward.
http://www.treas.gov/press/releases/tg21 .htm
8/3/2010
New Financial Stability Trust
The program will consist of three elements: (1) a forward-looking assessment of the
risks on bank balance sheets and their capital needs, (2) a capital program to help
banks establish an additional buffer that strengthens both the amount and quality of
the capital and (3) efforts to improve the disclosure of exposures on bank balance
sheets. In conducting these exercises, supervisors recognize the need not to adopt
an overly conservative posture or take steps that could inappropriately constrain
lending.
Capital Assistance Program (CAP)
While the vast majority of U.S. banking institutions continue to exceed regulatory
requirements for being well-capitalized, the highly uncertain economic environment
has eroded confidence in the amount and quality of capital held by some banks.
As an essential part of restoring confidence in U.S. banking institutions, the
supervisory agencies will undertake a coordinated and consistent capital planning
exercise with each of the major U.S. banking institutions. As part of this process,
supervisors will conduct a special forward-looking "stress" assessment of the losses
that could occur across a range of economic scenarios, including conditions more
severe than currently anticipated or than are typically used in the capital planning
process.
This stress testing exercise will allow supervisors to determine whether an
additional buffer, particularly one that strengthens the composition of capital, is
needed for the bank to comfortably absorb losses and continue lending, even in a
more adverse environment. Banks will be encouraged to access private markets to
raise any additional capital needed to establish this buffer. However, in light of the
current challenging market environment, the Treasury will make a new capital
facility generally available to eligible banking institutions as a bridge to private
capital until market conditions normalize.
This additional capital buffer is designed to help absorb larger than expected future
losses and to support lending to creditworthy borrowers during an economic
downturn.
Our expectation is that the capital provided under the CAP will be in the form of a
preferred security that is convertible into common equity, with a dividend rate to be
specified and a conversion price set at a modest discount from the prevailing level
of the institution's stock price up to February 9th, 2009. This security would serve
as a source of "contingent" common equity, convertible solely at the issuer's option
for an extended period of time.
The instrument will be designed to give banks the incentive to replace USGprovided capital with private capital or to redeem the USG capital when conditions
permit. In addition, with supervisory approval, banks will be allowed to apply to
exchange the existing CPP preferred stock for the new CAP instrument.
By reassuring investors, creditors, and counterparties of financial institutions-as
well as the institutions themselves--that there is a sufficient amount and quality of
capital to withstand even a considerably weaker-than-expected economic
environment, the CAP instrument should improve confidence and increase the
willingness of financial institutions to lend.
Any capital investments made by Treasury under the CAP will be placed in a
separate entity set up to manage the government's investments in US financial
institutions.
Eligible U.S. banking institutions with assets in excess of $100 billion on a
consolidated basis will be required to participate in the coordinated supervisory
review process, and may access the CAP as a means to establish any necessary
additional buffer. Eligible US banking institutions with consolidated assets below
http://www.treas.gov/press/releases/tg21 .htm
8/3/2010
$100 billion may also obtain capital from the CAP. Eligibility will be consistent with
the criteria and deliberative process established for identifying Qualifying Financial
Institutions (QFIs) in the existing Capital Purchase Program (CPP).
The U.S. government has a range of other tools available for use in extraordinary
circumstances to help mitigate the strains facing banks and restore confidence
during this period of significant uncertainty. These tools include the provision of
credit loss protection for specified asset pools held on the balance sheets of
institutions as well as the guaranteeing of liabilities.
In pursuit of its commitment to restore and maintain the strength and stability of the
U.S. financial system, the U.S. government remains committed to preventing the
failure of any financial institution where that failure would pose a systemic risk to the
economy.
Enhancing public disclosure
Increased transparency will facilitate more effective market discipline in financial
markets. We will work with bank regulatory agencies and the Securities and
Exchange Commission and accounting standard setters in their efforts to improve
public disclosure by banks. This process will aim to increase the publicly available
information about the range of exposures on bank balance sheets.
New Public-Private Investment Fund (PPIF)
As a complement to the CAP, the Treasury, working with the Federal Reserve,
FDIC, and private investors, will create a new Public-Private Investment Fund to
acquire real-estate related "legacy" assets. By selling to PPIF, financial institutions
will be able to reduce balance sheet risk, support new lending and help improve
overall market functioning. The PPIF facility will be sized up to $500 billion and we
envision expanding the program to up to $1 trillion over time.
This PPIF will combine a mix of government and private capital with financing
supported by the Federal Reserve and the FDIC. Designing this structure in an
efficient manner will require a careful balance between the interests of taxpayers,
investors, and the financial institutions, and we will continue to consult with market
participants to design the best structure. The participation of private investors will
help promote competitive prices that will sufficiently compensate and protect
taxpayers, while providing additional risk capital to support the purchase program.
Temporary Financing and Direct Purchase Facilities
Full restoration of credit flows to households and businesses will require restarting
critical segments of our financial markets, particularly securitization markets. The
facilities described below are designed to improve the functioning of markets where
dislocation is most acute and most detrimental to economic activity.
Expansion o f the Term Asset-Backed Securities Lending Facility (TALF)
The Term Asset-Backed Securities Lending Facility (TALF) combines capital
provided by the TARP with funding from the Federal Reserve in order to promote
lending by increasing investor demand for securitized loans. The TALF will
significantly expand the availability and reduce the cost of term financing for
investors in asset-backed securities (ABS), which will stimulate demand for ABS
and thereby allow originators of securitized loans to lower the cost and increase the
availability of credit to consumers and businesses.
The Treasury and Federal Reserve have agreed to dramatically increase the size of
the TALF from $200 billion to as much as $1 trillion and to expand the eligible asset
classes from the current newly issued 'AAA' rated ABS collateralized by credit card,
auto, student, and Small Business Administration loans to include newly issued
AAA' commercial mortgage-backed securities (CMBS). In addition, the Treasury
will continue to consult with the Federal Reserve regarding possible further
http://www.treas.gov/press/releases/tg21 .htm
8/3/2010
expansion of the TALF program to include other asset classes, such as non-Agency
residential mortgage-backed securities (RMBS) and assets collateralized by
corporate debt.
This facility is designed in a way that gradually reduces its attractiveness and scale
as the economy and financial conditions recover.
Ongoing m ortgage-backed securities (MBS) and A g ency D ebt Purchases
The Federal Reserve will continue its current purchase program of Agency debt and
mortgage-backed securities (MBS) on a total scale of at least $600 billion. The
Federal Reserve and the Treasury stand ready to expand their MBS purchase
programs as conditions warrant. These purchase programs should help to stimulate
economic activity by reducing mortgage rates, thereby improving housing
affordability and the demand for houses, as well as reducing interest payments and
freeing up funds for households that refinance.
A dditional tools fo r the Federal Reserve
In order for the Federal Reserve to manage monetary policy over time in a way
consistent with maximum sustainable employment and price stability, it must be
able to manage its balance sheet, and in particular, to control the amount of
reserves that the Fed provides to the banking system. The amount of reserves is
the key determinant of the interest rate that the Federal Reserve uses to pursue its
monetary policy objectives. Treasury and the Federal Reserve will seek legislation
to give the Federal Reserve the additional tools to enable it to manage more
effectively the level of reserves.
Extension of Temporary Liquidity Guarantee Program (TLGP)
The FDIC's Temporary Liquidity Guarantee Program has contributed importantly to
the gradual easing of liquidity strains on our financial institutions. Though funding
conditions have eased somewhat, this temporary program will be extended for an
additional four months to provide liquidity to our banks as part of this overall
strategy to move our economy forward.
With that in mind, for an additional premium, the FDIC will extend the TLGP
program through October 2009.
Stronger Conditions on Lending, Executive Compensation, and Reporting
Going forward, the Financial Stability Plan will call fora new level of transparency,
accountability and conditionality with tougher standards for firms receiving
exceptional assistance. These stronger conditions were informed by
recommendations made by formal oversight groups - the Congressional Oversight
Panel, the Special Inspector General, and the Government Accountability Office -as well as Congressional banking oversight leaders.
Use o f governm ent-provided capital and im pact on lending
Recipients of capital provided under the CAP will be required to submit a plan for
how they intend to use this capital to preserve and strengthen their lending capacity
- specifically, they will commit to increase lending activities above levels relative to
what would have been possible without government support. This plan will be
submitted during the application process, and the Treasury Department will make
these plans public upon distribution of the capital investment to the firm.
These firms must submit to Treasury monthly or quarterly reports on their lending
by category. This report will also include a comparison to estimates of what their
lending would have been in the absence of government support. For public
companies, similar reports will be filed on an 8K simultaneous with the filing of their
10Q and 10K reports. All these reports will be put on the Treasury website
http://www.treas.gov/press/releases/tg21 .htm
8/3/2010
FinancialStability.gov.
Taxpayers' Right to Know
Information disclosed or reported to Treasury by recipients pursuant to the
conditions and requirements announced today will be posted on
FinancialStability. gov.
Committing recipients to m ortgage foreclosure mitigation
All recipients of Capital Assistance Program (CAP) funds shall commit to participate
in mortgage foreclosure mitigation programs consistent with guidelines we will
release on industry standard best practices.
Restricting dividends, stock repurchases and acquisitions
Limiting dividends, stock repurchases and acquisitions provides assurance to
taxpayers that all of the capital invested by the government under the CAP goes to
improving banks' capital bases and promoting lending. Until an Institution repays all
funds provided to it under the CAP, it shall be:
*
Restricted from paying quarterly common stock dividend payments in
excess of $0.01 per share unless approved by Treasury and the primary
regulator as consistent with the firm reaching its capital planning objectives.
* Restricted from repurchasing shares. Special approval for share
repurchases may be granted by the Treasury Department and the banking
institution's primary regulator.
* Restricted from pursuing acquisitions. Banking institutions that receive CAP
funds are restricted from pursuing cash acquisitions of healthy firms until the
government investment is repaid. Exceptions will be made for regulatorapproved restructuring plans.
Lim iting executive compensation
Firms receiving CAP funds will be required to comply with final version of the
executive compensation restrictions announced February 4th.
http://www.treas.gov/press/releases/tg21 .htm
8/3/2010
February 10, 2009
TG-02102009
Secretary Tim Geithner Opening Statement - Delivery Senate Banking
Committee Hearing
Treasury Secretary Tim Geithner
Opening Statement - A s Prepared fo r D elivery
Senate Banking Committee Hearing
February 10, 2009
Chairman Dodd, Ranking Member Shelby, and Members of the Committee: thank
you for inviting me to be here today.
This morning, as the Senate continues its work on an economic recovery plan to
help create jobs and lay a foundation for stronger economic future, I announced our
Administration's plan to restart the flow of credit, strengthen our financial system,
and provide critical aid for homeowners and for small businesses.
Right now, job losses are accelerating and credit has slowed to a trickle. On top of
the financial and economic challenges we face... there is another; a lack of faith.
The American people have lost faith in the leaders of our financial institutions, and
are skeptical that their government has - to this point - used taxpayers' money in
ways that will benefit them.
Together we can change this.
To get credit flowing again, to restore confidence in our markets, and restore the
faith of the American people, we have proposed a fundamental reshaping of the
government's program to repair the financial system.
It all begins with transparency. We propose to establish a new framework of
oversight and governance of all aspects of our Financial Stability Plan. The
American people will be able to see where their tax dollars are going and the return
on their government's investment. They will be able to see whether the conditions
placed on banks and institutions are being met and enforced. They will be able to
see whether boards of directors are being responsible with taxpayer dollars and
how they're compensating their executives. And they will be able to see how these
actions are impacting the overall flow of lending and the cost of borrowing.
These new requirements, which will be available on a new website
FinancialStability.gov, will give the American people the transparency they deserve.
Second, we are going to bring together the government agencies with authority
over our nation's major banks and initiate a more consistent, realistic, and forward
looking assessment about the risk on balance sheets. We're calling it a financial
"stress test." We want banks' balance sheets cleaner, and stronger. And we are
going to help this process by providing a new program of capital support for those
institutions that need it.
Institutions that need additional capital will be able to access a new funding
mechanism that uses money from the Treasury as a bridge to private capital. The
capital will come with conditions to help ensure that every dollar of assistance is
http://www.treas.gov/press/releases/tg02102009.htm
8/3/2010
used to generate a level of lending greater than what would have been possible in
the absence of government support.
Third, together with the Fed, the FDIC, and the private sector, we propose the
establishment of a Public-Private Investment Fund. This program will provide
government capital and government financing to help leverage private capital and
get private markets working again. This fund will be targeted to the legacy loans
and assets that are now burdening many financial institutions.
By providing the financing the private markets cannot now provide, this will help
start a market for the real estate-related assets that are at the center of this crisis.
Our objective is to use private capital and private asset managers to help provide a
market mechanism for valuing the assets.
We are exploring a range of different structures for this program, and will seek input
from this Committee as we design it.
Fourth, working jointly with the Federal Reserve, we are prepared to commit up to a
trillion dollars to support a Consumer and Business Lending Initiative. This initiative
will kick start the secondary lending markets, to bring down borrowing costs, and to
help get credit flowing again.
In our financial system, 40 percent of consumer lending has historically been
available because people buy loans, put them together and sell them. Because this
vital source of lending has frozen up, no financial recovery plan will be successful
unless it helps restart securitization markets for sound loans made to consumers
and businesses - large and small.
This lending program will be built on the Federal Reserve's Term Asset Backed
Securities Loan Facility, announced last November, with capital from the Treasury
and financing from the Federal Reserve.
And because small businesses are so important to our economy, we're going to
take additional steps to make it easier for them to get credit from community banks
and large banks.
Fifth, we will launch a comprehensive housing program. Just as the name of this
Committee makes a link between banking and housing, so must our efforts to
strengthen the financial system.
The President has asked his economic team to come together with a
comprehensive plan to address the housing crisis. We will announce the details of
this plan in the next few weeks.
Our focus will be on using the full resources of the government to help prevent
avoidable foreclosures and to reduce mortgage interest rates. We will do this with a
substantial commitment of resources already authorized by the Congress under the
Emergency Economic Stabilization Act. We welcome the ideas and input of this
Committee in this important effort.
And finally, President Obama is committed to moving quickly to reform our entire
system of financial regulation so that we never again face a crisis of this severity.
And, again, that effort can only succeed with the collaboration and support of this
Committee and other Members of Congress.
Let me close by saying that our challenges in this financial crisis are more complex
than any our financial system has ever faced, requiring new programs and
persistent attention to solve. But the President, the Treasury, and the entire
Administration are committed to working with you to see it through because we
know how directly the future of our economy depends on it.
Thank you, and with that, I'd be happy to take your questions.
http://www.treas.gov/press/releases/tg02102009.htm
8/3/2010
February 11,2009
TG-22
Treasury Targets U.S. Front for Sri Lankan Terrorist Organization
Washington, DC - The U.S. Department of the Treasury today targeted the support
network of the Sri Lanka-based designated terrorist group Liberation Tigers of Tamil
Eelam (LTTE) by designating the U.S.-based Tamil Foundation under Executive
Order 13224. Executive Order 13224 targets terrorists and those providing support
to terrorists or acts of terrorism.
"The LTTE, like other terrorist groups, has relied on so-called charities to raise
funds and advance its violent aims," said Adam J. Szubin, Director of the Treasury's
Office of Foreign Assets Control. "We will continue to aggressively target attempts
by any terrorist group to hide behind charities, front companies, or name changes to
propagate terror against innocents around the world."
The head of the Tamil Foundation is also president of the Tamils Rehabilitation
Organization (TRO) in the United States. The TRO was named a Specially
Designated Global Terrorist (SDGT) under Executive Order 13224 on November
15, 2007. Over the course of many years, the Tamil Foundation and the TRO have
co-mingled funds and carried out coordinated financial actions. Additional
information links the Tamil Foundation to the TRO through a matching gift program.
The common leadership of the TRO and the Tamil Foundation has facilitated these
activities.
The TRO is a charitable organization that acts as a front to facilitate fundraising and
procurement for the LTTE. Prior to its designation, Sri Lanka-based TRO operated
offices in seventeen other countries worldwide, including the United States. In the
U.S., TRO has raised funds for the LTTE through a network of individual
representatives. According to sources within the organization, TRO is the preferred
means for sending funds from the United States to the LTTE in Sri Lanka.
The LTTE is a terrorist group that seeks an independent state in northeastern Sri
Lanka, where most of Sri Lanka's minority ethnic Tamil population lives. For over
two decades, the LTTE has employed conventional, guerrilla, and terror tactics in a
civil war that has claimed over 60,000 lives. The U.S. Department of State
designated the LTTE a Foreign Terrorist Organization (FTO) on October 8, 1997.
On November 2, 2001, the U.S. Department of State named the LTTE an SDGT
under E.O.13224.
Under E.O. 13224, any assets the Tamil Foundation has under U.S. jurisdiction are
frozen, and U.S. persons are prohibited from engaging in any transactions with the
Tamil Foundation.
Identifying Information
TAMIL FOUNDATION
Address:
517 E. Oldtown Road, Cumberland, MD 21502
Tax ID number:
52-1699409
http://www.treas.gov/press/releases/tg22.htm
8/3/2010
February 11,2009
2009-2-11 -12-53-13-24689
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $75,436 million as of the end of that week, compared to $75,524 million as of the end of the
prior week.
I. Official reserve assets and other foreign currency assets (approximate market value, in US millions)
February 6, 2009
A. Official reserve assets (in US millions unless otherwise specified)
A
Euro
Yen
Total
"~||75,436
|(1) Foreign currency reserves (in convertible foreign currencies)
8,931
|(a) Securities
||14,051
|of which: issuer headquartered in reporting country but located abroad
||22,982
□ e
|(b) total currency and deposits with:
10,258
|(i) other national central banks, BIS and IMF
|ii) banks headquartered in the reporting country
|of which: located abroad
|(iii) banks headquartered outside the reporting country
|of which: located in the reporting country
o
(2) IMF reserve position *
7,675
(3) SDRs 2
9,041
o
(4) gold (including gold deposits and, if appropriate, gold swapped) u
11,041
Pvolume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,554
II
II
||6,885
||17.143
II
II
II
II
llo
no
llo
llo
-financial derivatives
-loans to nonbank nonresidents
-other (foreign currency assets invested through reverse repurchase
agreements)
7,554
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
-loans not included in official reserve assets
-financial derivatives not included in official reserve assets
-gold not included in official reserve assets
-other
II
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
i
Il
ll
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200921112531324689.htm
8/3/2010
--outflows (-)
||Principal
||lnterest
-inflows (+)
||Principai
lllnterest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-390,079
-279,565
-110,514
(b) Long positions (+)
| 3. Other (specify)
| --outflows related to repos (-)
| -inflows related to reverse repos (+)
| -trade credit (-)
| -trade credit (+)
| --other accounts payable (-)
i -other accounts receivable (+)
Ill, Contingent short-term net drains on foreign currency assets (nominal value)
i
il
l
Maturity breakdown (residual maturity, where
applicable)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-other national monetary authorities (+)
-BIS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-other national monetary authorities (-)
-BIS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
(ii) Written calls
______________
I
_
I
(b) Long positions
http://www.treas.gov/press/releases/200921112531324689.htm
8/3/2010
|(i) Bought calls_____________________
|(ii) Written puts
PRO MEMOR1A: in-the-money options —
|(1 ) At current exchange rate
|(a) Short position
|(b) Long position
|(2) + 5 % (depreciation of 5%)
|(a) Short position
|(b) Long position
|(3) - 5 % (appreciation of 5%)
~
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
~
|(a) Short position
|(b) Long position
|(5) -10 % (appreciation of 10%)
|(a) Short position
[(b) Long position
________________
l(6) Other (specify)
[(a) Short position
[(b) Long position
IV. Memo items
(1) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
-nondeliverable forwards
-short positions
-long positions
-other instruments
(c) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
7,705
-lent or repoed and included in Section l
-lent or repoed but not included in Section I
-borrowed or acquired and included in Section I
l-borrowed or acquired but not included in Section I
7,705
(e) financial derivative assets (net, marked to market)
-forwards
-futures
-swaps
-options
-other
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
|(a) short positions ( - )
|(b) long positions (+)
l-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ir
http://www.treas.gov/press/releases/200921112531324689.htm
8/3/2010
(a) short positions
i) bought puts
|(ii) written calls
|(b) long positions
(i) bought calls
i written puts
(2) To be disclosed less frequently:
(a) currency composition of reserves (by groups of currencies)
75,436
-currencies in SDR basket
75,436
|2-currencies not in SDR basket
-by individual currencies (optional)
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets,” of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/200921112531324689.htm
8/3/2010
February 11,2009
TG-02112009
Secretary Tim Geithner Opening Statement - Senate Budget Committee
Hearing Policies to Address the Crises in Financial and Housing Markets
Treasury Secretary Tim Geithner
Opening Statement - As Prepared for Delivery
Senate Budget Committee Hearing
Policies to Address the Crises in Financial and Housing Markets
February 11, 2009
Chairman Conrad, Ranking Member Gregg, and Members of the Committee: thank
you for inviting me to be here today, as Congress continues its work on an
economic recovery plan to help create jobs and lay a foundation for a stronger
economic future.
Right now, job losses are accelerating and credit has slowed to a trickle. On top of
the financial and economic challenges we face... there is another: a lack of faith.
The American people have lost faith in the leaders of our financial institutions, and
are skeptical that their government has - to this point - used taxpayers' money in
ways that will benefit them.
Together we can change this.
Yesterday, I announced our Administration's plan to restart the flow of credit,
strengthen our financial system, and provide critical aid for homeowners and for
small businesses: the Financial Stability Plan.
To get credit flowing again, to restore confidence in our markets, and to restore the
faith of the American people, we have proposed a fundamental reshaping of the
government's program to repair the financial system.
It all begins with transparency. We propose to establish a new framework of
oversight and governance of all aspects of our Financial Stability Plan. The
American people will be able to see where their tax dollars are going and the return
on their government's investment. They will be able to see whether the conditions
placed on banks and institutions are being met and enforced. They will be able to
see whether boards of directors are being responsible with taxpayer dollars and
how they are compensating their executives. And they will be able to see how these
actions are impacting the overall flow of lending and the cost of borrowing.
These new requirements, which will be available on a new website
FinancialStabiiity.gov. will give the American people the transparency they deserve.
Second, we are going to bring together the government agencies with authority
over our nation's major banks and initiate a more consistent, realistic, and forward
looking assessment about the risk on balance sheets. We are calling it a financial
"stress test." We want banks' balance sheets cleaner and stronger. And we are
going to help this process by providing a new program of capital support for those
institutions that need it.
Institutions that need additional capital will be able to access a new funding
http://www.treas.gov/press/releases/tg02112009.htm
8/3/2010
mechanism that uses money from the Treasury as a bridge to private capital. The
capital will come with conditions to help ensure that every dollar of assistance is
used to generate a level of lending greater than what would have been possible in
the absence of government support.
Third, together with the Fed, the FDIC, and the private sector, we propose the
establishment of a Public-Private Investment Fund. This program will provide
government capital and government financing to help leverage private capital and
get private markets working again. This fund will be targeted to the legacy loans
and assets that are now burdening many financial institutions.
By providing the financing that the private markets cannot now provide, this will help
start a market for the real estate-related assets that are at the center of this crisis.
Our objective is to use private capital and private asset managers to help provide a
market mechanism for valuing the assets.
We are exploring a range of different structures for this program, and will seek input
from this Committee as we design it.
Fourth, working jointly with the Federal Reserve, we are prepared to commit up to a
trillion dollars to support a Consumer and Business Lending Initiative. This initiative
will kick start the secondary lending markets, to bring down borrowing costs, and to
help get credit flowing again.
In our financial system, 40 percent of consumer lending has historically been
available because people buy loans, put them together and sell them. Because this
vital source of lending has frozen up, no financial recovery plan will be successful
unless it helps restart securitization markets for sound loans made to consumers
and businesses - large and small.
This lending program will be built on the Federal Reserve's Term Asset Backed
Securities Loan Facility, announced last November, with capital from the Treasury
and financing from the Federal Reserve.
And because small businesses are so important to our economy, we are going to
take additional steps to make it easier for them to get credit from community banks
and large banks.
Fifth, we will launch a comprehensive housing program. Millions of Americans have
lost their homes, and millions more live with the risk that they will be unable to meet
their payments or refinance their mortgages.
The President has asked his economic team to come together with a
comprehensive plan to address the housing crisis. We will announce the details of
this plan in the next few weeks.
Our focus will be on using the full resources of the government to help prevent
avoidable foreclosures and to reduce mortgage interest rates. We will do this with a
substantial commitment of resources already authorized by Congress under the
Emergency Economic Stabilization Act. We welcome the ideas and input of this
Committee in this important effort.
And finally, President Obama is committed to moving quickly to reform our entire
system of financial regulation so that we never again face a crisis of this severity.
And, again, that effort can only succeed with the collaboration and support of this
Committee and other Members of Congress.
Chairman Conrad, I would like to applaud you for your longstanding leadership on
fiscal responsibility matters. As you know, it is Treasury's tradition is to defend the
integrity of policy, to respect the constraints imposed by limited resources, and to
limit government intervention to where it is essential to protect our financial system
and improve the lives of the American people. As Treasury Secretary, I take that
charge very seriously and look forward to working with you and this Committee to
http://www.treas.gov/press/releases/tg02112009.htm
8/3/2010
address our fiscal challenges, both short-term and long-term.
Let me close by saying that our challenges in this financial crisis are more complex
than any our financial system has ever faced, requiring new programs and
persistent attention to solve. But the President, the Treasury, and the entire
Administration are committed to working with you to see it through because we
know how directly the future of our economy depends on it.
Thank you, and with that, I'd be happy to take your questions.
###
http://www.treas.gov/press/releases/tg02112009.htm
8/3/2010
February 13, 2009
TG23
Treasury Releases Photo from Geithner, Steinbruck G-7 Finance Ministers
and Central Bank G overnors Bilateral Meeting
Washington, DC - U.S. Treasury Secretary Tim Geithner met today with German
Finance Minister Peer Steinbruck in Rome, Italy, the site of the G-7 Finance
Ministers and Central Bank Governors meeting.
###
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/tg23.htm
8/3/2010
February 13, 2009
TG24
Treasury Releases Photo from Geithner, Darling G-7 Finance Ministers and
Central Bank Governors Bilateral Meeting
Washington, DC - U.S. Treasury Secretary Tim Geithner met today with British
Chancellor Alistair Darling in Rome, Italy, the site of the G-7 Finance Ministers and
Central Bank Governors meeting.
http://www.treas.gov/press/releases/tg24.htm
8/3/2010
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/tg24.htm
8/3/2010
February 13, 2009
td25
Treasury Releases Photo from Geithner, Kudrin G-7 Finance Ministers and
Central Bank Governors Bilateral Meeting
Washington, DC - U.S. Treasury Secretary Tim Geithner met today with Russian
Finance Minister Alexei Kudrin in Rome, Italy, the site of the G-7 Finance Ministers
and Central Bank Governors meeting.
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/td25.htm
8/3/2010
February 13, 2009
TG26
Treasury Releases Photo from Geithner, Nakagawa G-7 Finance Ministers and
Central Bank Governors Bilateral Meeting
Washington, DC - U.S. Treasury Secretary Tim Geithner met today with Japanese
Finance Minister Shoichi Nakagawa in Rome, Italy, the site of the G-7 Finance
Ministers and Central Bank Governors meeting.
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/tg26.htm
8/3/2010
February 14, 2009
tg27
Statement by Secretary Tim Geithner Following Meeting of the G7 Finance
Ministers and Central Bank Governors
Statement by Secretary Tim Geithner - As Prepared for Delivery
Following Meeting of the G7 Finance Ministers and Central Bank Governors
Rome, Italy
I am very pleased to be in Rome for the G7 Finance Ministers and Central Bank
Governors meeting. I want to compliment Minister Tremonti for his hospitality in
this beautiful city in these challenging times.
We meet at a time when growth has slowed sharply around the world. We are
confronted with a broader, deeper slowdown in global growth than has been
experienced in decades. Although the current crisis began in the major economies,
emerging markets are also experiencing a sharp deceleration in growth. Global
trade has declined significantly. While conditions in financial markets have
improved modestly, the financial system remains under stress, and financial
pressures are working against recovery.
These are global challenges and it is imperative that we work together to address
them. Effective global response will require sustained action by governments
working with the international financial institutions.
*
Governments and central banks are already acting throughout the world to
provide substantial support for global economic recovery. Given the
severity of the current economic and financial environment, these actions
must be forceful and sustained for a period that matches the likely duration
of the crisis.
* Alongside these actions, governments need to continue to act to stabilize
and strengthen financial systems and restart the flow of credit. Although the
precise mix of measures must be tailored to each country's situation, there
is a common recognition of the need for more capital and temporary
financing to help restart credit markets.
* The international financial institutions should deploy their resources to help
mitigate the effects of the crisis on their most vulnerable members. These
institutions should be developing creative approaches and adapting their
lending mechanisms to meet the needs of the crisis.
1 All countries need to sustain a commitment to open trade and investment
policies which are essential to economic growth and prosperity.
The countries around the table today recognize this common imperative. President
Obama will soon sign into law the American Economic Recovery and Reinvestment
Plan, which will lay a foundation for economic recovery with a powerful mix of
investments and tax cuts to create jobs and strengthen our long term growth
potential.
Earlier this week we outlined a broad framework for financial recovery and stability.
This framework is designed to provide greater transparency to the financial system,
to bring in new capital, new financing to restart the flow of credit to consumers and
businesses, and create a new investment fund to finance and leverage private
sector capital to facilitate the clean up of bank balance sheets. In the coming days
we will announce a comprehensive plan to address the housing crisis.
http://www.treas.gov/press/releases/tg27.htm
8/3/2010
As we act together to build a strong foundation for recovery, we need to begin the
process of comprehensive reform of our financial system and the international
financial system, so the world never again faces a crisis this severe. While this is a
responsibility of national governments, our markets are global and therefore
national efforts cannot be fully effective without stronger international cooperation to
implement higher standards. In this regard, we will continue to support the
important work underway in the Financial Stability Forum and the G20. We will
work closely with our colleagues in the G7 and the G20 to build consensus on
reforms that match the scope of the problems revealed by this crisis.
I want to emphasize that an important part of this effort is to protect the international
financial system from illicit finance. We must continue to work together to reduce
the vulnerability of the system to those who would seek to abuse it for criminal or
terrorist purposes.
The world is facing enormous challenges. Governments around the globe are
acting with greater force and urgency to address these challenges. These actions
are critical to laying the foundation for recovery and reform, and need to be
sustained on a scale commensurate with the severity of the crisis.
http://www.treas.gov/press/releases/tg27.htm
8/3/2010
February 14, 2009
tg28
Statement o f G7 Finance Ministers and Central Bank Governors
Statement of G7 Finance Ministers and Central Bank Governors
ROME - We, the G7 Finance Ministers and Central Bank Governors, met today
amid an ongoing and severe global economic downturn and financial turmoil. The
stabilization of the global economy and financial markets remains our highest
priority. We have collectively taken exceptional measures to address these
challenges and we reaffirm our commitment to act together using the full range of
policy tools to support growth and employment and strengthen the financial sector.
The financial measures taken by each of us are helping to stabilize extremely
volatile financial markets. These actions aimed at restoring normal credit flows to
the economy follow three approaches as needed: i) enhance liquidity and funding
through traditional and newly-created instruments and facilities; ii) strengthen the
capital base according to the competent authority's assessment of individual
financial institutions; and iii) facilitate the orderly resolution of impaired assets. The
G7 commit to take any further action that may prove necessary to reestablish full
confidence in the global financial system. We will continue to work together and to
cooperate to avoid undesirable spillovers and distortions.
What started as financial turmoil has now gripped the real economy and spread
throughout the world. The severe downturn has already resulted in significant job
losses and is expected to persist through most of 2009. The policy response by the
G7 has been prompt and vigorous; its full effects will build over time. Policy interest
rates have been reduced to very low levels and unconventional monetary policy
actions are being taken as appropriate. Budgetary action has been resolute. In
addition to the full functioning of automatic stabilizers, substantial further fiscal
stimulus packages are being implemented. By taking action together the effects of
our individual action will be boosted. Our fiscal policy measures adhere to principles
that will increase their effectiveness:
*
*
be frontloaded and quickly executed;
include the appropriate mix of spending and tax measures to stimulate
domestic demand and job creation and support the most vulnerable;
" increase longer-term growth prospects, addressing structural weaknesses
through targeted investments;
* be consistent with medium-term fiscal sustainability and mostly rely on
temporary measures.
We also welcome and appreciate the prompt macroeconomic response from others
throughout the world. In particular, we welcome China's fiscal measures and
continued commitment to move to a more flexible exchange rate, which should lead
to continued appreciation of the Renminbi in effective terms and help promote more
balanced growth in China and in the world economy.
We reaffirm our shared interest in a strong and stable international financial system.
Excess volatility and disorderly movements in exchange rates have adverse
implications for economic and financial stability. We continue to monitor exchange
markets closely, and cooperate as appropriate.
http://www.treas.gov/press/releases/tg28.htm
8/3/2010
An open system of global trade and investment is indispensable for global
prosperity. The G7 remains committed to avoiding protectionist measures, which
would only exacerbate the downturn, to refraining from raising new barriers and to
working towards a quick and ambitious conclusion of the Doha Round. The G7 also
stresses the need to support emerging and developing countries' access to credit
and trade financing and resume private capital flows, and is committed to explore
urgently ways, including through multilateral development banks, to enhance this
support.
This crisis has highlighted fundamental weaknesses in the international financial
system and that urgent reforms are needed. We agree that a reformed IMF,
endowed with additional resources, is crucial to respond effectively and flexibly to
the current crisis. In this respect, we welcome the Japanese government's lending
agreement with the IMF. Increased collaboration between the IMF and the
expanded Financial Stability Forum (FSF) will be particularly important to develop a
timely and reliable assessment of macro-financial risks. We also welcome the
contribution of the World Bank and regional Development Banks to providing
finance to emerging and developing countries affected by the crisis, using their
resources effectively.
The G7 Finance Ministers have asked their Deputies to prepare, in consultation
with other partners, a progress report in four months on developing an agreed set of
common principles and standards on propriety, integrity and transparency of
international economic and financial activity.
The G7 is committed to continue working with partners in international fora to
accelerate reforms of the regulatory framework, including limiting procyclicality, the
scope of regulation, compensation practices, market integrity and risk management.
http://www.treas.gov/press/releases/tg28.htm
8/3/2010
FROM THE OFFICE OF PUBLIC AFFAIRS
We recommend printing this release using the PDF file below.
To view or print the PDF content on this page, download the tree ftdoi^SAcrobailS fisederiiX
February 17, 2009
TG-29
Treasury International Capital (TIC) Data fo r December
W ashington — The U.S. Department of the Treasury today released Treasury international Capital (TIC) data for December 2008. The next release, which
will report on data for January 2009, is scheduled for March 16, 2009.
Net foreign purchases of long-term securities were $34.8 billion.
•
Net foreign purchases of long-term U.S. securities were $22.4 billion. Of this, net purchases by private foreign investors were $25.2 billion, and net
purchases by foreign official institutions were negative $2.8 billion.
*
U.S. residents sold a net $12.4 billion of long-term foreign securities.
Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $24.4 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $2.1 billion. Foreign holdings
of Treasury biils increased $25.3 billion.
Banks’ own net dollar-denominated liabilities to foreign residents increased $47.5 billion.
Monthly net TIC flows were $74.0 billion. Of this, net foreign private flows were $65.7 billion, and net foreign official flows were $8.2 billion.
Complete data is available on the Treasury website at www.treas.aov/tic.
-30-
TIC Monthly Reports on Cross-Border Financial Flows
__________ (Billions o f dollars, not seasonally adjusted)
2006
_____
12 Months Through
2007
Dec-07
Dec-08
Sep-08
Oct-08 Nov-08 Dec-08
Foreigners' Acquisitions of Long-term Securities
1
2
3
Gross Purchases of Domestic U.S. Securities
Gross Sales of Domestic U.S. Securities
Domestic Securities Purchased, net (line 1 less line 2) /I
21077.1 29730.6
19933.9 28724.8
1143.2 1005.8
29730.6
28724.8
1005.8
30674.1
30261.6
412.5
3081.9
3051.9
30.0
2492.1
2528.7
-36.6
1546.6
1606.7
-60.1
1480.5
1458.1
22.4
4
5
6
7
8
Private, net /2
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
946.6
125.9
193.8
482.2
144.6
818.1
195.0
99.9
342.8
180.4
818.1
195.0
99.9
342.8
180.4
309.1
239.4
-6.2
58.6
17.4
34.8
15.8
14.8
-7.3
11.5
-19.4
34.0
-33.5
-13.8
-6.1
-22.9
0.4
-10.9
-15.3
2.8
25.2
11.1
-24.6
37.5
1.2
9
10
11
12
13
Official, net /3
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
196.6
69.6
92.6
28.6
5.8
187.7
3.0
119.1
50.6
15.1
187.7
3.0
119.1
50.6
15.1
103.4
76.6
-31.5
34.9
23.4
-4.8
4.9
-8.7
-1.2
0.0
-17.2
-1.1
-16.7
0.7
-0.1
-37.1
-26.2
-11.6
-0.9
1.6
-2.8
3.9
-12.9
3.5
2.6
5515.9
5766.8
-250.9
8187.6
8416.8
-229.2
8187.6
8416.8
-229.2
7694.6
7592.6
102.1
710.0
674.7
35.3
645.3
609.0
363
411.6
377.2
34.5
352.1
339.7
12.4
-144.5
-106.5
-133.9
-95.3
-133.9
-95.3
82.0
20.1
37.8
-2.5
14.6
21.7
13.2
21.3
12.3
0.1
892.3
776.6
776.6
514.6
65.3
-0.4
-25.6
34.8
-174.6
-235.1
-235.1
-196.8
-13.5
-14.8
-12.0
-10.4
717.7
541.5
541.5
317.8
51.8
-15.2
-37.6
24.4
14
15
16
17
18
Gross Purchases of Foreign Securities from U.S. Residents
Gross Sales of Foreign Securities to U.S. Residents
Foreign Securities Purchased, net (line 14 less line 15) /4
Foreign Bonds Purchased, net
Foreign Equities Purchased, net
19
Net Long-Term Securities Transactions (line 3 plus line
20
Other Acquisitions of Long-term Securities, net 15
21
Net Foreign Acquisition of Long-Term Securities
(lines 19 and 20):
http://www.treas.gov/press/releases/tg29.htm
8/3/2010
27
28
Increase in Foreign Holdings of Dollar-denominated ShortU.S. Securities and Other Custody Liabilities: 16
U.S. Treasury Bills
Private, net
Official, net
Other Negotiable Instruments
and Selected Other Liabilities: /7
Private, net
Official, net
29
Change in Banks' Own Net Dollar-Denominated Liabilities
22
23
24
25
26
30 Monthly Net TIC Flows (lines 21,22,29) /8
of which
31
Private, net
32
Official, net
/1
/2
/3
146.2
-9.0
16.1
-25.0
198.0
49.7
28.1
21.5
198.0
49.7
28.1
21.5
240.8
456.0
196.5
259.5
13.0
90.9
59.7
31.2
92.0
147.4
63.6
83.8
51.1
82.1
15.5
66.6
2.1
253
-5.4
30.7
155.1
174.9
-19.8
148.4
72.2
76.2
148.4
72.2
76.2
-215.2
-95.8
-119.4
-77.9
-69.5
-8.4
-55.4
-17.5
-37.9
-31.0
-6.9
-24.1
-23.2
-5.1
-18.1
198.0
-122.9
-122.9
39.1
91.1
196.3
47.7
47.5
1061.8
616.7
616.7
597.8
155.9
273.1
613
74.0
923.0
138.9
327.5
289.2
327.5
289.2
422.1
175.6
138.7
17.3
261.3
11.9
70.2
-9.0
65.7
8.2
Net foreign purchases of U.S. securities (+)
Includes international and regional organizations
The reported division of net purchases of long-term securities between net purchases by foreign official institutions and net purchases
of other foreign investors is subject to a "transaction bias" described in Frequently Asked Questions 7 and 10.a.4 on the TIC web site.
Net transactions in foreign securities by U.S. residents. Foreign purchases of foreign securities = U.S. sales of foreign securities to foreigners.
Thus negative entries indicate net U.S. purchases of foreign securities, or an outflow of capital from the United States; positive entries
indicate net U.S. sales of foreign securities.
Minus estimated unrecorded principal repayments to foreigners on domestic corporate and agency asset-backed securities +
estimated foreign acquisitions of U.S. equity through stock swaps estimated U.S. acquisitions of foreign equity through stock swaps +
increase in nonmarketable Treasury Bonds and Notes Issued to Official Institutions and Other Residents of Foreign Countries.
These are primarily data on monthly changes in banks' and broker/dealers' custody liabilities. Data on custody claims are collected
quarterly and published in the Treasury Bulletin and the TIC web site.
"Selected Other Liabilities" are primarily the foreign liabilities of U.S. customers that are managed by U.S. banks or broker/dealers.
TIC data cover most components of international financial flows, but do not include data on direct investment flows, which are collected
and published by the Department of Commerce's Bureau of Economic Analysis. In addition to the monthly data summarized here, the
TIC collects quarterly data on some banking and nonbanking assets and liabilities. Frequently Asked Question 1 on the TIC web
site describes the scope of TIC data collection.
/4
15
/6
H
/8
REPORTS
•
/PDF; TIC Monthly Reports on Cross-Border Financial Flows fBiiiions of dollars, not seasonally adjusted)
http://www.treas.gov/press/releases/tg29.htm
8/3/2010
DEPARTMENT OF THE TREASURY
OFFICE OF PUBLIC AFFAIRS
February 17,2009
EMBARGOED UNTIL 9:00 AM
Contact: Treasury Public Affairs
(202) 622-2960
TREASURY INTERNATIONAL CAPITAL DATA FOR DECEMBER
Washington —The U.S. Department of the Treasury today released Treasury International Capital
(TIC) data for December 2008. The next release, which will report on data for January 2009, is
scheduled for March 16, 2009.
Net foreign purchases of long-term securities were $34.8 billion.
•
Net foreign purchases of long-term U.S. securities were $22.4 billion. O f this, net purchases
by private foreign investors were $25.2 billion, and net purchases by foreign official
institutions were negative $2.8 billion.
•
U.S. residents sold a net $ 12.4 billion of long-term foreign securities.
Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have
been $24.4 billion.
Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and
other custody liabilities increased $2.1 billion. Foreign holdings of Treasury bills increased $25.3
billion.
Banks’ own net dollar-denominated liabilities to foreign residents increased $47.5 billion.
Monthly net TIC flows were $74.0 billion. O f this, net foreign private flows were $65.7 billion, and
net foreign official flows were $8.2 billion.
Complete data is available on the Treasury website at www.treas. gov/tic.
TIC Monthly Reports on Cross-Border Financial Flows
________ (Billions of dollars, not seasonally adjusted)_____ i_____
2006
2007
12 Months Through
Dec-08
Dec-07
Sep-08
Oct-08
Nov-08
Dec-08
Foreigners' Acquisitions of Long-term Securities
1
2
3
Gross Purchases of Domestic U.S. Securities
Gross Sales of Domestic U.S. Securities
Domestic Securities Purchased, net (line 1 less line 2) 11
21077.1 29730.6
19933.9 28724.8
29730.6
28724.8
30674.1
30261.6
3081.9
3051.9
2492.1
2528.7
1546.6
1606.7
1480.5
1458.1
1143.2
1005.8
1005.8
412.5
30.0
-36.6
-60.1
22.4
4
5
6
7
8
Private, net /2
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
946.6
818.1
818.1
309.1
34.8
-19.4
-22.9
25.2
125.9
193.8
482.2
144.6
195.0
99.9
342.8
180.4
195.0
99.9
342.8
180.4
239.4
-6.2
58.6
17.4
15.8
14.8
-7.3
11.5
34.0
-33.5
-13.8
-6.1
0.4
-10.9
-15.3
2.8
11.1
-24.6
37.5
1.2
9
10
11
12
13
Official, net /3
Treasury Bonds & Notes, net
Gov't Agency Bonds, net
Corporate Bonds, net
Equities, net
196.6
187.7
187.7
103.4
-4.8
-17.2
-37.1
-2.8
69.6
92.6
28.6
5.8
3.0
119.1
50.6
15.1
3.0
119.1
50.6
15.1
76.6
-31.5
34.9
23.4
4.9
-8.7
-1.2
0.0
-1.1
-16.7
0.7
-0.1
-26.2
-11.6
-0.9
1.6
3.9
-12.9
3.5
2.6
5515.9
5766.8
8187.6
8416.8
8187.6
8416.8
7694.6
7592.6
710.0
674.7
645.3
609.0
411.6
377.2
352.1
339.7
-250.9
-229.2
-229.2
102.1
35.3
36.3
34.5
12.4
-144.5
-106.5
-133.9
-95.3
-133.9
-95.3
82.0
20.1
37.8
-2.5
14.6
21.7
13.2
21.3
12.3
0.1
892-3
776.6
776.6
514.6
65.3
-0.4
-25.6
34.8
-174.6
-235.1
-235.1
-196.8
-13.5
-14.8
-12.0
-10.4
717.7
541.5
541.5
317.8
51.8
-15.2
-37.6
24.4
146.2
-9.0
198.0
49.7
198.0
49.7
240.8
456.0
13.0
90.9
92.0
147.4
51.1
82.1
2.1
25.3
16.1
-25.0
28.1
21.5
28.1
21.5
196.5
259.5
59.7
31.2
63.6
83.8
15.5
66.6
-5.4
30.7
14
15
16
17
18
Gross Purchases of Foreign Securities from U.S. Residents
Gross Sales of Foreign Securities to U.S. Residents
Foreign Securities Purchased, net (line 14 less line 15) /4
Foreign Bonds Purchased, net
Foreign Equities Purchased, net
19
Net Long-Term Securities Transactions (line 3 plus line 16):
20
Other Acquisitions of Long-term Securities, net 15
21
Net Foreign Acquisition of Long-Term Securities
(lines 19 and 20):
27
28
Increase in Foreign Holdings of Dollar-denominated Short-term
U.S. Securities and Other Custody Liabilities: 16
U.S. Treasury Bills
Private, net
Official, net
Other Negotiable Instruments
and Selected Other Liabilities: /7
Private, net
Official, net
29
Change in Banks' Own Net Dollar-Denominated Liabilities
22
23
24
25
26
30 Monthly Net TIC Flows (lines 21,22,29) /8
of which
Private, net
31
32
Official, net
/I
/2
/3
/4
/5
16
H
/8
155.1
148.4
148.4
-215.2
-77.9
-55.4
174.9
-19.8
72.2
76.2
72.2
76.2
-95.8
-119.4
-69.5
-8.4
-17.5
-37.9
-31.0
-6.9
-24.1
-23.2
-5.1
-18.1
198.0
-122.9
-122.9
39.1
91.1
196-3
47.7
47.5
1061.8
616.7
616.7
597.8
155.9
273.1
61.3
74.0
923.0
138.9
327.5
289.2
327.5
289.2
422.1
175.6
138.7
17.3
261.3
11.9
70.2
-9.0
65.7
8.2
Net foreign purchases of U.S. securities (+)
Includes international and regional organizations
The reported division of net purchases of long-term securities between net purchases by foreign official institutions and net purchases
of other foreign investors is subject to a "transaction bias" described in Frequently Asked Questions 7 and 10.a.4 on the TIC web site.
Net transactions in foreign securities by U.S. residents. Foreign purchases of foreign securities = U.S. sales of foreign securities to foreigners.
Thus negative entries indicate net U.S. purchases of foreign securities, or an outflow of capital from the United States; positive entries
indicate net U.S. sales of foreign securities.
Minus estimated unrecorded principal repayments to foreigners on domestic corporate and agency asset-backed securities +
estimated foreign acquisitions of U.S. equity through stock swaps estimated U.S. acquisitions of foreign equity through stock swaps +
increase in nonmarketable Treasury Bonds and Notes Issued to Official Institutions and Other Residents of Foreign Countries.
These are primarily data on monthly changes in banks' and broker/dealers' custody liabilities. Data on custody claims are collected
quarterly and published in the Treasury Bulletin and the TIC web site.
"Selected Other Liabilities" are primarily the foreign liabilities of U.S. customers that are managed by U.S. banks or broker/dealers.
TIC data cover most components of international financial flows, but do not include data on direct investment flows, which are collected
and published by the Department of Commerce's Bureau of Economic Analysis. In addition to the monthly data summarized here, the
TIC collects quarterly data on some banking and nonbanking assets and liabilities. Frequently Asked Question 1 on the TIC web
site describes the scope of TIC data collection.
2
lo view or p rin t the H u t content on this page, download the tree Adobe® Acrobat® Header®.
February 17, 2009
TG-30
Treasury Releases First Monthly Bank Lending Survey
Despite Econom ic Downturn, Top 20 Banks Receiving Governm ent Funds
Continued Lending A ctivities; Survey Reflects Adm inistration's Com m itm ent
to Greater Transparency, Communication A round Financial Stability
Program s
WASHINGTON- The U.S. Department of the Treasury released today its first
monthly bank lending survey designed to provide new, more frequent and more
accessible information on banks' lending activities to help taxpayers easily assess
the lending and other activities of banks receiving government investments.
Despite the negative effects of the economic downturn and unprecedented
financial markets crisis, the first survey of the top 20 recipients of government
investment through the Capital Purchase Program (CPP) found that banks
continued to originate, refinance and renew loans from the beginning of the
program in October through December 2008.
In the face of severe economic deterioration during this period-unemployment rose
from 6.5 to 7.2 percent and more than 1.5 million jobs were lost as real GDP
decreased by 3.8 percent-lending levels largely held steady and would have likely
been lower absent capital provided to banks through CPP. The CPP directly
infuses capital into viable banks, stabilizing the financial system and enabling banks
to continue to play their vital roles as providers of credit to businesses and
consumers. Some 400 banks in 47 states have participated since the program
began.
As part of its commitment to greater transparency, Treasury will release a monthly
survey summarizing the lending and other activities of the top 20 CPP recipients
and post the findings on its web site. Today's survey tracks lending activity through
the first three months of the CPP program, and subsequent reports will reflect data
from the previous month.
Overall, loan origination and underwriting activities were weak from October to
November 2008 but picked up from November through December, fueled by falling
mortgage interest rates and the Federal Deposit Insurance Corporation's
Temporary Liquidity Guarantee Program.
Over the period, the median change in residential mortgage loan balances was a
decrease of 1 percent, while the median change in corporate loan balances was a
decrease of 1 percent. Meanwhile, the median percent change in loan balances for
U.S. credit cards was an increase of 2 percent, reflecting greater reliance on
existing credit lines by consumers.
In commercial real estate, renewals of existing accounts increased significantly,
while new commitments decreased. The median percent change in renewals of
existing accounts was an increase of 55 percent, and the median percent change in
new commitments was a decrease of 19 percent.
Iri sum, loan activity was resilient in the face of the worst economic downturn in
decades.
http://www.treas.gov/press/releases/tg30.htm
8/3/2010
Treasury launched the monthly bank lending survey as part of its commitment to
Congress and the public to greater communication and transparency about its
programs to stabilize the financial system. The Financial Stability Plan announced
by Secretary Tim Geithner last week will further enhance the public's understanding
of banks' lending, requiring companies receiving future government funds to report
to Treasury how the money they receive preserves or generates new lending and to
explain how they intend to use government assistance to strengthen their lending
capacity.
To read the Monthly Lending and intermediation Snapshot dick here
To view individual banks’ reports click here
http://www.treas.gov/press/releases/tg30.htm
8/3/2010
TREASURY DEPARTMENT MONTHLY LENDING AND INTERMEDIATION
SNAPSHOT
Summary Analysis fo r October - December 2008
I. Purpose of the Snapshot
The purpose of the monthly snapshot is to provide the Treasury Department (Treasury) and the
public with regular insight into the lending trends and intermediation activities —including
underwriting, buying and selling of securities, and other activities in capital markets -- o f the
banks that received the most funding via the Capital Purchase Program (CPP).
This snapshot seeks to gather information to help answer the question posed by many during this
crisis: “Are banks doing what they are supposed to do, providing credit to borrowers in a safe
and sound manner?”
Answering this question is difficult because we are in an economic downturn, during which it is
common for lending levels to contract. During the past nine recessions, inflation-adjusted total
private sector lending per quarter has contracted on average 30 percent from peak to trough,
while real GDP has contracted 2.0 percent.1 During the last quarter of 2008, unemployment rose
from 6.5 to 7.2 percent and more than 1.5 million jobs were lost as real GDP decreased by 3.8
percent. The demand for credit by consumers and businesses typically falls during an economic
downturn, reflecting caution by both lenders and borrowers to take on new risk during uncertain
economic times. This snapshot cannot, by itself, answer what lending levels would have been
without the CPP, but levels would likely have been lower had Treasury not taken actions to
stabilize the financial system and provided additional capital to banks through the CPP, enabling
banks to continue lending during the financial crisis. These surveys will help Treasury and the
public better understand lending activity in our system during this crisis by looking at some key
metrics, such as levels, volumes, and drivers of credit.
Why lending? Lending is clearly one of the most important ways CPP recipients can deploy this
additional capital, as it affects Americans directly. The CPP was created to stabilize the financial
system by directly and quickly infusing capital into viable banks, enabling them to continue to
extend credit to businesses and consumers during this unprecedented financial market crisis and
economic downturn. The snapshot is designed to complement a separate but related Treasury
initiative, whereby Treasury, in collaboration with the four banking agencies, is coordinating a
more robust statistical research initiative to analyze quarterly regulatory reporting data to
measure the impact of the Capital Purchase Program on the banking sector.
Why monthly? Banks report a significant amount of data to bank regulators every quarter. This
information is typically released to the public six weeks after quarter end. The Treasury
Department believes it is worthwhile to obtain more frequent and more real-time information in
order to assess the impact of the CPP on bank lending and to inform policymaking as market
conditions change.
1Data derived from the Federal Reserve flow o f funding data and from data released by the Commerce Department.
1
W hy o n ly th e to p b a n k s? The largest recipients o f CPP funds represent a significant proportion
of the banking system, or roughly 75 percent of bank holding company assets. These banks are
diverse in terms of size, business focus, customer base, geographic coverage and product and
service offerings. Treasury wanted to quickly but effectively provide an objective analysis to the
public on this important topic and this targeted survey allows us to do that faster than otherwise
possible. In addition, Treasury is in the process of developing a more streamlined snapshot for
smaller institutions.
II. Snapshot Design
The snapshot contains quantitative information on three major categories of lending - consumer,
commercial, and other activities - based on banks’ internal reporting, as well as commentary to
explain changes in lending levels for each category. In addition, the snapshot contains a
qualitative section that provides market color on lending demand and credit standards generally
to help Treasury and the public meaningfully and accurately interpret the quantitative data.
W hy b a se th e q u a n tita tiv e d a ta on in te rn a l rep o rtin g ? Treasury believes that it is critical to
provide the public and Congress with as much information as possible about the programs we are
implementing to stabilize the financial system. In this spirit, the snapshot has been designed to
collect new information on a more frequent basis from banks. In order to do this, Treasury must
utilize banks’ internal reporting. This snapshot complements the detailed quarterly reports
provided by banks on activities and financial condition to regulators, which is also publicly
available. The Treasury snapshot is focused on lending activities and will be issued on a
monthly basis. This information will also help guide policy making going forward as Treasury
and the federal regulators continue to coordinate to develop a comprehensive response to the
unprecedented financial markets crisis.
W hy in clu d e both c o m m en ta ry a n d a q u a lita tiv e sectio n ? Lending levels are a function of
credit availability, which is in banks’ control, as well as a host of factors outside of banks’
control: loan demand, borrower creditworthiness, capital markets liquidity, the macroeconomic
environment, etc. The purpose of the commentary and qualitative section is to allow banks to
provide color on the interaction of these variables so that readers can put the banks’ information
in context and draw meaningful conclusions from the quantitative data.
W h at a re th e lim its o f th e sn a p sh o t? The snapshot’s reliance on internal reporting means that
aggregation by loan category and comparisons of asset and origination levels across firms may
be imperfect. Snapshot readers should focus on trends within a firm across time, particularly in
percentage change terms, a fact that is reflected in Treasury4s summary analysis.
III. Summary analysis
1 Despite significant headwinds nosed by unprecedented financial market crisis and
economic turn, banks continued to originate, refinance and renew loans. Significant
challenges facing both banks and consumers that impact demand for and extension of
credit include the shut down of various credit markets and the process o f loan
2
securitization. In addition, during the last quarter of 2008, unemployment rose from 6.5
to 7.2 percent and more than 1.5 million jobs were lost as real GDP decreased by 3.8
percent, all of which increase the caution of consumers in taking on new loans and
typically reduce demand for loans during a downturn. In addition, the crisis has
negatively impacted confidence in our financial system, limiting banks’ ability to raise
private capital that enables them to increase consumer and business lending.
Please see the attached table detailing each bank’s loan originations over the period o f the
survey.
2
Due to decreasing loan demand and tighter underwriting standards, as well as other
factors such as charge-offs, or losses written off on loans, banks reported a general trend
of modestly declining total loan balances.
a. From October to December, total residential mortgage balances across the
twenty banks was essentially flat. The median percent change in total residential
mortgage balances was a decrease of 1 percent.
b. For the same period, corporate loan balances decreased slightly. The median
percent change in total loan balances across banks was a decrease of 1 percent.
Ten banks experienced increases in total loan balances. The driver o f the decrease
was softening loan demand, particularly by smaller businesses, as noted by
several banks.
c. Credit card borrowing increased, while available credit decreased. The median
percent change in average total loan balance for U.S. credit cards was an increase
of 2 percent. The median percent change in total used and unused commitments
for U.S. credit cards was essentially flat. For banks with the largest credit card
loan balances, the decrease was more marked.
d. In commercial real estate, renewals o f existing accounts increased significantly,
while new commitments decreased significantly. The median percent change in
renewals of existing accounts was an increase of 55 percent. The median percent
change in new commitments was a decrease of 19 percent. Many banks noted
challenges in this space, including “negligible” residential home builder loan
demand and weaker construction and development activity, softening with regards
to retailers, an uncertain outlook with regards to office space, and the continued
dislocation of the commercial mortgage backed securities (CMBS) market.
3
Outside factors nlaved a big role in driving month-on-month changes. In general, lending
activity decreased from October to November and then picked back up from November
to December. Drivers of this phenomenon varied by loan type.
a. A substantial increase in residential mortgage demand/applications from
November to December was largely attributed to falling rates, driven by
initiatives by Treasury, the Federal Reserve and other federal regulators.
b. A similar trend was observed in the area of corporate lending, where the
December increase in loan demand was attributed by several banks to diminished
borrower access to other debt markets such as the commercial paper market,
which effectively shut down in October 2008 due to the credit crisis. This market
funds both financial and non-financial companies across the U.S. and its
3
breakdown forced corporate borrowers to increase their relative use o f bank debt
as a source of replacement funding.
c. Similarly, the FDIC’s Temporary Liquidity Guarantee Program (TLGP) provided
a significant boost to debt underwriting which had been quiet for some time. The
TLFP was launched in conjunction with the CPP in October 2008 as another
measure by the federal government to strengthen confidence and encourage
liquidity in the banking system by guaranteeing newly issued senior unsecured
debt by banks and other institutions. The median percent change across firms
from October to November was an increase of 39 percent, and from November to
December the median percent change was an increase o f was 74 percent.
IV. Process going forward
The Treasury Department will continue to refine this monthly analysis, including potentially
other formats for presenting the data. While this initial snapshot included survey data from a
three month period extending back to the launch of the CPP, monthly snapshots going forward
will reflect data from the prior month only.
In addition, as noted above, Treasury is working with the federal banking agencies (Federal
Reserve, FDIC, OCC and OTS) to conduct research on the impact that the Troubled Assets
Relief Program and other federal programs have had on banks’ health, lending and financial
intermediation. Treasury anticipates publishing this analysis as it becomes available.
4
Loan Originations (Sum of October, November and December)
Name
Baak of America
First Mortgage
HELOC (Lines
and Increases)
$44,611
$5,326
US Card
Other Consumer C & I: Renewal of
(Managed):
Existing Accounts
Lending
Initial Line
Amount
$52,852
$6,753
1 $6,986
$1,779
$1,108
$401
BB&T
$3,682
$694
Baak of New York Mellon
. $212
$7
$34
$72
$3,671
$2,131
$0
$0
$0
$16,274
$1,122
$27,121
... $3
$4,219
$83
$102
$65
$129
$2,551
$445
$541
$1,186
Capital One
ITI
Citigroup
Comerica
Fifth Third
$0
$17
$49,004
CRE: Renewal of
Existing Accounts
$4,399
, $7,985
$3,271
CRE: New
Commitments
$7,343
$1.693
$1,055
$213
$195
$1,930
$183
$759
$3,341
$6,470
$0
$0
$3,553
$955
$378
$6,439
; $1,255
$1,015
: $284
$843
$11,833
$1,322
$1,838
$8Q2
$576
$10,387
:
C & I: New
Commitments
$1,086
; $150
$0
$203
$571
$0
$1,606
$17,900
$6,037
$57,127
$3,686
$48,533
$10
$28,271
$2,693
$2,560
$315
$411
; $467
$0
$237
$3,439
$2,375
$2,575
: $1,020
$130
$16
$155
$1,318
$777
$366
$545
Morgan Stanley
$0,
$0
$9,504
$240
$319
; $657
$421
$1,098
Northern Trust
$0
$0
$1,082
$2,709
$°
$71
$317
Goldman Sacks
JPMorgan Chase
KeyCorp
Marshall & Ilsley
$0
$20
; $766
- $200
$551
: $15,354
$5,546
$1,309
; $1,935
Regions
$1,022
$487
$0
$310
$2,627
$5,468
$1,990
State Street
$0
: $0
$0
$890
$0
$800
SunTrust
$0
$7.205
$4,586
$2,045
$440
$53
$1,151
$4,075
$3,628
$1,099
$1,303
U.S. Bancorp
$8,390
$1,427
$1,736
$2,886
$2,692
$11,513
: $9,062
■ $3,455
$2,452
$3,715
$2,571
$10,915
$17,623
$4,041
$4,415
PNC
Wells Fargo
$48,189
Loan Category Key*
First Mortgages
Loans secured by first liens on residential real estate
HELOC
Home equity lines o f credit
US Card (Managed)
US credit cards (managed)
C&I
Commercial and industrial
CRE
Commercial real estate
NOTE: Reliance on internal reporting means that aggregation by loan category varies for each
reporting bank. Because o f the differences in loan category definitions, comparisons o f
origination levels across firms may be imperfect.
5
TREASURY M ONTHLY INTERMEDIATION SNAPSHOT
PART 1.
QUANTITATIVE OVERVIEW
SCHEDULE A: CONSUMER LENDING (Millions $)
1. First Mortgage
a. Average Loan Balance (Daily Average Total Outstanding)
Person to be contacted regarding this rep o rt: Craig Rosato
Submission da te : January 3 0 ,2 0 0 9
N a m e o f institution: Bank o f Am erica
__________________________________ ____ _______________________________________________________________________________________________________
OCT
2008
NOV
Average balance consists of (1-4 family) residential loans held on the balance sheet, whether
originated by BAC or purchased from others, but does not include discontinued products (pay
$251,712 option and sub prime).
Originations include both loans originated for the balance sheet as well as loans originated for
$2SS,343
$253,344
$17,606
$11,595
$ 7 .8 »
$4,951
$7,732
$9,801
$6,645
H i $7,678
b. Total Originations
sale.
I
Comments
Kev
DEC
Average balance decline was due prim arily to sales and the conversion o f loans to securities th a t were
subsequently retained w ithin the Investment Portfolio. First Mortgage rates to consumers have dropped
substantially in December leading to increased application volume. Origination activity during the m onth of
December was 33% higher than November activity. The increase in volume is prim arily due to refinancings
into conventional products. The level o f FHA and VA product activity has remained relatively fla t. No
changes in credit standards occurred during December th a t w ould have impacted originations.
$15,410
(1) Refinancings
(2) New Home Purchases
Average balances represent HELOC, HELOAN and Reverse Mortgage, but do not include
discontinued products (sub prime).
a. Average Total Loan Balance
$15/,414
$152,904
Average balances declined in December due to additional principal writedowns on loans acquired from
Countrywide. October and November average balances were n ot restated
« '5 0 794
Originations represent HELOC, HELOAN and Reverse Mortgage, but do not include discontinued
b. Originations (New Lines-f-Line increases)
products (sub prime).
$1,686
Total commitments exclude Reverse Mortgage.
c. Total Used and Unused Commitments
$260,063 Ü ,i :$258Æ86
3. US Card - Managed
___________________________________________ ________________________________________________ ____ _______________________________________________________________________________________
Total commitments decreased during the quarter due to fewer line increases and reducing lines on riskier
Average balances represent US Domestic Card and US Small Business Card.
accounts and inactive accounts. As o f December 31, 2008, US Card to ta l commitments included $189.5B o f
a. Average Total Loan Balance - Managed
$161.12/
$161,119
inactive customer accounts.
iliu.348
Originations represent US Domestic Card and US Small Business Card.
b. New Account Originations (Initial Line Amt)
$2,290
$2,022
$7,440
Commitments represent US Domestic Card and US Small Business Card.
c. Total Used and Unused Commitments
$911,276
$907,970 1
4. Other Consumer
a. Average Total Loan Balance
$7$,623
$76,363
S3J544
$1,083
b. Originations
$903,025
__________________________________ ____________________________________________________ ________________________________________________________________________
October and December originations are higher due to bulk auto purchases o f $2B in October and $1.1B in
Average balances and Originations represent Dealer Financial Services (organically originated
December. A uto activity has been robust in December and into January 2009. Inconsistent m arket
and bulk purchases), Consumer Lending and Student Lending.
participation from the captive finance companies is driving increased volume. M arine & RV volume and
$76,355
bookings slowed signifcantly throughout 2008 and in to 2009.
Average balances and Originations exclude Foreign Consumer, Banking Center loans. Small
Business Lines & Loans and Global Wealth Investment Management non-real estate loans and
s i i s i other discontinued businesses.
SCHEDULE B: COMMERCIAL LENDING (Millions $)
OCT
Key
DEC
NOV
l.C & l
a. Average Total Loan and Lease Balance
C&l is non-real estate commercial loans and leases, includes domestic and foreign loans and
leases and excludes U S Small Business Card (which is included in Schedule A above).
$763,$51
$262,398
b. Renewal o f Existing Accounts
$19.319
$15,310
$282336
$13,472
c. New Commitments
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
$64,092
$64,917
b. Renewal of Existing Accounts
m
Ê Ê m
The shut down o f the CMBS securitization m arket during the second ha lf o f 2008, coupled w ith the
Commercial Real Estate includes domestic and foreign loans primarily secured by non owneroccupied real estate which are dependent on the sale or lease of the real estate as the primary commercial real estate market has resulted in a reduction in CRE lending activity.
source
o
f
repayment.
$64,693
Renewals represent credit facilities that expired/matured and were renewed during the period;
includes funded and unfunded exposure; includes all instrument types (see l.b above).
$1,964
$3.190
New commitments represent new credit facilities booked during the period; includes funded
and unfunded exposure and includes all instrument types (see l.b above). October 2008 new
$1,730 W / , í £ t . * 2 8 commitments are estimates due to legacy LaSalle system conversions.
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
$40,606
-$12,012
$0
$0
b. Asset Backed Securities
Increased bank borrowings occurred in September '08, particularly after the dislocation in the funding
markets post Lehman's bankruptcy filing, w hen companies also increased borrowings as a result o f concern
around participant lenders' funding capabilities.
Renewals represent credit facilities that expired/matured and were renewed during the period;
As the corporate bond and commercial paper markets recovered in 4QQ8, our customers were able to return
includes funded and unfunded exposure; includes all instrument types (loans held for
to th e ir traditional funding sources. As a result, corporate clients retired bank borrowings and draws on
$18.0*3 investment, loans held for sale, LCs, bankers acceptances and derivatives.
New commitments represent new credit facilities booked during the period; includes funded
and unfunded exposure and includes all instrument types (see l.b above). October 2008 new
commitments are estimates due to legacy LaSalle system conversions.
$*,$63
c. New Commitments
_
$239,474
Comments
$3,457
Mortgage-backed securities net purchases include only activity related to our Asset/liability
Gross purchases fo r October, November and December were $43,043, $13,679 and $9,080, respectively,
management process, and excludes those securities related to internally originated loans which w hile gross sales were $2,437, $25,691 and $17,844, respectively.
-$8,764 have been securitized externally and re-sold to BAC.
Same as l.a above.
ta
2. Secured Lendine (Repo. PB. Margin Lending]
Matched Book Balances represent customer driven ReverseRepo activity. Monthly fluctuations
driven by customer demand, ability to apply FIN41 netting and balance sheet capacity.
a. Average Total Matched Book (Repo/Reverse Repo)1
$49,770
$66,191
$34,975
Margin Loan balances are minimal following sale o f prime brokerage on 9/30/08.
b. Average Total Debit Balances2
$220
$296
$340
$1,674
$3,760
$230
3. Underwriting
a. Total Equity Underwriting
Underwriting represents BAC commitment on deals closed in current periods.
b. Total Debt Underwriting
Same as 3a.
$ 9 /2 /
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
$7,018
$7,474
Notes:
* Average Total Loan and Lease Balances exclude loans held for sale.
* Q408 data excludes Merrill Lynch as the acquisition was effective January 1, 2009.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Bank o f America
Reporting Month(s): Oct-Nov-Dec 2008
Submission Date: January 30, 2009
Person to be contacted regarding this report: Craig Rosato
PART il. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
inclu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n dem an d, a n y changes in le n d in g
s ta n d a rd s a n d term s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Bank o f America, headquartered in Charlotte, North Carolina, operates in 32 states, the District of
Columbia and more than 30 foreign countries. The company provides a diversified range o f banking and
non-banking financial services and products domestically and internationally through three business
segments: Global Consumer and Small Business Banking (GCSBB), Global Corporate and Investment
Banking (GCIB), and Global Wealth and Investment Management (GWIM).
At December 31, 2008, Bank o f America had $1.8 trillion in assets, nearly $911 billion in loans and $831
billion in deposits.
Economic Environment
2008 was a year in which the U.S. economy moved into an economic recession that deepened severely
in the fourth quarter, triggered in part by the intensifying financial crisis. Housing activity and prices
declined sharply throughout the year. Consumer spending in inflation-adjusted terms softened in the
first half o f 2008, and then declined in the second half, weighed down by the spike in energy prices that
reduced real purchasing power, weaker trends in employment and personal income and the loss of
household wealth resulting from sharp declines in home prices and stock market valuations. Sales o f
automobiles, household durables and consumer discretionary items were hit the hardest.
The stress consumers experienced from depreciating home prices, rising unemployment and tighter
credit conditions resulted in a higher level o f bankruptcy filings during the year as well as higher levels of
delinquencies and losses in our consumer and small business portfolios. Housing value declines, a
slowdown in consumer spending and the turm oil in the global financial markets also impacted our
commercial portfolios where we experienced higher levels o f losses, particularly in the homebuilder
sector o f our commercial real estate portfolio.
Credit M arkets
First mortgage rates to consumers dropped substantially in December leading to increased application
volume. Origination activity during the month of December was 33% higher than November activity.
The increase in volume is primarily due to refinancing into conventional products. The level o f FHA and
VA product activity has remained relatively flat. No changes in credit standards occurred during
December th a t would have impacted originations. The majority of the recent application volume has
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: Bank o f America
Reporting Month(s): Oct-Nov-Dec 2008
Submission Date: January 30, 2009
Person to be contacted regarding this report: Craig Rosato
been refinance activity. Just over 20% o f the volume is related to new purchases. Home equity demand
remains sluggish. Auto activity was up in December and into January 2009. Inconsistent market
participation from the captive finance companies is driving increased volume. Marine and RV volume
and bookings slowed significantly in 2008 and into 2009.
Overall new loan demand fo r commercial real estate is down due to the lack of new construction activity
and the overall condition of the real estate market. The CMBS market remains closed and the lack of
permanent financing continues to put pressure on bank deals. Large corporate demand is stable;
however there is limited demand fo r acquisition financing and capital expenditure activity. Middle
market demand remains stable.
Bank o f America's Response
In response to these changing conditions, Bank of America did the following to help stabilize the U.S.
economy:
Bank o f America extended more than $115 billion in new credit during the fourth quarter o f 2008, of
which about $49 billion was in commercial non-real estate; $45 billion was in mortgages; nearly $8
billion was in domestic card and unsecured consumer loans; nearly $7 billion was in commercial real
estate; more than $5 billion was in home equity products; and approximately $2 billion was in consumer
Dealer Financial Services.
Bank of America lent $45 billion through its mortgage unit ($11.3 billion o f th a t to low- and moderateincome borrowers), helping more than 200,000 Americans purchase a home or save money on the
home they already own in the fourth quarter alone.
Bank o f America com m itted to assist as many as 630,000 customers to help them stay in th e ir homes,
representing more than $100 billion in mortgage financing. In 2008, the company modified
approximately 230,000 home loans - representing more than $44 billion in mortgage financing. Bank of
America also modified nearly 700,000 credit card loans fo r borrowers experiencing financial hardship
last year.
In 2008, Bank o f America extended almost $4.8 billion in new credit to nearly 250,000 small business
customers (defined as businesses w ith less than $2.5 million in revenues and less than $250,000 in credit
exposure). During the fourth quarter alone, nearly $1 billion in new credit was extended to more than
47,000 new small business customers.
Bank of America extended about $49 billion in commercial non-real estate lending credit and nearly $7
billion in real estate lending during the fourth quarter to middle market and large corporate clients as
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Bank o f America
Reporting Month(s): Oct-Nov-Dec 2008
Submission Date: January 30, 2009
Person to be contacted regarding this report: Craig Rosato
well as not-for-profit organizations and governments. In 2008, the company also invested $1 billion in
affordable housing development financing by using Low Income Housing Tax Credits.
The secondary market created through mortgage-backed securities provides liquidity in the housing
market, enabling lenders to provide credit to homebuyers. In the fourth quarter, Bank of America had
net purchases o f $20 billion in mortgage-backed securities.
3
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: Bank o f New York M ellon Corporation
PART 1.
Submission date: January 3 0,2009
Person to be contacted regarding this report: Jeffrey 0 Landau
QUANTITATIVE OVERVIEW
SCHEDULE A: CONSUMER LENDING (Millions $)
1. First Mortgage
a. Average Loan Balance (Daily Average Total Outstanding)
¡ g ¡¡|¡¡
■
b. Total Originations
(1) Refinancings
2008
NOV
OCT
'
'
$54
$69
$ 37
$17
SÎS
$17
$44
«31
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
$335
$772
3. US Card - Managed
a. Average Total Loan Balance - Managed
gj
$0
b. New Account Originations (Initial Line Amt)
$0
$o
c. Total Used and Unused Commitments
$0
b. Originations
Comments
$341 Secured by revolving, open-end loans for 1-4 family residential properties extended under lines ol
credit.
$10
$12
$769
4. Other Consumer
a. Average Total Loan Balance
Kev
$99
(2) New Home Purchases
2. Home Equity
a. Average Total Loan Balance
DEC
$4,672 i 1 g 1 ;$4y604 Secured by 1st liens on closed-end loans for 1-4 family residential properties. Includes jumbo
mortgages.
$791 Period end balances plus unused home equity lines of credit.
$0
<.
y
&
'
S769
$765
$a
$5
jjSjf
$757 Other consumer loans, excluding other revolving credit plans. These loans include single
payment loans and loans for household and other personal expenditures.
Jj
$4
_____________ > — -_______
The company does not make credit card loans.
SCHEDULE B: COMMERCIAL LENDING (Millions $)
l^C & |
a. Average Total Loan and Lease Balance
NOV
OÇT
DEC
$10,7C9
K£X
$10,«S Domestic and foreign loans and leases to manufacturers and other commercial businesses,
excluding loans made to finance commercial real estate.
b. Renewal of Existing Accounts
$ 1 3 5 li|S S ii
c. New Commitments
$449
a. Average Total Loan and Lease Balance
$3,100
^
b. Renewal of Existing Accounts
c. New Commitments
X....
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
$20$
b. Asset Backed Securities
| p | 1 >AV
a. Average Total Matched Book (Repo/Reverse Repo)1
| | i '£
2
b. Average Total Debit Balances
These loans and leases are primarily to investment grade companies. The volume o f credit requests declined
*n the fourth quarter 2008 compared to the third quarter 2008.
$»a
$3,074 Loans to finance commercial real estate, construction and land development. Includes real estate Loans are secured by residential buildings, office buildings, retail properties and other properties. The
unsecured portfolio is primarily allocated to REITs under revolving credit agreements. The volume o f credit
loans both secured and unsecured.
requests declined in the fourth quarter 2008 compared to the third quarter 2008.
$45
$6«
$10 0
$ao
__________________________ ______ __ ______________________________ _____________ ____________________________ — —-----------------------------------------------------------------------------------------------------These purchases were made to increase the amount o f money available to qualified borrowers in the
Reported amounts are amounts paid for the securities. Includes $178 million in Oct and $988
residential housing market.
million in Nov of Agency Debentures.
$1,451
$0
|||||||
N/A
-fee «tu
$4,721
N/A Activity less than $50 billion.
Average total debit balances reflects margin loans recorded by our broker/dealer subsidiary.
$4,533
iiill l l l l i l
a. Total Equity Underwriting
,
$0
||
It
$305
b. Total Debt Underwriting
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
$u
$0 No equity deals in the 4th quarter.
Amounts reported represent our portion of the transactions.
$336 Represents our portion of the transactions.
---------------------------------- ----------------------------------------------------------------------- . ----- --------------------------------- — --------------------------------------- ----- ---------
"
1
..................
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Bank o f New York M ellon Corporation
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Jeffrey D Landau
PART II. QUALITATIVE OVERVIEW
The Bank of New York Mellon, a global leader in asset management and securities servicing, also has a
significant presence in the areas o f wealth management, issuer services, clearing services and treasury
services. The company's global client base includes financial institutions, corporations, government
agencies, pension funds, endowments and foundations. The company does not have a consumer
banking franchise.
W ith regard to our lending activity, it is paramount to point out that the business model o f The Bank of
New York Mellon is very different from traditional retail, commercial or investment banks. In contrast to
most of the other companies that have received a TARP investment, our business model does not focus
on the broad retail market or products such as mortgages, credit cards or auto loans, or on typical
lending to corporate businesses.
Our business is dedicated to helping other financial institutions around the world. We help m onitor and
administer th e ir complex "back-office" processes. The Bank also provides critical infrastructure fo r the
global financial markets by facilitating the movement of money and securities through the markets.
The m ajority of The Bank o f New York Mellon's lending activity relates to extending credit (i.e.,
overdrafts, loans to broker/dealers, etc.) to its institutional client base. Following the Lehman
bankruptcy, we experienced a significant increase in (i) demand fo r loans from our broker/dealer clients
and (ii) overdrafts relating to the clearing and securities processing services we provide to clients. Our
willingness and ability to extend credit in this manner provided liquidity to the market and our core
financial institution client base at the tim e it was needed most. During the latter part of the fourth
quarter 2008, and into January 2009, client demand fo r these extensions of credit returned to more
normal levels. Loans to broker/dealers and overdrafts are included in the aggregate amount of loans
th a t we publicly report, but are not classified as C&l loans.
In keeping w ith its role as an institutional provider, The Bank o f New York Mellon has used the TARP
investment to help address the need to improve liquidity in the U.S. financial system. This has been
done through the purchase of securities issued by U.S. government-sponsored agencies. The company
has also provided liquidity to other financial institutions in order to increase the amount o f funds
available in the credit markets.
Specifically, we have purchased mortgage-backed securities and debentures issued by U.S. governmentsponsored agencies to support efforts to increase the amount o f money available to lend to qualified
borrowers in the residential housing market. The company has also purchased debt securities o f other
financial institutions, which helps increase the amount o f funds available to lend to consumers and
businesses. In addition, we have used the funds fo r interbank placements, federal funds sold and other
interbank lending. All of these efforts address the need to improve liquidity in the financial system and
are consistent w ith our business model which is focused on institutional clients.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: BB&T Corporation
Submission date: January 3 0 ,2 0 0 9
Person to be contacted about this report: Daryl N. Bible, Chief Financial Officer
PART 1. QUANTITATIVE OVERVIEW
2008
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First Mortgage
OCT
a. Average Loan Balance (Daily Average Total Outstanding)
b. Total Originations
(1) Refinancings
NOV
DEC
$18/477
$18,362
$v b ¡
$1,008
$672
$461
Kev
$$8*21! Consists o f 1-4 family residential loans originated primarily through BB&T's branch network.
$1 748
,,
Comments
Mortgage originations in the fo u rth quarter o f 2008 were down slightly from the th ird quarter; however,
low er interest rates late in the quarter drove a 42% increase in mortgage application volume compared to
the th ird quarter o f 2008. Approxim ately 86% o f fo u rth quarter originations w ere conforming loans sold to
Freddie Mac and Fannie Mae and FHA / VA loans.
Includes loans originated for sale and to be included in the mortgage portfolio.
*' i ' '
(2) New Home Purchases
$75«
$547
..........
2. Home Equity
a. Average Total Loan Balance
$5,718
b. Originations (New Lines+Line Increases)
$232
$5,809 Item 2 includes only home equity lines. All are originated through BB&T's branch network.
Growth in home equity lines continues to be challenged by soft demand.
$217
|||1|
c. Total Used and Unused Commitments
$15,785
$15,777 ......... '$ ¡s '.w
gœ a&M IBM ai
1
3. US Card - Managed
a. Average Total Loan Balance - Managed
b. New Account Originations (Initial Line Amt)
c. Total Used and Unused Commitments
-
>
$1,530
$1,934
$15»
$122
' $120
$9,565
¿9,629
V
$1*906 Item 3 balances include bank cards and demand deposit protection lines. Bank cards are
primarily originated through the banking network and are positioned as a relationship product.
Revolving credit balances are experiencing strong grow th w ith annualized linked quarter grow th o f 12% in
the fo u rth quarter o f 2008.
4. Other Consumer
a. Average Total Loan Balance
b. Originations
$18,877
$18,766
$462
$352
$18,653 Item 4 includes non-revolving home equity loans, sales finance and other consumer loans.
'$ 2 9 4
Weak economy and increasing unemployment have contributed to soft consumer markets.
SCHEDULE B: COMMERCIAL LENDING (Millions $)
OCT
NOV
Key
DEC
Comments
l.C & l
a. Average Total Loan and Lease Balance
b. Renewal o f Existing Accounts
c. New Commitments
'
V-
$33,531 Item l.a . includes leveraged leases.
$32,470
$32,947
$455
$503
$821
$1.473
$1,372
$¿554
$18.36$
$19,383
$1 4 4 2
$911
$1,218
85»
$416
$897
$5.313
-$3,723
C&l lending is experiencing very strong annual grow th o f 15.3%, accelerating to 17% annualized in the fo u rth
quarter on average. BB&T is focused on diversifying our commercial p o rtfo lio via increased C&l lending and
continues to capitalize on credit m arket disruptions and in-m arket mergers.
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
b. Renewal o f Existing Accounts
c. New Commitments
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (M illions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
b. Asset Backed Securities
$0
$10.928 Item l.a . represents gross purchases, net o f gross sales on a trade date basis. Principal
paydowns are excluded. All these securities purchases are GSE mortgage-backed securities.
$0
$0
l l l f f c f t l
2. Secured Lendine (Repo, PB, Margin Lending]
a. Average Total Matched Book (Repo/Reverse Repo)1
b. Average Total Debit Balances2
3. Underwriting
a. Total Equity Underwriting
b. Total Debt Underwriting
m
N/A
H/A
,1 2 /
$117
-
$0
$0
'M
§
$830
$430
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
$110
P
' *
Construction starts have remained a t low levels and the in ability to sell homes in other parts o f the country
is having a negative impact on housing sales in the Southeastern U.S. as in-m igration o f population has
slowed. BB&T has seen grow th in CRE, prim arily due to the collapse o f the CMBS market. Point-to-point
annualized grow th fo r the fo u rth quarter was approxim ately 25%.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: BB&T Corporation
Reporting month(s): Oct, Nov, Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Daryl N. Bible, Chief Financial Officer
PART il. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion sh o u ld
inclu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m an d, a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Company Description
BB&T Corporation ("BB&T") is a regional financial holding company headquartered in Winston-Salem,
North Carolina. BB&T conducts its business operations primarily through its commercial bank subsidiary,
Branch Banking and Trust Company, which has banking offices in North Carolina, South Carolina,
Virginia, Maryland, Georgia, West Virginia, Tennessee, Kentucky, Alabama, Florida, Indiana and
Washington, D.C. In addition, BB&T's operations consist o f several nonbank subsidiaries, which offer
financial services products. Substantially all o f BB&T's loans are made to businesses and individuals in
these market areas.
Overall Loan Growth
In the fourth quarter of 2008, BB&T's average loans and leases increased $1.3 billion, or 5.3%
on an annualized link basis, and BB&T's end of period loans increased $2.0 billion, or 8.2% on an
annualized link basis, compared to the third quarter of 2008. This growth rate includes runoff in
home equity lines, which results as many clients are rolling home equity lines into mortgage
refinancing, and lower mortgage balances as BB&T is selling a large percentage of loans
originated to Fannie Mae and Freddie Mac. Average commercial loans and leases increased
10.7% on an annualized link quarter basis during the fourth quarter, sales finance increased
3.8%, revolving credit increased 11.5% and loans originated by our specialized lending
subsidiaries increased 7.0%, all on the same basis. BB&T originated approximately 54,000
commercial loans during the fourth quarter and 161,000 consumer loans. Total loan
originations for the fourth quarter of 2008 were approximately $15 billion.
Commercial Loans and Leases
The commercial loan and lease portfolio represents the largest category o f BB&T's loans. It is
traditionally targeted to serve small to middle market businesses. BB&T is focusing on diversifying the
commercial portfolio by growing commercial and industrial loans at a faster rate than commercial real
estate loans. We continue to capitalize on in-market mergers, challenged competitors and credit market
disruption and have grown end o f period C&l loans by approximately 20% on an annualized link quarter
basis. We are gaining market share by picking up good credits at reasonable spreads, while guarding
against adverse selection. While we have seen recent growth in lending to our Small Commercial and
lower Middle Market clients, much o f the growth has also come from our larger client segments.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: BB&T Corporation
Reporting month(s): Oct, Nov, Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Daryl N| Bible, Chief Financial Officer
Commercial real estate
Overall new loan demand fo r commercial real estate is slower; however, due to the collapse o f the
CMBS market, BB&T's other CRE portfolio has experienced growth in 2008, particularly in the
m ultifam ily, warehouse / light industrial and hotel / motel segments. End of period growth fo r the
fourth quarter was approximately 25%. This growth is in spite of tighter lending standards imposed mid
year 2008 and was prim arily a result of bank and non-bank financial institutions curtailing income
property lending. BB&T's other CRE portfolio is very granular, w ith an average loan size o f $515,000.
Consumer
New production continues to decline in most consumer portfolios as these markets continue to reflect
recession related weakness.
Our Sales Finance portfolio includes the origination o f loans fo r the purchase o f new and used
automobiles, boats and recreational vehicles through approved dealers w ithin the 11 state BB&T
footprint. New loan volume is highly seasonal. The total Sales Finance portfolio grew slightly in the
fourth quarter fueled by growth in recreational lending and flo o r plan portfolios. Auto loans were down
in accordance w ith seasonal trends coupled w ith a downturn in new car sales. However, the decrease
was not as great as expected because we are gaining market share as other lenders w ithdraw from our
footprint.
Our Bankcard product line is positioned as a relationship product offered to prime credit BB&T clients
and business loan clients. We continue to see growth in this portfolio, and are maintaining a consistent
conservative posture w ith respect to risk at account origination. Line utilization has remained relatively
consistent fo r both retail and commercial clients.
Mortgage
Mortgage originations totaled $3.7 billion in the fourth quarter, down slightly compared to the third
quarter o f 2008. However, application volume was up 42% from the third quarter as mortgage rates
declined considerably. Many of these applications were received in the month of December. While
mortgage balances were down on average 2.9% on an annualized link quarter basis compared to the
third quarter, this decrease reflects loan sales to Freddie Mac and Fannie Mae as approximately 86% of
originations were sold in the secondary markets. The vast majority of current origination volume is
conforming or FHA / VA.
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: BB&T Corporation
Reporting month(s): Oct, Nov, Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Daryl N. Bible, Chief Financial Officer
Capital Purchase Plan Deployment
The U.S. Treasury invested $3.1 billion in BB&T on November 14, 2008. BB&T pursued quality loans and
investments throughout 2008, as evidenced by average loan growth o f 8.6% through the first nine
months of 2008. Following receipt of the CPP funds and in the spirit o f the program, BB&T developed an
initial deployment strategy, including a number of initiatives, to aggressively make loans across all
lending strata. We have made additional loans in areas that have been negatively affected by liquidity
and funding challenges, particularly through initiatives in corporate lending, equipment leasing,
insurance premium finance and consumer lending. In addition to our normal lending activities, these
special lending initiatives have resulted in an additional $1.6 billion in loans and commitments to lend
th a t were made in the six weeks following receipt o f the CPP funds through the end o f 2008.
BB&T also invested over $10 billion in GSE mortgage-backed securities following receipt of the CPP
funds in the fourth quarter to provide liquidity to mortgage markets. Through these lending and
investment initiatives, BB&T increased the balance sheet by the maximum amount possible in the fourth
quarter consistent w ith meeting our minimum capital guidelines in an e ffo rt to minimize the dilutive
impact of the CPP investment. BB&T's current strategy is to re-deploy the cash flow from our securities
portfolio into lending over the course o f the year, thereby changing the mix o f our balance sheet, but
holding total asset levels fairly stable throughout the year to maintain our capital levels.
3
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Submission date: January 3 0 ,2 0 0 9
N a m e o f institution: Capital O ne Financial Corp
PART 1.
Person to be contacted regarding this rep o rt: Kevin M u rray
QUANTITATIVE OVERVIEW
2008
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First Mortgage
OCT
NOV
Kev
DEC
Mortgage and Home Equity numbers are end o f month figures rather than averages and include
a. Average Loan Balance (Daily Average Total Outstanding)
run-off portfolio inherited from GreenPoint Mortgage
$ 7 ,2 5 5 ®
$7,333
$7,20«
b. Total Originations
(1) Refinancings
(2) New Home Purchases
N H pl
SO
Comments
Capital One has through most o f its history not been an originator of, or investor in, residential mortgage
loans. GreenPoint M ortgage - a subsidiary o f NorthFork Bancorp - was acquired along w ith NorthFork in
December 2006 but its origination business was closed in August 2007. Mortgage loan balances largely
reflect assets acquired from NorthFork which are currently in run-off mode
lllÍ
¡¡p
■MNHj
SO
50
$2
$4
2. Home Equity
a. Average Total Loan Balance
Mortgage and Home Equity numbers are end o f month figures rather than averages and include Fluctuations in volume in the measured tim e period reflect idiosyncratic factors; there have been no
run-off portfolio inherited from GreenPoint Mortgage
changes in credit standards. We continue to originate home equity loans to our customers in our fo o tp rin t.
$3,476
$3,449 H
b. Originations (New Lines+Line Increases)
$29
$2 1 ;
$4,543
$4,510.
$22
c. Total Used and Unused Commitments
3. US Card - Managed
a. Average Total Loan Balance - Managed
US Card reflects only consumer card volumes; All numbers reflect managed portfolio
$51,883
$52,
$53,568
b. New Account Originations (Initial Line Amt)
''
$1,728
$983 f i l
c. Total Used and Unused Commitments
$278,170
i l **0
$178,157*
4. O ther Consumer
a. Average Total Loan Balance
$33,781
$33,363* .
b. Originations
$794
___ $673¡B
We tightened credit standards in the fall to reflect continued worsening in the economic outlook triggered
by the events in September. The relatively high origination volume in October reflects the last bookings
from earlier campaigns prior to the new standards going into effect. The increase in outstandings in
December reflects holiday sales. Overall, fo u rth quarter loan grow th in th e US Card business was weaker
than usual, on the heels o f weak holiday spending. Despite weak economic growth, we opened 1 m illion
new consumer credit card accounts in the quarter. We continue to originate new credit card accounts
through our direct mail and in ternet channels.
$178,031
Other consumer non-revolving include auto loans, unsecured installment loans and other non
revolving loans secured by boats, RVs, money-market accounts, etc and $200 million of
$32,850 unsecured other consumer revolving lines
For the small volume o f revolving loans, the line extended is included in originations.
We've observed greater increases in the risk o f closed-end loan customers in "Boom and Bust" housing
markets as compared to the risk o f credit card customers in those housing markets. In response to adverse
credit trends, w e've had to be very disciplined in originating most closed-end loans. A uto Finance trends
continue to show the impacts o f broad economic worsening, falling auto sales and th e im pact o f sharply
falling used card auction prices.
SCHEDULE B: COMMERCIAL LENDING (M illions $)
l.C & l
OCT
Key
DEC
NOV
Small Business credit cards are included in C&l avg balance and new commitments numbers.
a. Average Total Loan and Lease Balance
$ 2 3 ,5 «
b. Renewal o f Existing Accounts
$23,722
$23,921
fo r the financing o f plant, equipment, inventory and accounts receivable.
a s s is t i
$716
..............
N ot withstanding deteriorating economic conditions, we continue to make new loans across a variety of
V
$189
5220
c. New Commitments
11
Unutilized capacity o f both small business cards and more broadly C&l lending is not captured
anywhere on the "Snapshot."
$699
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
$17,355
$17,421
b. Renewal of Existing Accounts
...
$23
«8
Despite deteriorating economic conditions, w e increased our CRE p o rtfo lio modestly. The Retail asset class
has softened overall as many retailers have cut back expansion plans or gone in to bankruptcy. Office space
is not ye t showing significant deterioration in our markets, although dram atic jo b losses could im pact this
segment in '09. We see softness in construction and development activity due to lim ited demand and
excess supply in some markets. We are w atching rents and vacancies in retail and office space closely and
factoring trends into new lending decisions. In a ll sectors, we are maintaining strong covenants and
coverage ratios. This has translated in to significant declines in new construction projects in all o f our
markets and cautious grow th in other segments.
$17,438
li
$102
c. New Commitments
$220
_________$ m
p i
$406
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
Asset Backed Securities are predom inantly made up o f securities backed by credit card and auto loan
receivables
■
.1 8 U
$1,212
5414
$285
' 5ÎÏ548
b. Asset Backed Securities
j j
$568
2. Secured Lendine (Repo. PB. Margin Lending)
Secured Lending and Underwriting not applicable
a. Average Total Matched Book (Repo/Reverse Repo)1
n/a
Î '
_____ « /* _____
n/a
I
m Ê Ê Ê Ê IÊ Ê m
n/a
M Ê Ê Ê Ë
b. Average Total Debit Balances2
n/a
Secured Lending and Underwriting not applicable
n/a
3. Underwriting
a. Total Equity Underwriting
Secured Lending and Underwriting not applicable
n/a
b. Total Debt Underwriting
_
Secured Lending and Underwriting not applicable
,
h /»,
i „
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
Comments
Growth in the fo u rth quarter was m oderated by weakening demand which has continued into the first
quarter o f 2009. Loan demand was moderately weaker fo r large and middle m arket firm s. For smaller
firms, loan demand was substantially weaker. The decrease in demand was attributed to decreasing needs
n/a
1
n /*
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: Capital One Financial Corporation
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Kevin Murray
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m a n d , a n y ch anges in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Capital One is a “ main street” bank th at serves consumers and small-to-medium sized businesses locally
in New York, Louisiana and Texas and that serves credit card and auto loan customers nationally, in
Canada and in the UK. Capital One and its subsidiaries collectively had $109 billion in deposits and $147
billion in managed loans outstanding as o f December 31, 2008. Headquartered in McLean, VA, Capital
One has 738 locations, primarily in New York, New Jersey, Texas and Louisiana. Capital One offers a
broad spectrum of financial products and services to consumers, small business and commercial clients.
Consumer Lending
In the fourth quarter, we extended billions o f dollars in new credit to both new and existing customers
across our lending businesses. For example, our consumer credit card customers have access to more
than $170 billion in credit lines on their cards to use to make transactions and to finance those
purchases as they choose. We continue to originate new credit card accounts through our direct mail
and internet channels and opened 1 million new credit card accounts in the fourth quarter. We
extended those new customers more than $3 billion in new credit line in the fourth quarter.
W hile we originated billions o f dollars o f new loans in the fourth quarter, ending loan balances fo r the
total company did not grow in the quarter, and declined modestly from the prior year. Several factors
had a negative impact on ending loan balances in the fourth quarter o f 2008. These factors include:
rising charge-offs; normal amortization and attrition; declining purchase volumes; and tightened
underwriting in the midst o f the economic downturn. Together, these factors offset loan originations in
the fourth quarter. Of particular note is th a t total purchase volume on our US Consumer Credit Cards
dropped 11% in the Fourth Quarter of 2008 and purchases per active account dropped 6%, which was
roughly in-line w ith the decline in national retail sales figures. In general, the mix o f purchases on our
cards has mirrored what we're seeing in the broader economy, w ith consumers reining in discretionary
purchases.
As is well documented, economic deterioration accelerated during the fourth quarter and economic
worsening is widely projected to continue. We must maintain prudent risk management standards in
the face o f a worsening economy in order to protect the U.S. taxpayers’ investment in us and ensure an
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Capital One Financial Corporation
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Kevin Murray
appropriate return. Also, we must adapt to an environment in which consumers w ith strong credit are
borrowing less while consumers w ith weak credit are becoming riskier. Under these conditions, we
expect that loan balances w ill decline going forward even though we remain an active lender across our
businesses. For example, auto sales declined significantly in 2008 compared to last year due to
weakened consumer confidence, tight credit and rising unemployment. New car sales dropped
approximately 18% from 16.2 million in 2007 to 13.3 million in 2008. In Q4 2008, car sales dropped by
over 30% compared to the previous year. Despite these headwinds, Capital One originated more than
$1.4 billion in auto loans in the Fourth Quarter of 2008.
Commercial and Small Business Lending and Commercial Real Estate Lending
Growth in commercial and Industrial lending in the fourth quarter was moderated by weakening
demand which has continued into the first quarter o f 2009. C&l loan demand was moderately weaker
fo r large and middle market firms. For smaller firms, loan demand was substantially weaker. The
decrease in demand was attributed to decreasing needs fo r the financing of plant, equipment, inventory
and accounts receivable.
Notwithstanding deteriorating economic conditions, we continue to make new loans across a variety of
industry segments as evidenced by our more than $2.5 billion in new loan commitments and renewals
o f existing accounts in the fourth quarter.
Despite deteriorating economic conditions, we increased our CRE portfolio modestly. The Retail asset
class has softened overall as many retailers have cut back expansion plans or gone into bankruptcy.
Office space is not yet showing significant deterioration in our markets, although dramatic job losses
could impact this segment in 2009. We see softness in construction and development activity due to
limited demand and excess supply in some markets. We are watching rents and vacancies in retail and
office space closely and factoring trends into new lending decisions.
strong covenants and coverage ratios.
In all sectors, we are maintaining
This has translated into significant declines in new construction
projects in all o f our markets and cautious growth in other segments.
We continue to make new loans across a variety o f industry segments, as well as lending in new
markets, which contributed to the more than $900 million dollars in new commitments and renewals of
existing accounts in the fourth quarter.
Finally, we would note that consistent w ith our strong com m itm ent to support all sectors of our local
communities, Capital One originated more than $440 million in loans and investments in Q4 2008 to
support activities such as community development and affordable housing.
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Capital One Financial Corporation
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Kevin Murray
Investm ent A ctivity in Support o f Consumer Lending
To the extent th a t falling loan demand limits the extension o f new credit directly to our customers, we
put our funds to w ork by purchasing high quality securities backed by consumer loans. Most often,
these loans were originated to help consumers to buy homes, autos and a range o f discretionary items.
In the fourth quarter, we purchased $6 billion of high quality investment securities backed by mortgage
and consumer loans. In the current economic and market environment, investing in high-quality, shortduration securities provides appropriate risk-adjusted returns fo r our shareholders, and supports the
recovery and stabilization o f secondary markets that are critical to consumer lending and the economy.
Capital One believes th a t this disciplined stance is in the best interests of both our customers and
investors, including the U.S. taxpayer. Although growth in loan balances has slowed in response to rising
charge-offs, run-offs in businesses we've exited and reduced consumer spending, we are actively
originating billions of dollars o f good loans on good terms w ith our consumer, commercial and small
business customers.
3
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: CIT Group Inc.
Submission date: 01/30/2009
PART 1. QUANTITATIVE OVERVIEW
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First Mortgage
a. Average Loan Balance (Daily Average Total Outstanding)
2008
NOV
OCT
DEC
KSI
Comments
We closed th e home lending origination platform in August 2007 and sold the remaining assets in July, 2008.
b. Total Originations
(1) Refinancings
(2) New Home Purchases
2. Home Equity
a. Average Total Loan Balance
WMMm W MMM,
We are currently not engaged in any o f these activities.
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
îm m
WÆ w M Æ .
3. US Card - Managed
a. Average Total Loan Balance - Managed
We are currently n o t engaged in any o f these activities.
b. New Account Originations (Initial Line Amt)
c. Total Used and Unused Commitments
4. Other Consumer
a. Average Total Loan Balance
Consumer Lending assets consist primarily o f our Student Lending business, which is
approximately 95% government guaranteed.
S
«¿76
$
%
1
$
b. Originations
12,692
3k
1 & .
12,604
i
CIT ceased underwriting new student lending business in the second quarter o f 2008.
NOV
OCT
SCHEDULE B: COMMERCIAL LENDING (M illions $)
Comments
Key
DEC
1. C & l
a. Average Total Loan and Lease Balance
Included in the C 8i 1asset balances is approximately $13 Billion o f operating leases.
Our commercial and industrial business consists o f Corporate Finance, Transportation Finance, Trade
Finance and Vendor Finance segments.
pZ -;
57,085
$
56,224
The Renewal o f Existing Accounts is predominately from our Trade Finance business.
b. Renewal o f Existing Accounts
c. New Commitments
Wâ
'4 > 8 3 : $
3,344
i m , $
a : ... C à
887
' ‘¿*,960
$
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
XXiX
Some of our other businesses, such as our Small Business Administration lending, and Energy
financing, may also have some o f their loans secured by real estate. Those businesses are
$
882
$
880
$
CIT's Commercial Real Estate business ceased underw riting new business in the firs t h alf o f 2008.
included in the reported C&l numbers.
b. Renewal o f Existing Accounts
c. New Commitments
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (M illions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
X y/,y t
We are currently no t engaged in any o f these activities.
b. Asset Backed Securities
2. Secured Lending (Repo. PB. Margin Lending)
a. Average Total Matched Book (Repo/Reverse Repo)
We are currently not engaged in any o f these activities.
b. Average Total Debit Balances2
3. U nderwriting
a. Total Equity Underwriting
b. Total Debt U nderwriting
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services
We are currently not engaged in any o f these activities.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f in s titu tio n : CIT G roup Inc.
R eporting m onth(s): Oct-Nov-Dec 2008
Submission date: 01 /3 0 /2 0 0 9
Person to be contacted regarding this re p o rt: Ken Reynolds
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d em an d, a n y ch anges in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Founded in 1908, CIT Group Inc. provides financing and leasing products and services to clients in over
30 industries and 50 countries. The m a jo rity o f o u r business focuses on com m ercial clients w ith a
p articular focus on m iddle-m arket companies. O ur largest industries include tra n s p o rta tio n , particularly
aerospace and rail, and a broad range o f m anufacturing and retailing. W e also serve th e w holesaling,
healthcare, com m unications, media and e n te rta in m e n t and various service-related industries.
The TARP m oney was received by CIT on December 31, 2008. The re p o rtin g in fo rm a tio n is based on
CIT's internal repo rtin g on th e related lending activity. Overall, com m ercial financing dem and has
declined due to current econom ic conditions. O rigination volum e in o u r com m ercial businesses,
excluding factoring, was $3.3 billion fo r th e fo u rth q u a rte r 2008, dow n fro m $3.9 billion in th e p rio r
q uarter, due p rim arily to econom ic conditions and balancing o f liq u id ity w ith custom er needs. Fourth
q u a rte r business activity by segm ent is discussed below :
Corporate Finance - Fourth q u a rte r volum e was $834 m illion. Fourth q u a rte r origin a tio n was dow n 44%
fro m th e p rio r q u a rte r and was across each o f o u r industry groups, m ost notably in th e Syndicated Loan,
Com m ercial and Industrial, Energy and Infrastructure and Healthcare units. This tre n d reflected th e
co n tin u a tio n o f th e Company's liq u id ity m anagem ent and tig h te r u n d e rw ritin g in light o f th e so ft m arket
conditions
T ransportation Finance - Fourth q u a rte r volum e was $722 m illion. Fourth q u a rte r orig in a tio n increased
21% fro m th e p rio r quarter, w ith th e increase largely in th e com m ercial aerospace unit, as w e accepted
delivery o f addition al aircra ft and leased th e m to customers.
Trade Finance - Fourth q u a rte r volum e was $10.3 billion. Renewal volum e declined 6% fro m p rio r
q u a rte r consistent w ith seasonal trends as volum e generally peaks in advance o f th e holiday season.
Volum e declined 14% fro m th e p rio r year, reflecting th e w eak retail environm ent.
V endor Finance - Fourth q u a rte r volum e was $1.8 billion. Fourth q u a rte r o rigination was essentially fla t
w ith p rio r q u a rte r as a m odest increase in U.S. volum e offset reductions in in te rn a tio n a l units. Volum e
was dow n 33% fro m p rio r year, reflecting continued focus on strategic vendor relationships and tig h te r
u n d e rw ritin g standards.
Consum er - We ceased origination o f student loans in th e second q u a rte r o f 2008 and sold o u r hom e
lending business in th e th ird q u a rte r o f 2008.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Submission date: January 30,2009
Name of institution: Citigroup
Person to be contacted regarding this report: Carol Hayles or Peter Bieszard
PART 1. QUANTITATIVE OVERVIEW
2008
SCHEDULE A: CONSUMER LENDING (Millions
1. First Mortgage
$)
a. Average Loan Balance (Daily Average Total Outstanding)
b. Total Originations
o rr
$158,562
$155,438
' " . $8,9*2
$3,788
S1.136
Key
$152.369
$$,$45 Originations includes new loans whether for refinance o f an existing home or the purchase o f a
home. It does not include troubled debt restructurings which usually includes a restructuring o f
terms and not additional extensions o f credit.
$858 If on a refinancing, amounts were added to the existing loan balance, the total amount o f the
new loan is reported.
$’ 64
(1) Refinancings
(2) New Home Purchases
DFC
mqv
Comments
First mortgage balances declined from October through December, reflecting increased sales o f mortgages
and higher repayments, due to refinancing as mortgage interest rates declined. O rigination volume was
significantly low er than in the prior year, reflecting a decline in mortgage applications, tightened credit
standards, declines in purchases from th ird party originators, and a focus on origination fo r sale to
government-sponsored enterprises. Q uantitative data do n o t include modifications to existing mortgage
loans and other m itigation efforts which usually involve a restructuring o f term s rather than a new
extension o f credit.
$ 5 5 1 ........... $489
2. Home Equity
a. Average Total Loan Balance
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
¡ g l » ¡ ¡ ¡ ¡ ¡ lg
$68,717 Includes HELOC and 2nd mortgages.
$68,829
$369
$362
S8/.496
$86,111
$391 If a line is increased, the total amount of the new line was included not just the increase. If the
line was increased without a simultaneous draw, then you would see an origination amount fo r
the total increase in the line, but no change in the balances.
:
3. US Card - Managed
a. Average Total Loan Balance - Managed
b. New Account Originations (Initial Line Amt)
c. Total Used and Unused Commitments
originators or Wall Street firms.
$ « ,4 5 4 If the customer both increased a line and simultaneously drew on the line, then you would see
an origination amount for the total increase in the line, and a change in the balances fo r the
drawn amount.
i '
-
$149,133 Balances do not include commercial card activity.
$148,344
$147,445
?
$8,'J13
$10,379
$1,044,764
$1,023,350
$1,008,069
$62,515
$62,243
$1,562
$1,344
> /.B
Home Equity balances have remained fairly constant during the period despite significantly declines in new
home equity originations during the period. W hile new home equity originations are down significantly
year over year, existing customers continue to draw on th e ir home equity on a regular basis. However,
low er housing prices have curbed the consumers a bility to take ou t new home equity loans fo r debt
consolidation or home im provement. Citi no longer purchases home equity loans from th ird party
Increasing balances during the quarter reflect seasonal spending and slower payment rates, however yearover-year sales declined 15% reflecting the current economic environm ent. In addition, the managed
p o rtfo lio is experiencing higher loss rates o f 8.04% in Q408 vs. 5.1% in the same quarter o f the prior year.
4. O ther Consumer
a. Average Total Loan Balance
b. Originations
$61,863 Includes Auto, student and personal loans. Student loans includes related deferred fees and
lines o f credit with schools (which are secured by student loans).
$1,313
M inim al auto lending activity relative to p rio r year w ith originations down approxim ately 80% reflecting
business consolidation and tighter credit standards; 4th quarter Student Loan originations declined 13%
reflecting the Company's tem porary w ithdraw al fro m the Federal Loan Consolidation market, partially
offset by increases in new FFELP volume reflecting increased loan lim its and higher penetration a t the
educational institutions.
SCHEDULE B: COMMERCIAL LENDING (M illions
$)
Kev
DEC
NOV
OCT
c& l
$42.104 Renewals and new commitments are on a facility basis. Facilities include L/Cs. If a loan is rolled
over at a higher amount, the total amount of the rollover is reported.
$41.740
$42.820
b. Renewal of Existing Accounts
$1,140
$1,344
$1.030
c. New Commitments
$133 i
$1,892
$$34$
$25,142
$21,329
b. Renewal of Existing Accounts
$134
$55
c. New Commitments
$126
$156
.■ m i
$5,180
a. Average Total Loan and Lease Balance
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions
C&l balances w ere relatively fla t in the quarter, the market evidenced a decline in business investment,
M8 lA activity and investment property purchases in response to the economic outlook fo r 2009. Small
business credit balances remained relatively strong on previously approved credit facilities, although
Overall, new loan demand and origination fo r commercial real estate w ere down, due to the economic
$23.169 Renewals and new commitments are on a facility basis. Facilities include L/Cs. If a loan is rolled
environm ent and uncertainties in the market, which have resulted in a significant slowdown in transaction
over at a higher amount, the total amount of the rollover is reported.
activity. Our investor portfolio in Cities Global W ealth M anagement business has historically focused on
$766
'
’
term bridge financing o f completed projects in the absence o f a permanent or commercial mortgage-backed
securities market. Our Institutional Client Group is rolling over and extending loans In its existing customer
base where it is comfortable w ith the counterparty and the underlying assets.
$96
$)
a. Mortgage Backed Securities
g g g | Does not include maturities and pay downs. Net Purchased Volume is reported using cost basis. MBS purchases and sales activity was higher in Dec due prim arily to increased agency pass-through pool
settlements w ith both customers and dealers, however sales activity was slightly higher than purchases,
resulting in a low er net balance in the m onth. In addition, $6B o f MBS purchases w ere made to manage
b. Asset Backed Securities
«
■
H
H
$284
$3361
purchases o f collateralized financing notes issued by th e big three auto financing companies.
2. Secured Lending (Repo, PB. Margin Lending)
a. Average Total Matched Book (Repo/Reverse Repo)1
$134.252
$22,069
b. Average Total Debit Balances2
$91
a. Total Equity Underwriting
b. Total Debt Underwriting
[ ■ H
9 H
$177,415 Average Total Matched Book (Repo/Reverse Repo) is before FIN 41 netting. Includes security
lending activity.
$123,197
”
$6
$4,708 *
' $2Ct*3i
m
$1$ Equity Underwriting represents Citi's portion o f underwritten issue.
$11357 Debt underwriting represents Citi's portion o f underwritten issue and extensions o f credit to
finance specific individual CRE projects that are in bond form.
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
Matchbook Secured lending declined from October to December due to reduced customer collateralized
financing activity.
Spreads on corporate bonds rose substantially in October and November and new issuance declined
markedly. Credit markets recovered somewhat in December increasing debt m arket activity after a number
o f the Federal Reserve initiatives started to take effect and im prove the day-to-day functioning o f the
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f in s titu tio n : Citigroup Inc.
Reporting m onth(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this re p o rt: Carol Hayles o r Peter Bieszard
PART il. QUALITATIVE OVERVIEW
Company description: C itigroup Inc. ("C iti") does business in th e U nited States thro u g h Citibank, Citi
In stitu tio n a l Clients Group, The Citi Private Bank, Smith Barney, Primerica, Diners Club, CitiFinancial,
C itiM ortgage and Citi Cards. Average loans in N orth Am erica in th e fo u rth q u a rte r o f 2008 w ere $532.6
billion. Average deposits and o th e r custom er lia b ility balances w e re $279.9 billion.
Consumer Lending: New U.S. consum er lending in th e fo u rth q u a rte r to ta le d approxim ate ly $48.7
billion despite a decline in consum er spending, tig h te r u n d e rw ritin g standards across th e U.S. banking
industry in light o f th e d e te rio ra tin g c re d it e n v iro n m e n t and capital considerations.
First m ortgage balances declined fro m O ctober th ro u g h December, reflecting increased sales o f
m ortgages and higher repaym ents, due to refinancing as m ortgage inte re st rates declined. O rigination
volum e was significantly lo w e r than in th e p rio r year, reflecting a decline in m ortgage applications,
tig h te n e d credit standards, declines in purchases fro m th ird party originators, and a focus on o rigination
fo r sale to governm ent-sponsored enterprises. Q u a n tita tive data do not include m odifications to
existing m ortgage loans and o th e r m itig a tio n e ffo rts w hich usually involve a restructuring o f term s
ra th e r than a new extension o f credit.
Average consum er credit card to ta l loan balances increased during th e quarter, reflecting seasonal
spending and slow er paym ent rates; how ever, year-over-year sales declined consistent w ith th e current
econom ic environm en t. Citi's managed net c re d it loss rate was 8.04 percent in th e q u a rte r against 5.1
percent in th e p rio r year, a fu rth e r sign o f th e financial strains on U.S. consum ers.
M ore than 360,000
card m em bers entered Citi's forbearance program s in th e fo u rth q u a rte r as th e Company introduced
new program s w ith broadened e lig ib ility criteria th a t benefit accounts in e arlier stages o f delinquency.
Average to ta l balances on o th e r consum er loans, w hich include auto, stu d e n t and personal loans, w ere
largely stable over th e q uarter, w h ile originations declined, reflecting, am ong o th e r things, a significant
decline in personal loan applications.
M inim al auto lending a ctivity reflected business consolidation
and tig h te r credit standards, again consistent w ith th e econom ic e nvironm en t.
Fourth q u a rte r student
loans declined over th e p rio r year, reflecting Citi's te m p o ra ry w ith d ra w a l fro m th e Federal Loan
Consolidation m arket. This was partia lly o ffse t by increases in new Federal Family Loan Education
Program (FFLEP) volum e.
Higher FFELP volum e reflected increased loan lim its and higher penetratio n at
educational in stitutions.
Commercial Lending: New U.S. com m ercial lending (including Com m ercial Real Estate) o f approxim ately
$11.4 billion during th e q u a rte r reflects new transactions in sup p o rt o f corporate acquisitions, as w ell as
general corporate financing. W hile C&l balances w ere relatively fla t in th e quarter, th e m arket
evidenced a decline in business investm ent, M 8iA activity and investm ent p ro p e rty purchases in
response to th e econom ic o u tlo o k fo r 2009. W e expect increased renewal a ctivity in 2009, as existing
facilities are refinanced a n d /o r restructured.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f in s titu tio n : Citigroup Inc.
Reporting m onth(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this re p o rt: Carol Hayles o r Peter Bieszard
Demand fo r small business credit rem ained relatively strong on previously approved credit facilities,
although dem and fo r new facilities was low.
Overall, new loan dem and and origination fo r com m ercial real estate w ere dow n, due to th e econom ic
enviro n m e n t and uncertainties in th e m arket, w hich have resulted in a significant slow dow n in
transaction activity. Our investor p o rtfo lio in Citi's Global W ealth M anagem ent business has historically
focused on short- to m edium - te rm lending on existing com m ercial real estate assets, and m any clients
sought sh o rt-te rm bridge financing o f com pleted projects in the absence o f a perm anent o r com m ercial
m ortgage-backed securities m arket. O ur Institu tio n a l Client Group is rolling over and extending loans in
its existing custom er base w here it is com fortable w ith th e c o u n te rp a rty and th e underlying assets.
Other Interm ediation Activities: Citi effected net purchases o f approxim ate ly $28.0 billion o f m ortgageand asset-backed securities (MBS/ABS) during th e quarter, in a m arket th a t was characterized by sharp
sell-offs and w eak investor demand.
Gross MBS purchases and sales a ctivity jum ped in December, due prim a rily to increased agency pass
th rough pool settlem ents w ith both custom ers and dealers, how ever sales a c tivity was slightly higher
than purchases, resulting in a low er net balance in th e m onth.
In addition , Citi made $6 billion o f MBS
purchases to m aintain targeted levels o f secured funding. ABS a ctivity was p rim a rily custom er tra d in g
and purchases o f collateralized financing notes issued by th e "Big Three" auto financing com panies
M atched Book secured lending declined fro m O ctober to December, due to reduced custom er
collateralized financing activity.
reads on corporate bonds rose substantially in O ctober and N ovem ber, and new issuance declined
m arkedly. Credit m arkets recovered som ew hat in December, increasing d e b t m arket activity a fte r a
num ber o f th e Federal Reserve initiatives started to take effect and im prove th e day-to-day fu n c tio n in g
o f th e capital markets.
it# #
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
PART 1.
Person to be contacted regarding this rep o rt: D arlene Persons
Submission date: 1 /3 0 /2 0 0 9
N am e o f institu tio n: COMERICA INCORPORATED
Q UANTITATIVE OVERVIEW
2008
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First M ortgage
a. Average Loan Balance (Daily Average Total Outstanding)
OCT
DEC
NOV
51.S'>8
$1,853
Comerica Bank.
Consists o f loans funded during the period, including those originated fo r sale.
$26 l l
b. Total Originations
Comments
i<£*
Consists o f 1st lien 1-4 family residential mortgage and construction loans originated by
First mortgage originations include loans originated and sold to our mortgage partner ($11 m illion Oct/$9
m illion N ov/$9 m illion Dec).
Total 4th quarter refinancings by market w ere $20 m illion, $23 m illion and $1 m illion in M idwest, Western
and Texas, respectively.
Total 4 th quarter new home purchases by market w ere $21 m illion, $13 m illion and $5 m illion in Midwest,
(1) Refinancings
$16
$13 r *
(2) New Home Purchases
$20
$13Ü
Western and Texas, respectively.
Ì
;Jyt
$6
2. Home Eauitv
a. Average Total Loan Balance
$1,710
$1,749-
$1*774 Consists o f both fixed and revolving home equity (2nd lien) loans.
--------------------------------------------------------------------------------------------------Total 4th quarter Home Equity originations by market w ere $46 m illion, $39 m illion, $15 m illion and $2
m illion in Midwest, Western, Texas and Florida, respectively.
b. Originations (New Lines+Line Increases)
$35
$32 I I
$31 Excludes commitments/originations where home equity collateral is provided for multiple
purposes (personal and business), which are included in Commercial Lending commitments
(Schedule B).
l l l l i i l '« B i s
$3,344
3. US Card - Managed
a. Average Total Loan Balance - Managed
$6}
$59
b. New Account Originations (Initial Line Amt)
$24
$14 V
c. Total Used and Unused Commitments
___________________________________ _______________________________________________________________________________________________________________________
New account originations include referrals to our consumer card partner ($19 m illion Oct/$13 m illion
$52 Consists prim arily o f commercial bankcard loans.
Nov/$23 m illion Dec).
Includes new card loans funded during the period and new referrals to our consumer card
partner.
c. Total Used and Unused Commitments
$460
$4S9S
$418
4. Other Consumer
a. Average Total Loan Balance
$8»
$830
$86$ Consists o f consumer installment loans (both secured and unsecured) and student loans.
Total 4th quarter Other Consumer originations by market were $104 m illion, $8 million, $2 m illion, $14
m illion and $1 m illion in Midwest, Western, Texas, Florida and National, respectively.
b. Originations
$49
$23IV
$57
l.C & l
a. Average Total Loan and Lease Balance
V ^ ig ^ Ig
$31,697
p u n
J0
$2,70«
b. Renewal o f Existing Accounts
Comments
Kev
DEC
NOV
OCT
SCHEDULE B: COMMERCIAL LENDING (M illions $)
Consists o f loans for commercial and industrial purposes to both domestic and international
sorrowers, lease financing and other non-consumer, non-real estate loans.
New 4th quarter C & 1commitments by market w ere $354 m illion, $381 m illion, $233 m illion, $25 m illion
and $262 m illion in Midwest, Western, Texas, Florida and National/lnternational, respectively.
Includes renewals o f and increases to lines with existing customers.
$1,517
%'
$47$
c. New Commitments
Consists o f binding commitments to new customers and new lines to existing customers, net of
participations sold. Includes commitments/originations where home equity collateral is
$394
jjg j
2. Commercial Real^state
a. Average Total Loan and Lease Balance
$15,207
provided for multiple purposes (personal and business).
Consists o f loans made to businesses where 50% or more o f the collateral is real estate
(primarily owner-occupied) and loans made to businesses or developers for building
$15,160
New 4th quarter Commercial Real Estate commitments by market w ere $76 m illion, $82 m illion, $86 m illion,
$21 m illion and $19 m illion in Midwest, Western, Texas, Florida and National, respectively.
construction.
b. Renewal of Existing Accounts
$3S3
$250
If
H
$44
c. New Commitments
*
,$372 Includes renewals o f and increases to lines with existing customers.
$23» Consists o f binding commitments to new customers and new lines to existing customers, net of
participations sold.
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
$0
$0
$432
$664
________________________ ______________________________________________ _ _____ _____________________________— ---------------------------------------------------------------------------------------------------------------Does not include commitments to purchase $2 billion o f mortgage-backed securities to be delivered
$0 Represents purchases (net o f sales, if any) o f mortgage-backed securities (AAA-rated agency
between Jan-Mar o f 2009.
securities) for investment portfolio available-for-sale on a trade date basis. Excludes principal
paydowns.
b. Asset Backed Securities
Represents purchases (net o f sales) of asset-backed auction-rate securities purchased as an
accomodation to customers from October through December 2008 for investment portfolio
preferred stocks.
available-for-sale, on a trade date basis.
2. Secured Lendine (Repo, PB. Marein L
a. Average Total Matched Book (Repo/Reverse Repo)
e
n
n /s
$0
i
n
g
)
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
n /a
n/a
b. Average Total Debit Balances2
3. Underwriting
a. Total Equity Underwriting
d
n/a
lllllp
-------------------------------------------_ _ _ _ _ ------------------------------------------------------------- -------------------------------------------------------------------------------------------------------------------------------------------------------------------Amount o f equity securities underwritten where the Corporation in manager or co-manager of
$0
the issue. All done on "best efforts" basis.
b. Total Debt Underwriting
a o m
$20 | | |
J lj
1
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
Amount o f debt securities underwritten where the Corporation in manager or co-manager o f
the issue. All done on "best efforts” basis.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: COMERICA INCORPORATED
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Darlene Persons
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion sh o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m a n d , a n y chan ge s in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Comerica Incorporated is a financial services company headquartered in Dallas, Texas; strategically
aligned into three major business segments: the Business Bank, the Retail Bank and Wealth &
Institutional Management, and operates in four primary markets: Texas, the Midwest (primarily
Michigan), Western (prim arily California and Arizona) and Florida.
The principal focus o f Comerica Incorporated is to meet the needs of small and medium-sized
businesses, m ultinational corporations and governmental entities through various products and services
including loans and lines o f credit, letters o f credit, deposits, international trade finance and other
services. The Business Bank, which includes all business customers except fo r small business,
traditionally accounts fo r at least tw o-thirds of net interest income. In addition to serving the needs of
businesses, Comerica Incorporated also offers a variety o f consumer products, including deposit
accounts, installm ent loans, credit cards, home equity lines of credit and residential mortgage loans.
Fiduciary services, private banking, retirem ent services and other wealth management services are also
provided.
National growth has been hampered by turm oil in the financial markets, declining home values and
rising unemployment rates. California lagged national growth primarily due to continued problems in
the state's real estate sector. Michigan continued to contract fo r a fifth consecutive year. The sharp
decline in car sales nationally, the restructuring in the auto sector and the recession nationally were
major factors holding back the Michigan economy. A wide variety of economic reports consistently
showed that Texas continued to outperform the nation in 2008, though growth clearly slowed from the
rapid pace seen in 2007. Texas continued to benefit from its energy sector and a much more modest
retrenchm ent in homebuilding than in most other states.
Due to the above economic conditions in our markets in the spring of 2008, especially in California and
Michigan, Management began a process intended to reduce business loans and commitments to
preserve capital and generate appropriate loan pricing fo r current risks. This was done as loans were
renewed. The process took a few months to implement and was in full effect beginning in the summer
of 2008. As a result, loans were expected to decline $2-3 billion from June 2008 to June 2009. In the
fourth quarter 2008, w ith the receipt o f TARP proceeds, Management's focus moved toward
establishing new and expanding existing relationships, particularly in Small Business, Middle Market and
Wealth Management in Texas and California, w ith appropriate pricing and credit standards. The change
in Management focus is evidenced by a fourth quarter 2008 annualized decline in average loans o f 1
percent, significantly lower than the third quarter annualized decline of 7 percent.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: COMERICA INCORPORATED
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Darlene Persons
Overall, loan demand declined in the fourth quarter 2008, as business customers continued to be
cautious due to the deteriorating economic conditions in our markets. Commercial lending renewals and
new commitments were $7.5 billion and $1.5 billion, respectively, both lower than the third quarter
2008. New commitments and renewals were lower in the three largest markets (Midwest, Western and
Texas), although new commitments declined the least in Texas, a less weak economy. There were $380
million o f new commitments in consumer lending in the fourth quarter.
Residential mortgage lending was facilitated through purchases o f mortgage-backed securities and
through lending to customers in our Mortgage Banker (part of Commercial Real Estate) and Financial
Services Divisions. Since receiving TARP proceeds, $2 billion of mortgage-backed securities were
purchased fo r delivery in the first quarter o f 2009. In addition, during October through December, 2008,
$808 million o f renewals were booked in the Mortgage Banker and Financial Services Divisions.
Debt underwriting through our broker/dealer subsidiary during the fourth quarter of 2008 o f $7.0 billion
provided access to liquidity fo r corporate customers.
During the fourth quarter 2008, $1.3 billion o f auction-rate securities were purchased from customers,
assisting w ith customer liquidity.
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
N a m e o f institution: Fifth Third Bancorp
PART 1
Submission date: 1 /3 0 /0 9
Person to be contacted regarding this rep o rt: Blane Scarberrv
QUANTITATIVE OVERVIEW
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First M ortgage
2008
NOV
OCT
a. Average Loan Balance (Daily Average Total Outstanding)
$12,448
DEC
$12,347
b. Total Originations
ms
$622 * ,
(1) Refinancings
$518
$326
(2) New Home Purchases
$457
$295
Key
$12432 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
$951
Comments
In the fo u rth quarter o f 2008, Fifth Third's average consumer loans and leases were fla t fro m the th ird
quarter. This result was prim arily driven by th e firs t mortgage p o rtfolio where the m ajority o f originations
are sold in to the secondary market. Mortgage applications increased sequentially driven by attractive
interest rates w ith in the agency conforming categories. During the fo u rth quarter. Fifth Third continued to
make prudent adjustm ents to consumer lending standards, consistent w ith peer institutions as reported by
the Federal Reserve and as observed in the market. Fifth Third focused on tightening loan to value
requirements w ith in real estate backed products, given an outlook fo r fu rth e r U.S. home price depreciation.
5354
2. Home Equity
a. Average Total Loan Balance
$12,034
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
$12.067 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
$178
$117
$150
$21494
$21,159
$21.137
$1,999
$2,041
$1S$
$139
$24?
$14498
$14,380
$14,578
$9.966
$9,364
$344
$328
Fourth quarter overall loan demand fo r non-mortgage consumer credit (home equity, credit card, auto)
compared to th ird quarter was slightly weaker, as expected, particularly given seasonality trends. During
the fo u rth quarter, Fifth Third continued to make p rudent adjustments to consumer lending standards,
consistent w ith peer institutions as reported by the Federal Reserve and as observed in the market. Fifth
Third focused on tightening loan to value requirements w ith in real estate backed products, given an outlook
fo r fu rth e r U.S. home price depreciation.
3. US Card - Manaeed
a. Average Total Loan Balance - Managed
b. New Account Originations (Initial Line Amt)
;
c. Total Used and Unused Commitments
$2,081 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
Fourth quarter overall loan demand fo r non-mortgage consumer credit (home equity, credit card, auto)
compared to th ird quarter was slightly weaker, as expected, particularly given seasonality trends.
4. O ther Consumer
a. Average Total Loan Balance
b. Originations
.
r
$9487 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
$414
Fourth quarter overall loan demand fo r non-mortgage consumer credit (home equity, credit card, auto)
compared to th ird quarter was slightly weaker, as expected, particularly given seasonality trends.
SCHEDULE B: COMMERCIAL LENDING (M illions $)
u
i
a. Average Total Loan and Lease Balance
$3M 45
$31,312 ' H
$213
b. Renewal o f Existing Accounts
Kev
DEC
NOV
OCT
Lending in the Commercial, Business Banking and Private Banking segments continues to qualified
borrowers exhibiting average risk or better. Continued emphasis is placed on prudent underw riting and
demonstrated ability to repay as we are seeing certain borrowers' sales weaken, p ro fit margins narrow and
the number o f business bankruptcies rise. Overall, loan demand is down as we are seeing reduced
......S a w The renewal of existing accounts (b) only includes the renewal o f loans. The renewal o f existing confidence in the economy from our C&l borrowers, w hich varies by geography. Customers are
commitments is captured in the New Commitments (c) for C&l and Commercial Real Estate.
deleveraging and increasing liq u id ity through asset sales and reduced inventories versus expanding
$30,906 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
operations and purchasing equipment.
c. New Commitments
53,870
$4,500
■
W
a. Average Total Loan and Lease Balance
$2 0 ,5 4 2
c. New Commitments
M m m .
$151,883 Average loan balances are based upon classifications consistent with the Y9C Report, Call
Report and FR 2416 Report.
$20,372
$791
$220
b. Renewal o f Existing Accounts
$8«
$275
■$is&
-$211
$3,465
Average CRE balances decreased slightly, down $200 m illion in the fo u rth quarter compared w ith the th ird
quarter. Fifth Third continues to engage in lending on owner occupied properties. Fifth Third continues to
suspend lending to new non-owner occupied properties and non new homebuilders and developer projects
in order to manage existing po rtfo lio positions. We believe this is prudent given th a t we do n o t believe
added exposure in those sectors is warranted and given our expectations fo r continued negative trends in
the performance o f those portfolios. Existing construction borrowers are taking advantage o f m ini-perm
options as th e ir options fo r longer term financing in th e market has diminished.
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (M illions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
The amounts reported are the net securities purchased less securities sold fo r the reporting
period.
MBS volume in the 4th quarter was largely a function o f managing the hedge fo r the Mortgage Servicing
Rights (MSR) asset. We, from tim e to tim e, use MBS to hedge th e basis exposure we have in the MSR asset.
We w ere fa irly active in selling MBS and buying Agency debt fo r the hedge during the 4th quarter as rates
declined. The ABS decline in the 4th quarter was due to a reduction in the am ount o f asset backed
commercial paper (ABCP) held in the investment portfolio. During the 4th quarter, $300 m illion o f the CP
was placed into the Federal Reserves' new financing program (CPFF).
-$83
b. Asset Backed Securities
r
2. Secured Lending (Reno. PB. Margin Lending)
SMMMMSI
$0
$G
b. Average Total Debit Balances2
$0
$0
$0
a. Total Equity Underwriting
$0
$0
so
$203
$483
a. Average Total Matched Book (Repo/Reverse Repo)1
b. Total Debt Underwriting
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Fifth Third Bancorp
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Blane Scarberry
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d em a n d , a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
C om pany d e s c rip tio n : Fifth Third Bancorp is a diversified financial services company headquartered in
Cincinnati, Ohio. As o f December 31, 2008, the Company had $120 billion in assets, operated 18
affiliates w ith 1,307 full-service Banking Centers, including 92 Bank M art locations open seven days a
week inside select grocery stores and 2,341 ATM's in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida,
Tennessee, West Virginia, Pennsylvania, Missouri, Georgia and North Carolina. Fifth Third operates five
main businesses: Commercial Banking, Branch Banking, Consumer Lending, Investment Advisors and
Fifth Third Processing Solutions. Fifth Third is among the largest money managers in the Midwest and, as
of December 31, 2008, had $179 billion in assets under care, of which it managed $25 billion fo r
individuals, corporations and not-for-profit organizations.
The Treasury's preferred stock investment in Fifth Third was made on December 31, 2008. As a result,
fourth quarter results discussed below did not include the effect or benefit o f the presence o f those
funds or capital.
C onsum er:
Fourth quarter overall loan demand fo r non-mortgage consumer credit (home equity, credit
card and auto) compared to third quarter was slightly weaker, as expected, particularly given seasonality
trends. Mortgage applications increased sequentially driven by attractive interest rates w ithin the
agency conforming product categories.
During the fourth quarter, Fifth Third continued to make prudent adjustments to consumer lending
standards, consistent w ith peer institutions as reported by the Federal Reserve and as observed in the
market. Fifth Third focused on tightening loan to value requirements w ithin real estate backed
products, given an outlook fo r fu rth e r U.S. home price depreciation. Fifth Third also enhanced our
credit requirements fo r non real estate lending due to projected further stress w ithin the U.S. economy.
Fifth Third continues to lend to qualified borrowers. In the month of December 2008, we originated
more than 4,400 mortgages, nearly 3,500 equity loans and over 23,200 auto loans.
In the fourth quarter of 2008, Fifth Third's average consumer loans and leases were flat from the third
quarter. This result was primarily driven by the first mortgage portfolio where the majority of
originations are sold into the secondary market.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Fifth Third Bancorp
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Blane Scarberry
CRE: Average CRE balances decreased slightly, down $200 million in the fourth quarter compared w ith
the third quarter. Fifth Third continues to engage in lending on owner occupied properties. Fifth Third
continues to suspend lending on new non-owner occupied properties and on new homebuilders and
developer projects in order to manage existing portfolio positions. We believe this is prudent given that
we do not believe added exposure in those sectors is warranted and given our expectations fo r
continued negative trends in the performance o f those portfolios. Existing construction borrowers are
taking advantage o f mini-perm options as their options fo r longer term financing in the market has
diminished.
C&/: Lending in the Commercial, Business Banking and Private Banking segments continues to qualified
borrowers exhibiting average risk or better. Continued emphasis is placed on prudent underwriting and
demonstrated ability to repay as we are seeing certain borrowers’ sales weaken, profit margins narrow
and the number o f business bankruptcies rise. Overall, loan demand is down as we are seeing reduced
confidence in the economy from our C&l borrowers, which varies by geography. Customers are
deleveraging and increasing liquidity through asset sales and reduced inventories versus expanding
operations and purchasing equipment.
Demand fo r Small Business credit is still relatively stable but showing signs o f weakening as application
volume is starting to slow. Business Banking loan originations continue to be made using prudent
underwriting standards. In the fourth quarter o f 2008, we originated or renewed over $800 million of
loan balances representing over 3,000 loans. Nearly half o f those balances were originated or renewed
in the month o f December.
The primary market fo r syndicated credit and large corporate deals has slowed in the fourth quarter as
demand has decreased. Given the outlook fo r the economy, many companies have scaled back plans fo r
capital expenditures and inventory build, which in turn has reduced the need fo r financing. Merger and
acquisition activity has also slowed significantly. Terms and covenants have tightened somewhat and
spreads have widened, which has also served to reduce demand.
Average total commercial loan and lease balances grew 3 percent fo r the fourth quarter compared w ith
the third quarter. During the fourth quarter, commercial loan and lease average loans grew by
approximately $1.7 billion primarily due to the use o f contingent liquidity facilities related to certain offbalance sheet programs. Excluding these items, commercial loan balances in the fourth quarter were
consistent w ith third quarter balances. During the fourth quarter, $1.3 billion in commercial loans were
either sold or transferred to held-for-sale, but there was minimal impact to average loan balances due
to the tim ing o f these actions.
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
PART 1.
Person to be contacted regarding this rep o rt: David A. V in ia r
Submission date: January 3 0 ,2 0 0 9
N a m e o f institution: The G oldm an Sachs G roup, Inc.
QUANTITATIVE OVERVIEW
2008
Kev
DEC
NOV
OCT
SCHEDULE A: CONSUMER LENDING (Millions $)
1. First Mortgage
a. Average Loan Balance (Daily Average Total Outstanding)
Amounts, reflected as principal balances, include whole loans secured by 1-4 family residential
properties originated or purchased by Goldman Sachs and purchased portfolios o f distressed
.Ç V
$4 ,4 4 5
$ 4 ,6 3 1 ®
$5,040 loans.
Primarily reflects loans purchased.
b. Total Originations
Comments
The residential mortgage market remains challenging as mortgage spreads continue to widen, liquidity
continues to decline and investors de-lever. There was no new issuance in the non-agency mortgage
securitization market as banks extending jum bo loans are holding th e loans on th e ir books. In November,
Goldman Sachs closed on the $1.2 billion purchase o f loans and m ortgage servicing assets fro m Popular, Inc.,
helping to provide additional liquidity to the mortgage market.
$214
$782
$113
$719»
$101
$63»
$30
(1) Refinancings
IÇ1IM
(2) New Home Purchases
$44
2. Home Equity
a. Average Total Loan Balance
Amounts, reflected as principal balances, include purchased home equity lines o f credit.
$0
$ 7 5 Ì j|
'$£
$15088
Goldman Sachs is largely a wholesale in stitution w ith no meaningful business lines engaged in direct
consumer lending through retail channels (including home equity, credit card and other consumer).
$m
b. Originations (New Lines+Line Increases)
'
1
}
'
.
$0
c. Total Used and Unused Commitments
.....................$0
$ 3 7 ® ..............$33
3. US Card - Managed
a. Average Total Loan Balance - Managed
Goldman Sachs is largely a wholesale in stitution w ith no meaningful business lines engaged in direct
consumer lending through retail channels (including home equity, credit card and other consumer).
So
$0
$c
$0
$0
$0
$0
so
$0
b. New Account Originations (Initial Line Amt)
c. Total Used and Unused Commitments
4. Other Consumer
Amounts, reflected as principal balances, include secured mixed use consumer loans.
a. Average Total Loan Balance
$1,43#
$ 1 ,5 3 1 «
$1,584
0
$203 ! § |
$o
b. Originations
Goldman Sachs is largely a wholesale in stitution w ith no meaningful business lines engaged in direct
consumer lending through retail channels (including home equity, credit card and other consumer).
SCHEOULE B: COMMERCIAL LENDING (M illions $)
NOV
OCT
Kev
DEC
l.C & l
a. Average Total Loan and Lease Balance
Amounts reflect principal balances and include purchased and originated loans, purchased
portfolios of distressed loans and the aggregate carrying value o f investments in certain
$86,907 merchant banking funds that invest in corporate mezzanine debt.
$98,361
$91,618
$268
$153
$150
$l,0u3
$367
$2,210
$29,359
$28,735
b. Renewal o f Existing Accounts
c. New Commitments
Comments
For most o f the calendar fo u rth quarter, constrained credit markets caused a difficu lt operating
environment, including declining asset prices, w id e r corporate credit spreads, higher levels o f vola tility and
reduced levels o f liquidity. However, in the m iddle o f December, the lending environm ent in some markets
eased to a degree, though conditions remain in flux. Investment grade credit spreads tightened in early
December w ith a dramatic increase tow ard the end o f the year. The prim ary m arket fo r high yield issuance
gradually reopened fo r seasoned names in defensive sectors. There were no prim ary issues in th e high yield
market in November 200&, the firs t m onth w ith o u t new issuance since March 1991. In December 2008,
there were tw o high yield transactions th a t came to market.
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
Amounts reflect principal balances and include purchased and originated loans, purchased
portfolios of distressed loans and the aggregate carrying value of investments in certain
$29,271 merchant banking funds that invest in real estate debt.
b. Renewal o f Existing Accounts
o
i
fl
$10
c. New Commitments
SO
$0
SO
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
Volumes reflect net settled proceeds on purchases and sales.
$5,277
$2,985
-$ M
-$355
Commercial real estate assets w ere under particular pressure w ith virtually no new issuance during the end
o f 2008 due to lim ited syndicated financing opportunities. Over the calendar fo u rth quarter, th e IYR (US
Real Estate ETF) declined 42 percent and CMBX AA index widened by nearly 60 percent. Higher cap rates,
weaker cash flows and continued weakening in the gaming and lodging sectors due to decreased consumer
spending fu rth e r impacted this market. Also, the continuing weakness in residential home prices negatively
impacted the land development sector.
$163,691
Volumes reflect net settled proceeds on purchases and sales.
b. Asset Backed Securities
flH H H
Despite w orld-w ide government programs which have started to im prove credit markets, uncertainty over
the potential fo r bankruptcy cram-downs resulted in deterioration o f liquidity in the non-agency secondary
market. In December, however, pricing began to stabilize, volumes began to m arginally increase, and
agency debenture spreads tightened w ith the im plem entation o f the Fed's purchase program. The large
increase in volumes reflected in December is driven by agency mortgage dollar roll short term financing
trades.
2. Secured Lendine (Repo, PB. Margin Lending)
a. Average Total Matched Book (Repo/Reverse Repo)1
$2.4.354
$205,294
$221,720
Balances are presented prior to netting by counterparty under FIN 41 and FIN 39. In addition to Securities lending and financing, including match book, stock borrow, and margin debits experienced
declines consistent w ith broader global markets and client de-leveraging trends. Overall, balances tended to
resale and repurchase agreements, balances include securities borrowed o f $121B, $109B and
stabilize in December.
$108B fo r Oct, Nov and Dec respectively.
Debit balances are reflected on a gross basis prior to any FIN 39 netting.
b. Average Total Debit Balances2
s m .M i
$76,754 : ,
$70,637
3. Underwriting
Total equity underwriting volumes were sourced from Thomson Reuters.
a. Total Equity Underwriting
$5,089
$2,389
b. Total Debt Underwriting
,
$326,000
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
$198,162
'Z 'r h\
Debt issuances include commercial paper, agency debt issuances, and corporate debt
underwriting. Total debt underwriting volumes (excluding commercial paper and tax exempt
municipals) were sourced from Thomson Reuters.
Although, Goldman Sachs has participated in several notew orthy transactions including GE's $12.2B
common share offering and Ecolab's $1.9B common share offering, weak new issuance and significant credit
market dislocation have resulted in a decrease in debt and equity underw riting issuances.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: The Goldman Sachs Group, Inc.
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: David A. Viniar
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m an d, a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Goldman Sachs serves a number o f im portant roles fo r our clients, including that of advisor, financier,
market maker, risk manager and co-investor. Our business is institutionally dominated, w ith the vast
m ajority o f our capital commitments made on behalf o f corporations, governments, institutional
investors, like mutual funds and pension funds and investing clients like hedge funds and private equity
firms. We do not have significant exposure to consumer lending and retail commercial banking.
The investment-grade new issue market remained essentially closed through early October and only
reopened at mid month when IBM came to market. Conditions continued to be fragile, however,
w ith the market only open to bellwether names. November was not a strong month fo r issuance
though Altria's transaction marked the first BBB issue since the summer. Credit spreads began to
tighten in early December w ith a dramatic increase toward the end of the year and into the first half
o f January.
W hile the primary market fo r high yield issuance has gradually reopened thus far in 2009 fo r
seasoned names in defensive sectors, looking back to late 2008, issuance was minimal. In October,
there was only one primary issue - a $750mm notional senior secured offering fo r MGM Mirage.
There were no primary issues in the high yield market in November 2008, the first month w ithout
new issuance since March 1991. Two high yield transactions came to market in December 2008.
The high-yield CDX index reached an all-time wide level at the end of November, as the secondary
market continued to trade o ff amidst continued credit and macroeconomic concerns. Secondary
market levels improved into the end o f December. Demand fo r defensive names improved,
however ail other names continued to remain under pressure.
The primary market fo r corporate bank loans was essentially closed during the calendar fourth
quarter o f 2008. The non-agency mortgage securitization market remains essentially closed to new
issuance. To the extent banks are making jum bo loans, they are keeping these loans on their books.
Non-agency secondary market liquidity has deteriorated due to uncertainty over the potential fo r
bankruptcy cram-downs, though liquidity is better than it was at its worst. Agency debenture
spreads have tightened w ith the im plementation of the Fed's purchase program.
Municipal new issuance activity in the fourth quarter was impacted by the turm oil in the broader
credit markets. In particular, institutional demand fo r municipal securities was crimped by
deleveraging and credit-related losses sustained by institutional investors. The primary source of
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: The Goldman Sachs Group, Inc.
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: David A. Viniar
demand fo r municipal credits was retail related. There was negligible issuance in October though
activity picked up somewhat toward the end o f the quarter. Municipalities were hesitant to raise
fresh funds due to higher borrowing costs.
2
TREASURY M ONTHLY INTERMEDIATION SNAPSHOT
N a m e o f institution: iP M o rg an Chase & Co
PART 1.
Submission date: 1 /3 0 /0 9
Person to be contacted regarding this report: A dam G ilbert
QUANTITATIVE OVERVIEW1'2
2008
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First M ortgage
OCT
NOV
DEC
Key
a. Average Loan Balance (Daily Average Total Outstanding)
$$5*257
$54,669m
b. Total Originations
$10,7*6
$8,'J39 j "
$8,594 Includes both loans originated fo r the balance sheet as well as loans originated fo r sale.
$4,336
(1) Refinancings
$5,340
$4,57° |
(2) New Home Purchases
$5,391
$ 4 ,3 6 9 »
$94,713
$94,553 m
$54,163 Consists o f residential whole loans. Excludes assets classified as trading assets and other
warehouse loan balances that are not part o f the core mortgage portfolio.
Comments
Originations were down in the quarter reflecting significant overall decline in real estate market activity. More
recently refinancing applications increased due to lower rates as a result o f Federal Reserve actions. Approval
rates fo r mortgages remained fairly consistent throughout the fourth quarter 2008.
2. Home Equity
a. Average Total Loan Balance
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
$774
$94,434 First and second lien home equity loan and line balances.
$455 | j H E m a
Home equity applications declined in the fourth quarter as a result o f macroeconomic factors such as home
price depreciation.
Home equity loans funded, new lines committed, and increases to existing lines committed.
$133,520
$152 ,0 1 6 0
$150,569 Outstanding balances plus undrawn home equity line commitments.
$156,454
$156,419®
$158,989 Credit card includes consumer and small business credit cards. Excludes international balances.
3. US Card - Managed
a. Average Total Loan Balance - Managed
b. New Account Originations (Initial Line Amt)
c. Total Used and Unused Commitments
$6,800
$5,900
$733,696
$736,759
I
Credit card balances were up slightly (2% higher in December vs. October). Overall approval rates remained
flat. Total commitments decreased 2% during the quarter (October to December).
Originations include initial line amounts fo r new cards but not line increases for existing
customers.
H $ 3 % 3 5 9 Ending balance for Total Used and ending unfunded for Unused Commitments. Excludes
accounts with zero balances that were closed during the quarter, the vast m ajority o f which had
been inactive for 24 months or more.3
4. Other Consumer
a. Average Total Loan Balance
b. Originations
$78,497
$2,295
$78,299i l
$1,602 ■
$78,426 Consists o f small business loans and lines; auto loans, leases, and lines; student loans; and other Applications declined in the fourth quarter.
consumer loans and lines.
■ B H Ö
Includes small business loans funded, lines committed, increases to existing lines committed, and renewals of existing
commitments; auto loans originated, leases and lines funded or committed, and increases to existing lines; student
loans funded; and other consumer loans funded and new lines committed.
OCT
l.C & l
a. Average Total Loan and Lease Balance
fcaH M M
Kev
DEC
NOV
SCHEDULE B: COMMERCIAL LENDING (M illions $)
$171,019 L
$167 795 Loans and Leases comprise o f retained loans, which primarily exclude Loans Held For Sale (HFS)
and are calculated using the simple monthly average o f the spot balances. Loans and Leases
also exclude $52B in interbank lending balances.
b. Renewal of Existing Accounts
c. New Commitments
:
V, "
\
$15,606
$17,203
$21,318
Ì'2 Ò A U
$15,797
$12,723
Renewals consist of any increases to existing facilities and extensions o f maturities. Renewals
and New Commitments include funded and unfunded exposure.
Wholesale balances declined 3% between October and December. Originations volume trended lower during
the quarter, affected by the decline o f wholesale business activity. For Large and Mid corporates, the decrease
was primarily driven by lower demand in the secondary markets fo r loan products in the syndication and trade
finance businesses. In addition, customer de-leveraging in line w ith higher market pricing o f credit risk has
contributed to lower balances.
For middle market companies, loan demand slowed, as evidenced by the declining number o f proposals
submitted (credit applications among middle market customers dropped by more than 50% in the last two
months of the year) and low utilization in the fourth quarter.
A, '
Companies across the spectrum are borrowing less due to lower working capital and fixed asset spending
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
NgNM M N|
Commercial Real Estate is defined by the NAICS Industry Code fo r Commercial Real Estate. All
$22,955
Other exposures roll into C&l.
b. Renewal of Existing Accounts
c. New Commitments
$481
$787
$1,597
$519
seasonal loan demand was driven down further by weak retail sales and reduced consumer spending.
$1,425
$444
lillilllll
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (M illions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
$18,648
$2,987
$3,203
$1,175
$35,945 Only includes securities in the firm's investment portfolio. Balances are mostly agency MBS.
Represents gross purchases, net o f gross sales on a trade date basis. Principal paydowns are
During the fourth quarter, JPMC purchased $60 billion o f mortgage-backed and asset-backed securities.
Itili
excluded.
b. Asset Backed Securities
Only includes securities in the firm's investment portfolio.
2. Secured Lendine (Repo, PB. Margin Lending)
$118,950 I
a. Average Total Matched Book (Repo/Re verse Repo)
b. Average Total Debit Balances2
$31,773
3. U nderwriting
a. Total Equity Underwriting
b. Total Debt Underwriting
$19,846
$14,786
$7,350
$23,550
1 $118,500 Includes Reverse Repo/Sec Borrowing (after Fin41 netting) less related short bond and equity
liabilities
The Matched Book business saw a broad-based decline as clients deleveraged and required less secured
financing.
S l.,4 “ l Reflects Net Debit Balances of margin loans included in customer receivables.
$u si
Includes Bookrunner and Co-manager transactions.
$62,410 Represents issue size where JPM was a lead, co-lead or joint books.
Notes:
1. All numbers exclude acquired Washington Mutual balances.
2. Excludes overdraft activity and balances.
3. Commitments were restated to exclude zero balance inactive accounts that wer dosed during the quarter. Zero balance inactive accounts that were closed totaled $80 billion in November and $46 billion in December.
Activity in the equity markets was limited in the fo urth quarter due to market volatility and lack o f investor confidence, causing
both the IPO and convertibles markets to effectively close and limiting volume in follow-on issues fo r the quarter.
On the debt side, the High Yield origination market was also effectively closed due to continued market volatility. Many High
Grade new issues remained on hold until late in the quarter. Commercial debt issuances under the FDIC Temporary Liquidity
Guarantee Program contributed significant volumes in December.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: JPMorgan Chase & Co
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Adam Gilbert
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m a n d , a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
A. Consumer lending
Overall consumer balances were little changed during the 4th quarter. In general, consumer and small business
applications for credit decreased. Approval rates for consumer loans remained fairly constant throughout the
quarter (slightly declining).
•
First mortgage originations were down in the quarter reflecting significant overall decline in real estate
market activity. More recently, refinancing applications increased due to lower rates as a result of Federal
Reserve actions. Home equity applications declined in the fourth quarter as a result of macroeconomic
factors including home price depreciation. Approval rates for mortgages remained fairly constant
throughout the fourth quarter. During the quarter JPMC approved more than 60,000 mortgages and
home equity loans and lines.
•
Credit card balances were up slightly (2% higher in December vs. October). Overall approval rates
remained flat. Total commitments decreased 2% from October to December. During the quarter JPMC
approved more than 3.5 million new credit card applications and more than 1 million credit card line
increases.
•
Applications for other consumer loans (small business, auto loans and education) declined in the fourth
quarter. During the quarter, JPMC approved 470,000 auto loans and 5,000 small business loans and lines.
•
Approval rates declined slightly during the quarter for most products. Consumer underwriting standards
are regularly adjusted based on changes in consumer behavior, portfolio performance and the external
environment, including home prices and unemployment. Thus, over the last 18 months, continuing into
the fourth quarter, lending standards were generally tightened across most consumer products.
B. Commercial Lending (C&l and CRE)
Wholesale balances declined 3% between October and December. Including interbank lending, wholesale
balances were 20% h ig h e r in December compared to October.
While there were no material changes in underwriting standards during the 4th quarter, pricing and structure were
adjusted somewhat to reflect the changing environment.
Wholesale balances and originations volume trended lower during the quarter, affected by the decline of
wholesale business activity.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: JPMorgan Chase & Co
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Adam Gilbert
•
For Large and Mid corporates, the decrease was primarily driven by lower demand in the secondary
markets for loan products in the syndication and trade finance businesses. In addition, customer de
leveraging in line with higher market pricing of credit risk has contributed to lower balances.
®
For middle market companies, loan demand slowed, as evidenced by the declining number of proposals
submitted (credit applications among middle market customers dropped by more than 50% in the last
two months of the year) and low utilization in the fourth quarter (i.e., clients were generally not drawing
additional credit on lines that were available to them).
•
Companies across the spectrum are borrowing less due to lower working capital and fixed asset spending
requirements. Lower mergers and acquisition activity also dampened bank loan demand. Fourth quarter
seasonal loan demand was driven down further by weak retail sales and reduced consumer spending.
Declines in wholesale balances are typical in a recession. For example, during the 2001-2002 recession, JPMC
wholesale balances decreased by more than 10% between 3Q. and 4Q01.
C. Other intermediation activities
The Matched Book business saw a broad-based decline as clients deleveraged and required less secured financing.
Activity in the equity markets was limited in the fourth quarter due to market volatility and lack of investor
confidence, causing both the IPO and convertibles markets to effectively close and limiting volume in follow-on
issues for the quarter.
On the debt side, the High Yield origination market was also effectively closed due to continued market volatility.
Many High Grade new issues remained on hold until late in the quarter. Commercial debt issuances under the FDIC
Temporary Liquidity Guarantee Program contributed significant volumes in December.
E. Overall lending summary
Given this background, JPMC maintained a significant level of lending activity in the 4th quarter, extending over
$150 billion in new loans and lines to retail and wholesale clients, including:
•
More than $50 billion in new consumer originations, in the form of credit cards, mortgages, home equity
loans and lines, student loans and auto loans - representing over 5 million new loans and lines1 to
consumers.
•
More than $20 billion in new credit extended to 5,000 small businesses2 and 3,000 mid-sized businesses,
1 Includes ~1 million credit card line increases extended during the tim e period
2 Small business originations include new and renewed loans and lines and are included as part of "Consumer Lending Other" (Schedule A, 4b)
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: JPMorgan Chase & Co
Reporting month(s): Oct-Nov-Dec 2008
Submission date: January 30, 2009
Person to be contacted regarding this report: Adam Gilbert
governments and non-profits3.
•
Approximately $90 billion in new and renewed commitments to Large Corporates and JPMC's full range of
Treasury and Security Services and Asset Management clients.
JPMC also lent an average of $50 billion to other banks through the interbank market - providing additional
liquidity to the system. Finally, during the 4th quarter, JPMC purchased almost $60 billion of mortgage-backed and
asset-backed securities.
In addition, during the 4th quarter, JPMC:
•
Took a number of significant steps to help more homeowners stay in their homes.
o
On October 31st, Chase announced significant enhancements to its mortgage modification
program, including: a systematic review of its entire portfolio to identify homeowners most
likely to require help; proactive modification offers in writing; 24 new Chase Homeownership
Centers in areas with high mortgage delinquencies; and the addition of new loan counselors to
provide better help to troubled borrowers, bringing the total number of counselors to more than
2,500. This effort is expected to help 400,000 homeowners with a total of $70 billion worth of
Chase-owned mortgages.
o
3
More recently, Chase announced that it would extend its mortgage modification efforts to
include $1.1 trillion of investor-owned mortgages it services (including those in securitizations).
•
Committed to extend an incremental $5 billion in lending to the state and local government and non
profit sector in the U.S. over the next year
•
Purchased the entire amount of a $1.4 billion bond offering to help the state of Illinois after it previously
failed to clear the markets.
N ew c o m m itm e n ts and re ne w a l o f existin g accounts. Included as p a rt o f C om m ercial Lending (Schedule B)
3
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
PART B
Person to be contacted regarding this rep o rt: R obert L. M orris
Submission date: 1 /3 0 /0 9
N a m e o f institution: KeyCorp
QUANTITATIVE OVERVIEW
SCHEDULE A: CONSUMER LENDING (M illions $)
1. First Mortgage
a. Average Loan Balance (Daily Average Total Outstanding)
b. Total Originations
(1) Refinancings
2008
NOV
OCT
$3463
$109
$54
(2) New Home Purchases
Kev
DEC
Comments
$3,667
$3430 First Mortgage includes loans secured by 1-4 family residential properties including home equity Residential mortgage demand was comparable to th ird quarter levels w ith a spike in refinance applications
beginning in December. Prime residential mortgage credit standards remained unchanged during fo u rth
loans secured by first liens.
quarter, after considerable tightening in previous quarters.
M B B Ib b I
$114
$92 Total Originations include both portfolio and held-for-sale loan originations.
$51
$44
$63
$49
W ÊÊBé
2. Home Equity
$7.941 Home Equity includes home equity lines o f credit only (Home equity loans secured by first liens
are included w ith First Mortgages above).
$7.773
$7,852
$1«
$151
$151
$16,294
$16,359
$16.411
3. US Card - Managed
a. Average Total Loan Balance - Managed
$6
$6
$6 US Card - Managed includes Credit Card loans.
b. New Account Originations (Initial Line Amt)
$0
$0
$0
$49
$48
$8,396
$8,354
$73
$54
a. Average Total Loan Balance
b. Originations (New Lines+Line Increases)
c. Total Used and Unused Commitments
c. Total Used and Unused Commitments
S
Application volume decreased throughout the fo u rth quarter as consumer confidence appears to have
impacted demand.
Key does not originate new credit card receivables fo r its ow n portfolio. The existing po rtfolio was acquired
through a bank acquisition.
ili
4. Other Consumer
a. Average Total Loan Balance
b. Originations
Other Consumer includes all other non-revolving consumer loans.
k t
ïx w
Key discontinued several higher risk, nonrelationship loan programs in 2008 including Indirect M arine, RV
and non-guaranteed student loans. The vola tility o f originations during the fo u rth quarter is typically
heavily impacted by guaranteed student loan funding schedules.
SCHEDULE B: COMMERCIAL LENDING (M illions $)
OCT
NOV
DEC
Kev
Comments
l.C & l
a. Average Total Loan and Lease Balance
$37,491
b. Renewal o f Existing Accounts
$37,100
$853- , ;
C & 1includes lease financing receivables, commercial and industrial loans, agricultural loans,
loans to depository institutions and other nonconsumer loans.
g g jlg l
Borrower credit inquiries decreased m oderately during the fo u rth quarter. Loan demand was moderately
weaker fo r large and middle market firms. For smaller firm s, loan demand was substantially weaker. The
decrease in demand was attrib u te d to decreasing needs fo r th e financing o f plant, equipment, inventory and
Renewals o f existing accounts include outstanding balances and unused commitments for which accounts receivable.
the terms were extended or changed. A renewed commitment may or may not have an active
draw.
c. New Commitments
Ili
$994 New commitments include outstanding balances and unused commitments. Commitment
amounts exclude standby letters o f credit.
$636m
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
$19.332
$19,359
b. Renewal o f Existing Accounts
$589
c. New Commitments
$273 i l
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (Millions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
b. Asset Backed Securities
'$27
-$120
$0
so
$19,224 Commercial Real Estate includes construction and land loans, loans secured by multi-family
residential properties and by other non residential properties.
CRE loan demand, already very weak, was even weaker during the fo u rth quarter. The collapse o f the CMBS
securitization m arket during the second half o f 2008, coupled w ith the economic conditions and Commercial
Real Estate market outlook, contributed to a considerable reduction in CRE lending activities. Refinancing
Renewals o f existing accounts include outstanding balances and unused commitments for which activity was up in the fo u rth quarter as alternative and perm anent financing markets, such as CMBS and Life
the terms were extended or changed. A renewed commitment may or may not have an active Companies, have been weak. Primary refinancing activity has been in the m ulti-fam ily space w ith Fannie
Mae, Freddie Mac, and FHA agencies.
draw.
New commitments include outstanding balances and unused commitments. Commitment
amounts exclude standby letters o f credit.
$146 Oct. MBS includes $82.8 MM in purchases offset by $109.3 MM in paydowns, calls and
maturities. Nov. MBS includes $119.5 million in paydowns, calls and maturities. Dec. MBS
includes $246.5 MM in purchases offset by $100.5 MM in paydowns, calls and maturities.
Purchases o f GSE-guaranteed MBS and CMO security types are targeted to replace maturing o r prepaying
volumes.
2. Secured Lending (Repo. PB. Margin Lending)
a. Average Total Matched Book (Repo/Reverse Repo)1
b. Average Total Debit Balances2
"Ÿ
N/A
N /A jljp
m
n/ a S
3. Underwriting
a. Total Equity Underwriting
b. Total Debt Underwriting
Notes:
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
N/A
■ ¡ ■ fi
$ 4 |g |
$362 I H
$0
1
Equity underwriting activity was low industry-wide during the quarter due to extreme m arket vo la tility and
pressure on valuations. Investor interest in the investm ent grade bond m arket picked up in late November
w ith the success o f the FDIC's Temporary Liquidity Guarantee Program.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: KeyCorp
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Robert L. Morris
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion sh o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d em a n d , a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Cleveland-based KeyCorp is one of the nation's largest bank-based financial services companies w ith
assets of approximately $105 billion at December 31, 2008. Through KeyBank and certain other
subsidiaries, KeyCorp provides a wide range o f retail and commercial banking, commercial leasing,
investment management, consumer finance, and investment banking products and services to
individual, corporate and institutional clients through tw o major business groups, Community Banking
and National Banking. Community Banking includes the consumer and business banking organizations
associated w ith the company's 14-state branch network. The branch network is organized into four
geographic regions: Northwest, Rocky Mountains, Great Lakes and Northeast. National Banking
includes those corporate and consumer business units that operate from offices w ithin and outside
Key's 14-state branch network. Its reach extends across the U.S. and to 26 countries.
General
Overall, loan balances trended lower at year-end 2008. The fourth quarter o f 2008 was characterized by
the continued general weakening o f credit demand across all client segments. Key tightened some
additional credit standards during the fourth quarter, subsequent to the tightening of credit standards
during the third quarter.
Key's lending strategies focus on serving the needs o f existing and new relationship clients while being
mindful o f risk-reward and strategic capital allocation.
Consumer
Overall loan demand fo r consumer credit (excluding residential first mortgage and credit card) was
weaker as is typically the case fo r Consumer in the fourth quarter compared to the third quarter, since
the fourth quarter generally marks a seasonal low point fo r the year. Based on the number of
applications received by Key, the demand fo r consumer credit during the fourth quarter of 2008 was
moderately weaker than th a t experienced during the fourth quarter of 2007.
During the fourth quarter there was modest tightening of Key's consumer credit standards, especially
pricing-related changes as performance-based pricing necessitated increases in practically all products.
This tightening of credit also reflects the elevated cost of funds that Key and others in the banking
industry continued to experience as the availability of long-term funding remained restricted.
1
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name of institution: KeyCorp
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Robert L. Morris
Residential mortgage demand was comparable to third quarter levels w ith a spike in refinance
applications beginning in December. Prime residential mortgage credit standards remained unchanged
during fourth quarter, after considerable tightening in previous quarters.
C& l
Sorrower credit inquiries decreased moderately during the fourth quarter. Loan demand was
moderately weaker fo r large and middle market firms. For smaller firms, loan demand was substantially
weaker. The decrease in demand was attributed to decreasing needs fo r the financing of plant,
equipment, inventory and accounts receivable. Also contributing to the decrease in Key's average C & I
loans during the fourth quarter were client paydowns made on previous draws as a result o f improved
liquidity conditions in the commercial paper markets. Loan demand declined w ith all borrowers
including those w ith desirable risk profiles.
Key had previously taken action to lim it and/or manage its exposure to higher risk industries. During the
fourth quarter, an even more cautious approach was taken to lending to these industries. These
changes were prompted by the unfavorable economic outlook, worsening o f industry-specific problems,
decreased liquidity in the secondary market, and business decisions regarding the strategic use of
capital.
Considerable focus was placed on pricing fo r risk during the third quarter. Continuing into the fourth
quarter, credit line costs increased and premiums were charged on riskier deals. The use o f interest rate
floors in commercial credit agreements also became much more prevalent during the fourth quarter
given trends in overnight and 30-day LIBOR, and the increased cost associated w ith term liquidity,
including customer deposits.
Commercial Real Estate
CRE loan demand, already very weak, was even weaker during the fourth quarter. The collapse of the
CMBS securitization market during the second half of 2008, coupled w ith the economic conditions and
Commercial Real Estate market outlook, contributed to a considerable reduction in CRE lending
activities.
During the fourth quarter, Key continued to tighten CRE credit standards and price fo r risk. Refinancing
activity was up in the fourth quarter as alternative and permanent financing markets, such as CMBS and
Life Companies, have been weak. Primary refinancing activity has been in the m ulti-fam ily space w ith
Fannie Mae, Freddie Mac, and FHA agencies.
2
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: KeyCorp
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Robert L. Morris
U nderw riting
Equity underwriting activity was low industry-wide during the quarter due to extreme market volatility
and pressure on valuations. Overall, only 32 transactions came to market during the quarter, w ith Key
being involved in tw o, versus the 177 transactions per quarter pace seen between 2000 and 2008.
Investor interest in the investment grade bond market picked up in late November w ith the success of
the FDIC's Temporary Liquidity Guarantee Program. The modest rally in credit spreads opened the
w indow fo r large, well-known, issuers o f investment grade bonds, however poor economic data and
expectations fo r weak fourth quarter earnings left some potential issuers o f debt, including high yield,
unable to attract investors.
3
TREASURY M ONTHLY INTERMEDIATION SNAPSHOT
N a m e o f institution: M arshall & llsley Corporation
PART 1.
Submission date: 1 /3 0 /0 9
Person to be contacted regarding this report: Gregory A. Smith
Q UANTITATIVE OVERVIEW
2008
SCHEDULE A: CONSUMER LENDING (Millions $)
1. First Mortgage
OCT
NOV
DEC
Key
a. Average Loan Balance (Daily Average Total Outstanding)
$ a ,iu
$8,089
b. Total Originations
$88 i p
1-4 Family Residential Mortgage Originations - includes loans held by M &l Portfolio and loans
originated to be sold into the secondary market. This excludes construction and vacant land
loans
which are included in the Commercial Real Estate section as new commitments.
$183
$»
$39
$124
$65
: 4
s m i
Comments
Includes all closed end residential RE; First Mortgages and Home Equity Loans (Approximately
• November unemployment rates fo r all M & l Bank regions increased or remained th e same m onth over
80% o f Home Equity Loans are held in first position). This excludes construction and vacant land m onth. W hile most M & l regions remain below the U.S. national average, three M & l regions, St. Louis,
loans which are included in the Commercial Real Estate section as average loan balances.
Orlando and Tampa have unem ploym ent rates exceeding the U.S. national average
• 1-4 fam ily residential real estate applications have experienced a significant increase in refinance activity
at the end o f the 4Q'08 which is expected to im pact closings in 1Q'09.
(1) Refinancings
........
(2) New Home Purchases
2. Home Equity
a. Average Total Loan Balance
Includes Home Equity Lines only
$2,1.48
..........
• Macroeconomic factors continue to create headwinds in Home Equity lending as depreciating home prices
negatively im pact loan levels and decreased consumer sentim ent has impacted demand.
$*,682
b. Originations (New Lines+Line Increases)
$5«
$38«
$36
c. Total Used and Unused Commitments
$5,153
$5,166
$5,122
3. US Card - Managed
a. Average Total Loan Balance - Managed
Includes Consumer Card only
$266
$266
'- ' 'V $ 2 7 S
b. New Account Originations (Initial Line Amt)
$6
$5 11
$5
c. Total Used and Unused Commitments
$ 1 ,3 6 7 »
4. Other Consumer
a. Average Total Loan Balance
Includes consumer PRA & LOCs. Subcategories include Auto Leases, Dealer Finance, Personal,
Securities Loans, and Student Loans
........... Î V »
$1,819
.$1,847
b. Originations
Includes Additional Notes and Refinances to existing customers and notes to new customers
»41
$68
• A uto Lending has experienced grow th despite macroeconomic conditions and decrease in overall
autom obile sales due to decreased lending by the captives.
SCHEDULE B: COMMERCIAL LENDING (M illions $)
OCT
Includes A/R and Inventory, Dealer Commercial, Agricultural, IRB’s and Muni, and Commercial
Leases.
$15,656
1$ l $ i i $ i
$15,358
b. Renewal of Existing Accounts
Ü
$525
V -X m sa.
Includes New Loans to New Customers and Unused Commitments to C&l (Also includes Unused
Commitments to: Finance Agricultural Production and Other)
c. New Commitments
$564
$215
s n .jia
$22,009
$U 0
$130
__________5251
$135
2. Commercial Real Estate
a. Average Total Loan and Lease Balance
b. Renewal of Existing Accounts
c. New Commitments
Comments
Kev
DEC
NOV
l.C & l
a. Average Total Loan and Lease Balance
• The aggregate decline in commercial loans during the 4th Q uarter was largely a result o f customer
seasonal borrowing patterns. Large pay downs from customers in the retail and agriculture sectors offset
the increases fro m new borrowers and grow th in existing customers.
• Declining economic conditions have resulted in borrowers reducing expenses and paying down debt,
delaying capital expenditure programs, experiencing declines in w orking capital assets, and not engaging in
acquisition activity, all o f which reduces customer borrow ing activity. Competition fo r credit business from
other financial institutions still exists, particularly fo r traditional commercial & industrial companies.
1111
Includes Business Purpose 1-4 and Construction, Development, & Vacant Land (Commercial and • Commercial Real Estate average loan balances have remained fla t during the past three months. Retail
space has softened as many retailers have cut back expansion plans or gone in to bankruptcy. Office space is
Residential)
in "relative” balance in most o f our markets, although dramatic jo b losses could im pact this segment in '09.
$22,020
• M ulti-fam ily, medical office building, and warehousing segments continue to o ffe r opportunities, b u t we
do see softness in construction and development activity. This has translated in to significant declines in new
construction in all o f our markets, w ith our Arizona and Florida markets impacted th e most.
r lif e !
Includes New Loans to New Customers and Unused Commitments for CRE (Also includes
Unused Commitments to: New Construction, Land Development and Other Land; Farmland; 1-4
Family Residential Properties; Multi-Family (5 or more) Residential Properties)
SCHEDULE C: OTHER INTERMEDIATION ACTIVITIES (M illions $)
1. MBS/ABS Net Purchased Volume
a. Mortgage Backed Securities
• Acquisition activity fo r investment portfolio. December volumes w ere mostly comprised o f agency
mortgage backed securities.
$3
$0
So
$0
$384
b. Asset Backed Securities
So
2. Secured Lendine (Repo, PB. Margin Lending)
N /A
a. Average Total Matched Book (Repo/Reverse Repo)1
b. Average Total Debit Balances2
1 S 1 S ||§
3. Underwriting
a. Total Equity Underwriting
N/A
if : :
b. Total Debt Underwriting
1. Not applicable if matched book activity does not exceed $50 billion.
2. Applicable only for institutions offering prime brokerage or other margin lending services to clients.
TREASURY MONTHLY INTERMEDIATION SNAPSHOT
Name o f institution: Marshall & llsley Corporation
Reporting month(s): Oct-Nov-Dec 2008
Submission date: 1/30/09
Person to be contacted regarding this report: Gregory A. Smith
PART II. QUALITATIVE OVERVIEW
Please p ro v id e a b r ie f o v e rv ie w o f th e in te rm e d ia tio n a c tiv ity d u rin g th e m o n th . This discussion s h o u ld
in clu d e a g e n e ra l c o m m e n ta ry on th e le n d in g e n v iro n m e n t, lo a n d e m an d, a n y changes in le n d in g
s ta n d a rd s a n d te rm s, a n d a n y o th e r in te rm e d ia tio n a c tiv ity .
Marshall & llsley Corporation is a diversified financial services corporation headquartered in Milwaukee,
Wis., w ith $63.8 billion in assets, $50.2 billion in loans and leases, and $7.7 B in shareholder equity. M &l
Marshall & llsley Bank is the largest Wisconsin-based bank, w ith 193 offices throughout the state. In
addition, M & l has 53 locations throughout Arizona; 32 offices in Indianapolis and nearby communities;
34 offices along Florida's west coast and in central Florida; 15 offices in Kansas City and nearby
communities; 25 offices in m etropolitan Minneapolis/St. Paul, and one in Duluth, Minn.; and one office
in Las Vegas, Nev. M &l's Southwest Bank subsidiary has 17 offices in the greater St. Louis area.
The communities and customers M & l serves continue to face impacts from current recessionary
conditions o f the economy. Nonetheless, M &l has increased lending in the markets we serve and has
effectively grown the balance sheet gross of 4th quarter chargeoffs and loan sales fo r a net gain of $437
million in the 4th quarter of 2008.
We are aggressively addressing our housing-related construction issues in Florida and Arizona; and
during 2008 we sold approximately $780 million in problem loans. We expect that the bulk o f our
Florida challenges are now behind us, and we continue to devote extraordinary resources to address our
Arizona construction challenges.
In Commercial Real Estate, we continue to see less investor activity in new construction projects, w ith
m ulti-fam ily and medical office being least impacted. Longterm fixed rate non recourse loans reflect
the lack o f liquidity in the CMBS/Conduit market. As a result, some maturing Bank CRE financing which
would have paid o ff upon completion o f construction and lease-up w ill have to be extended to provide
an interim solution.
We expect softness to continue throughout 2009 in C&l lending. Declining economic conditions have
resulted in borrowers reducing expenses and paying down debt, delaying capital expenditure programs,
experiencing declines in working capital assets, and not engaging in acquisition activities. All of these
factors reduce customer borrowing activity. Additionally, existing customers that have historically been
large seasonal borrowers, such as contractors, agriculture based companies, and retailers have reduced
borrowing levels as a result of softness in their own markets. Competition fo r credit business from other
financial institution still exists, particularly fo r traditional commercial & industrial companies.
1
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d o w n lo a d
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A d o b e ®
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<s>H
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®.
February 17, 2009
tg31
Statement From Treasury Secretary Geithner on GM, Chrysler Restructuring
Reports
Washington - The U.S. Department of the Treasury today released the following
statement from Secretary Tim Geithner upon receipt of restructuring reports from
Chrysler LLC and General Motors Corporation. The reports were required under
the terms of the loans made available to these companies in December to assist
the domestic auto industry in becoming financially viable.
"I have received restructuring reports from both General Motors and Chrysler, and
they have been posted on the Treasury website. NEC Director Summers and I will
be convening the President's Task Force on Autos later this week to analyze the
companies' plans and to solicit the full range of input from across the Administration
on the restructuring necessary for these companies to achieve viability."
General Motors Corporation restructuring plan:
reports/GMRestructuringPJan.pdf
Chrysler LLC restructuring plan:
http://www.treas.gov/initiatives/eesa/aareements/autoreports/ChrvsIerRestructurinQPIan.pdf
http://www.treas.gov/press/releases/tg31 .htm
8/3/2010
tg32: Statement by Secretary Tim Geithner on Treasury's Commitment to Fannie Mae and... Page 1 o f 2
February 18, 2009
tg32
Statement by Secretary Tim Geithner on Treasury's Commitment to Fannie
Mae and Freddie Mac
Washington, DC - Today, the Treasury Department is increasing its funding
commitment to Fannie Mae and Freddie Mac to ensure the strength and security of
the mortgage market, to help maintain mortgage affordability, and to help keep
interest rates low.
Fannie Mae and Freddie Mac are critical to the functioning of the housing finance
system in this country and play a key role in making mortgage rates affordable and
maintaining the stability and liquidity of our mortgage market. In 2008, almost
three-quarters of new home loans were financed or guaranteed by Fannie Mae and
Freddie Mac.
Using funds already authorized by Congress for this purpose, Treasury is amending
the Preferred Stock Purchase Agreements, contractual agreements between the
Treasury and the conserved entities designed to ensure that each company
maintains a positive net worth, to $200 billion each from their original level of $100
billion each. The increased funding will provide forward-looking confidence in the
mortgage market and enable Fannie Mae and Freddie Mac to carry out ambitious
efforts to ensure mortgage affordability for responsible homeowners.
In addition, the Treasury Department will continue to purchase Fannie Mae and
Freddie Mac mortgage-backed securities to promote stability and liquidity in the
marketplace. Treasury will also increase the size of the GSEs' retained mortgage
portfolios allowed under the agreements - by $50 billion to $900 billion - along with
corresponding increases in the allowable debt outstanding.
The increase announced today is not intended to indicate any estimate of possible
losses with respect to the companies, but to provide assurance to market
participants that Congress gave these companies a special purpose to support
housing finance. Given the difficulties in the housing market today, we stand firmly
behind their ability to provide that support.
Background:
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that
were created to provide stability in the secondary mortgage market and promote
access to mortgage credit throughout the United States. In 2008, Fannie Mae and
Freddie Mac purchased or guaranteed almost three-quarters of all mortgages being
originated in the United States. By purchasing some mortgages and guaranteeing
others, Fannie Mae and Freddie Mac help bring the liquidity of global capital
markets to local banks and other financial institutions, which lowers mortgage costs
for borrowers in communities across the United States. These savings can be
achieved because Fannie Mae and Freddie Mac are able to access a broader array
of investors resulting in lower cost of funds than typical local banks.
Last July, Congress granted Treasury new authorities to provide financial support to
Fannie Mae and Freddie Mac in order to provide stability to financial markets,
support the availability of mortgage finance, and protect taxpayers.
Even though neither institution is near its current $100 billion limit for funding from
Treasury under the Preferred Stock Purchase Agreements - based on preliminary
8/3/2010
tg32: Statement by Secretary Tim Geithner on Treasury’s Commitment to Fannie Mae and... Page 2 o f 2
disclosures from the last quarter of 2008, total funding provided to Freddie Mac
could approach $50 billion and total funding for Fannie Mae could approach $16
billion - it is crucial to maintain confidence in both of these institutions even under
worse-than-expected economic conditions.
Finally, it is important to note that these funding commitments are made under
authority provided by the Housing and Economic Recovery Act and do not use any
money allocated under the Emergency Economic Stabilization Act (EESA) or the
Financial Stability Plan.
http ://www.treas.gov/press/releases/tg32 .htm
8/3/2010
tg-33: Homeowner Affordability and Stability Plan
Page 1 o f 4
W
H
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o r p r in t th e
H U h
c o n te n t o n
t h is p a g e ,
d o w n lo a d
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tre e
A d o b e ®
A c ro b a t®
H e a d e r® .
February 18, 2009
tg-33
Homeowner Affordability and Stability Plan
Executive Summary
Read the Homeowner Affordability and Stability Plan Fact Sheet HERE
Read Support Under the Homeowner Affordability and Stability Plan: Three
Cases HERE
The deep contraction in the economy and in the housing market has created
devastating consequences for homeowners and communities throughout the
country.
■ Millions of responsible families who make their monthly payments and fulfill
their obligations have seen their property values fall, and are now unable to
refinance at lower mortgage rates.
*
Millions of workers have lost their jobs or had their hours cut back, are now
struggling to stay current on their mortgage payments - with nearly 6
million households facing possible foreclosure.
*
Neighborhoods are struggling, as each foreclosed home reduces nearby
property values by as much as 9 percent.
1.
Refinancing for Up to 4 to 5 Million Responsible Homeowners to
Make Their Mortgages More Affordable
2.
A $75 Billion Homeowner Stability Initiative to Reach Up to 3 to 4
Million At-Risk Homeowners
3.
Supporting Low Mortgage Rates By Strengthening Confidence in
Fannie Mae and Freddie Mac
The Homeowner Affordability and Stability Plan is part of the President's broad,
comprehensive strategy to get the economy back on track. The plan will help up to
7 to 9 million families restructure or refinance their mortgages to avoid
foreclosure. In doing so, the plan not only helps responsible homeowners on the
verge of defaulting, but prevents neighborhoods and communities from being pulled
over the edge too, as defaults and foreclosures contribute to falling home values,
failing local businesses, and lost jobs. The key components of the Homeowner
Affordability and Stability Plan are:
1.
Affordability: Provide Access to Low-Cost Refinancing for Responsible
Homeowners Suffering From Failing Home Prices
Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance:
Mortgage rates are currently at historically low levels, providing homeowners with
the opportunity to reduce their monthly payments by refinancing. But under current
rules, most families who owe more than 80 percent of the value of their homes have
a difficult time refinancing. Yet millions of responsible homeowners who put money
down and made their mortgage payments on time have - through no fault of their
own - seen the value of their homes drop low enough to make them unable to
8/3/2010
tg-33: Homeowner Affordability and Stability Plan
Page 2 o f 4
access these lower rates. As a result, the Obama Administration is announcing a
new program that will help as many as 4 to 5 million responsible homeowners who
took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to
refinance through those two institutions.
Reducing Monthly Payments: For many families, a low-cost refinancing
could reduce mortgage payments by thousands of dollars per year:
o Consider a family that took out a 30-year fixed rate mortgage of $207,000 with an
interest rate of 6.50% on a house worth $260,000 at the time. Today, that family
has about $200,000 remaining on their mortgage, but the value of that home has
fallen 15 percent to $221,000 - making them ineligible for today's low interest rates
that now generally require the borrower to have 20 percent home equity. Under this
refinancing plan, that family could refinance to a rate near 5.16% - reducing their
annual payments by over $2,300.
2.
Stability: Create A $75 Billion Homeowner Stability Initiative to Reach
Up to 3 to 4 Million At-Risk Homeowners
*
Helping Hard-Pressed Homeowners Stay in their Homes: This initiative
is intended to reach millions of responsible homeowners who are struggling
to afford their mortgage payments because of the current recession, yet
cannot sell their homes because prices have fallen so significantly. Millions
of hard-working families have seen their mortgage payments rise to 40 or
even 50 percent of their monthly income - particularly those who received
subprime and exotic loans with exploding terms and hidden fees. The
Homeowner Stability Initiative helps those who commit to make reasonable
monthly mortgage payments to stay in their homes - providing families with
security and neighborhoods with stability.
*
No Aid for Speculators: This initiative will go solely to helping homeowners
who commit to make payments to stay in their home - it will not aid
speculators or house flippers.
*
Protecting Neighborhoods: This plan will also help to stabilize home
prices for all homeowners in a neighborhood. When a home goes into
foreclosure, the entire neighborhood is hurt. The average homeowner
could see his or her home value stabilized against declines in price by
as much as $6,000 relative to what it would otherwise be absent the
Homeowner Stability Initiative.
*
Providing Support for Responsible Homeowners: Because loan
modifications are more likely to succeed if they are made before a borrower
misses a payment, the plan will include households at risk of imminent
default despite being current on their mortgage payments.
*
Providing Loan Modifications to Bring Monthly Payments to
Sustainable Levels: The Homeowner Stability Initiative has a simple goal:
reduce the amount homeowners owe per month to sustainable levels. Using
money allocated under the Financial Stability Plan and the full strength of
Fannie Mae and Freddie Mac, this program has several key components:
•
A Shared Effort to Reduce M onthly Paym ents: For a sample
household with payments adding up to 43 percent of his
monthly income, the lender would first be responsible for
bringing down interest rates so that the borrower's monthly
mortgage payment is no more than 38 percent of his or her
income. Next, the initiative would match further reductions in
interest payments dollar-for-dollar with the lender to bring
that ratio down to 31 percent. If that borrower had a
$220,000 mortgage, that could mean a reduction in monthly
payments by over $400. That lower interest rate must be
kept in place for five years, after which it could gradually be
stepped up to the conforming loan rate in place at the time of
the modification. Lenders will also be able to bring down
monthly payments by reducing the principal owed on the
8/3/2010
tg-33: Homeowner Affordability and Stability Plan
Page 3 o f 4
mortgage, with Treasury sharing in the costs.
*
"Pay fo r Success" Incentives to Servicers : Servicers will
receive an up-front fee of $1,000 for each eligible
modification meeting guidelines established under this
initiative. They will also receive "pay for success" fees awarded monthly as long as the borrower stays current on
the loan - of up to $1,000 each year for three years.
* Incentives to Help Borrowers Stay Current: To provide an
extra incentive for borrowers to keep paying on time, the
initiative will provide a monthly balance reduction payment
that goes straight towards reducing the principal balance of
the mortgage loan. As long as a borrower stays current on
his or her loan, he or she can get up to $1,000 each year for
five years.
*
Reaching Borrowers Early: To keep lenders focused on
reaching borrowers who are trying their best to stay current
on their mortgages, an incentive payment of $500 will be
paid to servicers, and an incentive payment of $1,500 will be
paid to mortgage holders, if they modify at-risk loans before
the borrower falls behind.
* Home Price Decline Reserve Paym ents: To encourage
lenders to modify more mortgages and enable more families
to keep their homes, the Administration -- together with the
FDIC - has developed an innovative partial guarantee
initiative. The insurance fund - to be created by the Treasury
Department at a size of up to $10 billion - will be designed to
discourage lenders from opting to foreclose on mortgages
that could be viable now out of fear that home prices will fall
even further later on. Holders of mortgages modified under
the program would be provided with an additional insurance
payment on each modified loan, linked to declines in the
home price index.
*
Institute Clear and Consistent Guidelines for Loan Modifications:
Treasury will develop uniform guidance for loan modifications across the
mortgage industry, working closely with the bank agencies and building on
the FDIC's pioneering work. The Guidelines will be used for the
Administration's new foreclosure prevention plan. Moreover, all financial
institutions receiving Financial Stability Plan financial assistance going
forward will be required to implement loan modification plans consistent with
Treasury Guidance. Fannie Mae and Freddie Mac will use these guidelines
for loans that they own or guarantee, and the Administration will work with
regulators and other federal and state agencies to implement these
guidelines across the entire mortgage market. The agencies will seek to
apply these guidelines when permissible and appropriate to all loans owned
or guaranteed by the federal government, including those owned or
guaranteed by Ginnie Mae, the Federal Housing Administration, Treasury,
the Federal Reserve, the FDIC, Veterans' Affairs and the Department of
Agriculture.
a Other Comprehensive Measures to Reduce Foreclosure and
Strengthen Communities
■ Require Strong O versight Reporting and Quarterly Meetings with
Treasury, the FDIC, the Federal Reserve and HUD to M onitor
Perform ance
•
A llow Judicial M odifications o f Home M ortgages During Bankruptcy
fo r Borrowers Who Have Run Out o f Options
■ Provide $1.5 Billion in Relocation and Other Forms o f Assistance to
Renters D isplaced by Foreclosure and $2 Billion in Neighborhood
Stabilization Funds
http://www.treas.gov/press/releases/tg3 3 .htm
8/3/2010
tg-33: Homeowner Affordability and Stability Plan
*
Page 4 o f 4
Improve the Flexibility o f Hope fo r H om eowners and Other FHA
Program s to M odify and Refinance A t-R isk Borrowers
3.
Supporting Low Mortgage Rates By Strengthening Confidence in Fannie
Mae and Freddie Mac:
■ Ensuring Strength and Security o f the Mortgage Market: Today, using
funds already authorized in 2008 by Congress for this purpose, the Treasury
Department is increasing its funding commitment to Fannie Mae and
Freddie Mac to ensure the strength and security of the mortgage market
and to help maintain mortgage affordability.
*
Provide Forward-Looking Confidence: The increased funding will
enable Fannie Mae and Freddie Mac to carry out ambitious efforts to
ensure mortgage affordability for responsible homeowners, and
provide forward-looking confidence in the mortgage market.
•
Treasury is increasing its Preferred Stock Purchase Agreements to
$200 billion each from their original level of $100 billion each.
Promoting Stability and Liquidity: In addition, the Treasury Department
will continue to purchase Fannie Mae and Freddie Mac mortgage-backed
securities to promote stability and liquidity in the marketplace.
* Increasing The Size o f Mortgage Portfolios: To ensure that Fannie Mae
and Freddie Mac can continue to provide assistance in addressing problems
in the housing market, Treasury will also be increasing the size of the GSEs'
retained mortgage portfolios allowed under the agreements - by $50 billion
to $900 billion - along with corresponding increases in the allowable debt
outstanding.
* Support State Housing Finance Agencies: The Administration will work
with Fannie Mae and Freddie Mac to support state housing finance
agencies in serving homebuyers.
* No EESA or Financial Stability Plan Money: The $200 billion in funding
commitments are being made under the Housing and Economic Recovery
Act and do not use any money from the Financial Stability Plan or
Emergency Economic Stabilization Act/TARP.
*
http://www.treas.gov/press/releases/tg3 3 .htm
8/3/2010
Page 1 o f 4
February 18, 2009
2009-2-18-14-43-18-11089
U.S. International Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $75,511 million as of the end of that week, compared to $75,436 million as of the end of the
prior week.
| Official reserve assets and other foreign currency assets (approximate market value, in US millions)
3
1
February 13, 2009
|A. Official reserve assets (in US millions unless otherwise specified) ^
Euro
Yen
|(1) Foreign currency reserves (in convertible foreign currencies)
Total
3 7 5 ,5 1 1
|(a) Securities
8,960
|of which: issuer headquartered in reporting country but located abroad
|| 14,074
¡¡23,034
II
llo
|(b) total currency and deposits with:
|(i) other national central banks, BIS and IMF
¡¡6,893
¡¡17,158
|ii) banks headquartered in the reporting country
10,265
II
llo
|of which: located abroad
II
llo
|(iii) banks headquartered outside the reporting country
II
llo
II
llo
¡of which: located in the reporting country
7,677
|(2) IMF reserve position ^
j(3)
9,043
SDRs ^
O
(4) gold {including gold deposits and, if appropriate, gold swapped) °
11,041
—volume in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,558
—financial derivatives
--loans to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
7,558
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
-lo a n s not included in official reserve assets
-financial derivatives not included in official reserve assets
-g o ld not included in official reserve assets
-o th e r
........
II
II
II. Predetermined short-term net drains on foreign currency assets (nominal value)
II
II
Maturity breakdown (residual maturity)
Total
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
1. Foreign currency loans, securities, and deposits
http://www.treas.gov/press/releases/200921814431811089.htm
8/3/2010
Page 2 o f 4
-outflow s (-)
||Principal
-in flow s (+)
||Principal
|| Interest
¡[interest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) ^
-380,230
-266,819
-113,411
(b) Long positions (+)
3. Other (specify)
| -outflow s related to repos (-)
| -in flow s related to reverse repos (+)
| -tra d e credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
ill. Contingent short-term net drains on foreign currency assets (nominal value)
Il
II
Maturity breakdown (residual maturity, where
applicable)
Total
More than 1 and
up to 3 months
Up to 1 month
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c ) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
'¡in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
~ \
__________ II____
(ii) Written calls
(b) Long positions
http://www.treas.gov/press/releases/20Q921814431811089.htm
8/3/2010
Page 3 o f 4
|(i) Bought calls_________________________
|(ii) Written puts
|pRO MEMORIA: In-the-money options 11
|(1 ) At current exchange rate
|(a) Short position
l(b) Long position
l(2) + 5 % (depreciation of 5%)
|(a) Short position
|(b) Long position
|(3) - 5 % (appreciation of 5%)
|(a) Short position
|(b) Long position
|(4) +10 % (depreciation of 10%)
|(a) Short position
|(b) Long position
|(5) -1 0 % (appreciation of 10%)
|(a) Short position
|(b) Long position
|(6) Other (specify)
|(a) Short position
|(b) Long position
___________________
IV. Memo items
(1 ) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
-nondeiiverabie forwards
-s h o rt positions
-lo n g positions
-o th e r instruments
(c ) pledged assets
-included in reserve assets
-included in other foreign currency assets
(d) securities lent and on repo
7,710
II—lent or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
-borrow ed or acquired but not included in Section I
7,710
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
-sw aps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) short positions ( - )
(b) long positions (+)
-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ÏÏ
http://www.treas.gov/press/releases/200921814431811089.htm
8/3/2010
Page 4 o f 4
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto~market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/200921814431811089.htm
8/3/2010
Treasury Secretary Paulson to Deliver First Speech in NYC
7/28/2006
hp-34
-UPDATEDWashington, D.C.--Treasury Secretary Henry M. Paulson will deliver his first speech as Secretary in New York next
week, on Tuesday, August 1, at the Columbia Business School. The speech will focus on the outlook and challenges
for the U.S. and global economies.
While in New York, the Secretary will also visit the New York Stock Exchange and NASDAQ's Stock Market. He will
meet with business leaders at both stops to discuss current economic conditions.
What NYSE Floor Tour
When::9:30 a.m. (EDT)
Where 11 Wall Street, New York, NY
Contact Allison Circle, 212-656-5717 or 646-938-6533, acirde@ nyse.com
What Remarks at the Columbia Business School
When 11:30 a.m. (EDT)
Where 535 W 116th Street, 101 Low Library, The Library Rotunda, New York, NY
Contact Jane Trombley or Keshia Mark at (212) 854-2747
Note Space is limited - media should RSVP by July 28.
What NASDAQ Closing Bell
When 4 p.m. (EDT)
Where 43rd Street and Broadway, Times Square, New York, NY
Contact Silvia Davi, 646-441-5014, silvia.davi@ nasdaq.com
Note Media should RSVP.
tg-35: Treasury Releases Photo o f Geithner, Lagarde Bilateral Meeting
Page 1 o f 1
February 19, 2009
tg-35
Treasury Releases Photo of Geithner, Lagarde Bilateral Meeting
U.S. Treasury Secretary Tim Geithner met today with French Minister of Economy,
Industry and Employment Christine Lagarde at the Treasury Department in
Washington, DC
All media queries should be directed to
The Press Office at (202) 622-2960.
Only call this number if you are a member of the media.
http://www.treas.gov/press/releases/tg35 .htm
8/3/2010
tg36: Geithner, Summers Convene Official Designees to Presidential Task Force on the A... Page 1 o f 2
IP^IP
m mm.
3
mm
1
=
1
February 20, 2009
tg36
Geithner, Summers Convene Official Designees to Presidential Task Force on
the Auto Industry
WASHINGTON - Today, Treasury Secretary Tim Geithner and National Economic
Council (NEC) Director Larry Summers convened official designees to the
Presidential Task Force on the Auto Industry to discuss recently submitted
restructuring plans from Chrysler LLC and General Motors Corporation.
The Task Force will be a cabinet-level group that includes the secretaries of
Transportation, Commerce, Labor, and Energy. It will also include the Chair of the
President's Council of Economic Advisers, the Director of the Office of Management
and Budget, the EPA Administrator, and the Director of the White House Office of
Energy and Climate Change. The Task Force will be led by Treasury Secretary
Geithner and NEC Director Summers.
The designees attending today's meeting presented their initial analyses on the
auto companies' restructuring plans. Participants discussed issues including
financial and operational restructuring, improving competitiveness of wage and
benefit structures, and progress toward creating clean, competitive cars of the
future. Secretary Geithner and Director Summers emphasized the urgency of the
issues affecting the American auto industry and the need for fundamental
restructuring to achieve long-term viability. They tasked the designees to conduct
additional analysis and form initial recommendations in their areas of expertise to
be presented at the next cabinet-level meeting of the Task Force.
Presidential Task Force on the Auto Industry
Members:
*
*
*
*
*
*
*
*
*
*
Treasury Secretary Tim Geithner
National Economic Council Director Larry Summers
Secretary o f Transportation
Secretary of Commerce
Secretary o f Labor
Secretary o f Energy
Chair o f the President's Council of Economic Advisers
Director of the Office of Management and Budget
Environmental Protection Agency Administrator
Director o f the White House Office of Energy and Climate Change
Senior Advisor on Auto Issues at the Treasury Department
Ron Bloom, Senior Advisor on the Auto Industry, Department of Treasury
Official Designees o f the Members o f the Presidential Task Force:
* Diana Farrell, Deputy Director, National Economic Council
* Gene Sperling, Counselor to the Secretary of Treasury
* Jared Bernstein, Chief Economist to Vice President Biden
* Edward Montgomery, Senior Advisor, Department of Labor
* Lisa Heinzerling, Senior Climate Policy Counsel to the EPA Administrator
* Austan Goolsbee, Staff Director and Chief Economist of the Economic
Recovery Advisory Board
* Dan Utech, Senior Advisor to the Secretary of Energy
* Heather Zichal, Deputy Director, White House Office of Energy and Climate
8/3/2010
tg36: Geithner, Summers Convene Official Designees to Presidential Task Force on the A... Page 2 o f 2
Change
* Joan DeBoer, Chief of Staff, Department of Transportation
* Rick Wade, Senior Advisor, Department of Commerce
8/3/2010
tg37: Treasury Department Directs Employers to Boost Paychecks o f Working Americans
Page 1 o f 1
i ?
February 21,2009
tg37
Treasury Department Directs Employers to Boost Paychecks o f Working
Americans
Secretary Geithner Praises IRS, Treasury Staff
for Quick Action to Implement President's Recovery Agenda
Washington, DC - Four days after President Barack Obama signed the American
Recovery and Reinvestment Act into law, the U.S. Department of the Treasury
today began directing employers to reduce the amount of taxes withheld from the
paychecks of millions of American workers - a step unprecedented in its speed and
scope.
Under the law signed Tuesday by President Obama, 95 percent of all working
families will realize a tax cut. By April 1st, the Making Work Pay credit, a key
provision of the new law, will send the typical family home with at least $65 more
every month.
Treasury and the Internal Revenue Service (IRS) worked to develop withholding
tables released today by the IRS to incorporate this credit and provide expedited
guidance to employers on the new provision.
"Just days after the President signed this landmark legislation into law, we have the
wheels turning to deliver much needed boosts to the paychecks of working
Americans," said Treasury Secretary Tim Geithner. "I commend Commissioner
Shulman and the IRS and Treasury staff for moving with exceptional speed to
implement this key provision of the President's recovery agenda. The Treasury
Department and its bureaus will continue to push to implement the Obama
Administration's economic recovery plans."
The IRS posted the new withholding tables today on IRS.gov and will publish
additional instructions related to the new tax law online next week. This publication
will also be mailed to more than 9 million employers in mid-March. Employers are
asked to start using the new tables as soon as possible but no later than April 1.
To view the tables and additional guidance on the Making Work Pay credit, please
see IRS.gov.
###
8/3/2010
tg38: Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve
Page 1 o f 1
February 23, 2009
tg38
Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve
Washington, DC - The U.S. Department of the Treasury, the Federal Deposit
Insurance Corporation, the Office of the Comptroller of the Currency, the Office of
Thrift Supervision, and the Federal Reserve Board today issued the following joint
statement:
"A strong, resilient financial system is necessary to facilitate a broad and
sustainable economic recovery. The U.S. government stands firmly behind the
banking system during this period of financial strain to ensure it will be able to
perform its key function of providing credit to households and businesses. The
government will ensure that banks have the capital and liquidity they need to
provide the credit necessary to restore economic growth. Moreover, we reiterate
our determination to preserve the viability of systemically important financial
institutions so that they are able to meet their commitments.
"We announced on February 10, 2009, a Capital Assistance Program to ensure that
our banking institutions are appropriately capitalized, with high-quality capital.
Under this program, which will be initiated on February 25, the capital needs of the
major U.S. banking institutions will be evaluated under a more challenging
economic environment. Should that assessment indicate that an additional capital
buffer is warranted, institutions will have an opportunity to turn first to private
sources of capital. Otherwise, the temporary capital buffer will be made available
from the government. This additional capital does not imply a new capital standard
and it is not expected to be maintained on an ongoing basis. Instead, it is available
to provide a cushion against larger than expected future losses, should they occur
due to a more severe economic environment, and to support lending to creditworthy
borrowers. Any government capital will be in the form of mandatory convertible
preferred shares, which would be converted into common equity shares only as
needed over time to keep banks in a well-capitalized position and can be retired
under improved financial conditions before the conversion becomes mandatory.
Previous capital injections under the Troubled Asset Relief Program will also be
eligible to be exchanged for the mandatory convertible preferred shares. The
conversion feature will enable institutions to maintain or enhance the quality of their
capital.
"Currently, the major U.S. banking institutions have capital in excess of the
amounts required to be considered well capitalized. This program is designed to
ensure that these major banking institutions have sufficient capital to perform their
critical role in our financial system on an ongoing basis and can support economic
recovery, even under an economic environment that is more challenging than is
currently anticipated. The customers and the providers of capital and funding can
be assured that as a result of this program participating banks will be able to move
forward to provide the credit necessary for the stabilization and recovery of the U.S.
economy. Because our economy functions better when financial institutions are
well managed in the private sector, the strong presumption of the Capital
Assistance Program is that banks should remain in private hands."
8/3/2010
Page 1 o f 4
PfFES'S ROO!
February 24, 2009
2009-2-24-11-8-32-4881
U.S. international Reserve Position
The Treasury Department today released U.S. reserve assets data for the latest week. As indicated in this table, U.S.
reserve assets totaled $74,500 million as of the end of that week, compared to $75,511 million as of the end of the
prior week.
i. Official reserve assets and other foreign currency assets (approximate market value, In US millions)
February 20, 2009
4
A. Official reserve assets (in US millions unless otherwise specified) 1
Euro
Yen
|(1) Foreign currency reserves (in convertible foreign currencies)
Total
□ |7 4 ,5 0 0
8,835
|(a) Securities
||13,778
|of which: issuer headquartered in reporting country but located abroad
||22,613
□ | o __
|(b) total currency and deposits with:
10,118
|(i) other national central banks, BIS and IMF
II
||6,739
II
||16,857
lo
|ii) banks headquartered in the reporting country
||0
|of which: located abroad
|(iii) banks headquartered outside the reporting country
□ l o __
|of which: located in the reporting country
II
I
9
|(2) IMF reserve position |
7,594
(3) SDRs 2
8,946
o
(4) gold (including gold deposits and, if appropriate, gold swapped) u
11,041
-volum e in millions of fine troy ounces
261.499
(5) other reserve assets (specify)
7,449
llo
-financial derivatives
-lo a n s to nonbank nonresidents
-o th e r (foreign currency assets invested through reverse repurchase
agreements)
7,449
B. Other foreign currency assets (specify)
-securities not included in official reserve assets
-deposits not included in official reserve assets
-lo a n s not included in official reserve assets
-financial derivatives not included in official reserve assets
-g o ld not included in official reserve assets
-o th e r
II
II
III Predetermined short-term net drains on foreign currency assets (nominal value)
□
ii
ii
Maturity breakdown (residual maturity)
Total
| 1. Foreign currency loans, securities, and deposits
Up to 1 month
More than 1 and
up to 3 months
More than 3
months and up to
1 year
Page 2 o f 4
-outflow s (-)
||Principal
|| Interest
-in flow s (+)
||Principal
||lnterest
2. Aggregate short and long positions in forwards and
futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
(a) Short positions ( - ) **
-375,447
-255,387
-120,061
(b) Long positions (+)
3. Other (specify)
| -outflow s related to repos (-)
| -in flow s related to reverse repos (+)
| -tra d e credit (-)
| -tra d e credit (+)
| -o th e r accounts payable (-)
| -o th e r accounts receivable (+)
III. Contingent short-term net drains on foreign currency assets (nominai value)
I
Il
II
Maturity breakdown (residual maturity, where
applicable)
Total
More than 1 and
up to 3 months
Up to 1 month
More than 3
months and up to
1 year
1. Contingent liabilities in foreign currency
(a) Collateral guarantees on debt falling due within 1
year
(b) Other contingent liabilities
2. Foreign currency securities issued with embedded
options (puttable bonds)
3. Undrawn, unconditional credit lines provided by:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (+)
-B IS (+)
-IM F (+)
(b) with banks and other financial institutions
headquartered in the reporting country (+)
(c) with banks and other financial institutions
headquartered outside the reporting country (+)
Undrawn, unconditional credit lines provided to:
(a) other national monetary authorities, BIS, IMF, and
other international organizations
-o th e r national monetary authorities (-)
-B IS (-)
-IM F (-)
(b) banks and other financial institutions headquartered
in reporting country (- )
(c) banks and other financial institutions headquartered
outside the reporting country ( - )
4. Aggregate short and long positions of options in
foreign currencies vis-à-vis the domestic currency
(a) Short positions
(i) Bought puts
I
________________ II__________
I
(ii) Written calls
(b) Long positions
http://www.treas.gov/press/releases/2009224118324881 .htm
8/3/2010
Page 3 o f 4
|(i) Bought calls
ll
ii
|(1 At current exchange rate
ii
|(a) Short position
II
II
ll
II
ll
II
ii
II
3
II
[(ii) Written puts
PRO MEMORIA: In-the-money options
)
|(b) Long position
|(2)
+5 % (depreciation of 5%)
|(a) Short position
|(b) Long position
|(3) - 5 % (appreciation of 5%)
I
II
II
II
II
II
II
Il
Il
I
I
ii
Il
Il
Il
Il
I
I
I
I
II
II
II
Il
Il
Il
I
I
I
II
II
II
II
II
|(a) Short position
II
Il
ii
ii
ii
- 10 % (appreciation of 10%)
i
I
ii
ii
|(b) Long position
Il
II
ll
II
II
II
II
ll
[(4) +10 % (depreciation of 10%)
ii
ii
II
ll
II
II
II
II
|(a) Short position
|(a) Short position
ii
II
ii
!(b) Long position
[(5)
ii
11
|(b) Long position
|(6) Other (specify)
[(a) Short position
|(b) Long position
ii
!V. Memo items
(1 ) To be reported with standard periodicity and timeliness:
(a) short-term domestic currency debt indexed to the exchange rate
(b) financial instruments denominated in foreign currency and settled by other means (e.g., in domestic
currency)
-nondeliverable forwards
--short positions
-lo n g positions
-o th e r instruments
(c) pledged assets
[--included in reserve assets
l-included in other foreign currency assets
|(d) securities lent and on repo
7,597
¡-le n t or repoed and included in Section I
-le n t or repoed but not included in Section I
-borrow ed or acquired and included in Section I
-borrow ed or acquired but not included In Section I
7,597
(e) financial derivative assets (net, marked to market)
-forw ards
-futures
-sw a ps
-options
-o th e r
(f) derivatives (forward, futures, or options contracts) that have a residual maturity greater than one year,
which are subject to margin calls.
-aggregate short and long positions in forwards and futures in foreign currencies vis-à-vis the domestic
currency (including the forward leg of currency swaps)
|(a) short positions ( - )
|(b) long positions (+)
l-aggregate short and long positions of options in foreign currencies vis-à-vis the domestic currency
ÏÏ
http://www.treas.gov/press/releases/20092241 1832488 l.htm
8/3/2010
Page 4 o f 4
Notes:
1/ Includes holdings of the Treasury's Exchange Stabilization Fund (ESF) and the Federal Reserve's System Open Market
Account (SOMA), valued at current market exchange rates. Foreign currency holdings listed as securities reflect markedto-market values, and deposits reflect carrying values.
2/ The items, "2. IMF Reserve Position" and "3. Special Drawing Rights (SDRs)," are based on data provided by the IMF
and are valued in dollar terms at the official SDR/dollar exchange rate for the reporting date. The entries for the latest
week reflect any necessary adjustments, including revaluation, by the U.S. Treasury to IMF data for the prior month
end.
3/ Gold stock is valued monthly at $42.2222 per fine troy ounce.
4/ The short positions reflect foreign exchange acquired under reciprocal currency arrangements with certain foreign central banks.
The foreign exchange acquired is not included in Section I, "official reserve assets and other foreign currency assets," of the template
for reporting international reserves. However, it is included in the broader balance of payments presentation as "U.S. Government
assets, other than official reserve assets/U.S. foreign currency holdings and U.S. short-term assets."
http://www.treas.gov/press/releases/2QQ9224118324881 .htm
8/3/2010
tg-39: Treasury Department Touts Expanded Tax Credit for First-Time Homebuyers
Page 1 o f 1
February 25, 2009
tg-39
Treasury Department Touts Expanded Tax Credit for First-Time Homebuyers
Credit Offers Up to $8,000 to Qualifying Taxpayers Now
Latest Move in Sw ift Im plem entation
o f Adm inistration's Recovery, Stability, A ffordability Plans
Washington, DC - In an ongoing effort to deliver on swift implementation of the
Obama Administration's recovery, stability and affordability plans, the U.S.
Department of the Treasury touted today the availability of an expanded tax break
for first-time homebuyers - a provision under the American Recovery and
Reinvestment Act of 2009 that will make up to $8,000 available now to qualifying
taxpayers who buy homes this year.
First-time home buyers represent a significant portion of existing single-family home
sales. In 2008, nearly one out of every two homebuyers were buying for the first
time, and the expansion in the first-time homebuyer credit will make it easier for
first-time home buyers to enter the housing market this year.
"The expansion of the first-time home buyer tax break as part of the President's
recovery agenda gives money to taxpayers when they need it most, while also
targeting an important group of buyers," said Treasury Secretary Tim Geithner. "We
view our economic recovery plan, our financial stability plan and now this
homeowner affordability plan as three legs of the same stool - an integrated whole
that represents our immediate response to the current crisis. We remain committed
to swift, efficient and effective implementation of all of these components."
The announcement comes on the heels of the first Recovery Plan Implementation
meeting led by Vice President Joe Biden at the White House this morning;
Secretary Geithner was among several Cabinet secretaries to attend and offer
updates on implementation efforts in progress at Treasury and its bureaus. Vice
President Biden is overseeing the Administration's implementation of the Recovery
Act's provisions.
The Internal Revenue Service (IRS) has posted on IRS.gov a revised version of
Form 5405, First-Time Homebuyer Credit to incorporate provisions from the
American Recovery and Reinvestment Act. Under the new law, qualifying
taxpayers who buy a home this year before December 1 can claim up to $8,000, or
$4,000 for married individuals filing separately, on either their 2008 or 2009 tax
returns. Unlike the prior first-time homebuyer credit, this is money individuals do
not need to pay back.
To view the form and additional information on who can and cannot claim the credit,
income limitations and repayment of the credit, please visit IRS.gov.
http://www.treas.gov/press/releases/tg39.htm
8/3/2010
tg-40: U.S. Treasury Releases Terms o f Capital Assistance Program
Page 1 o f 2
lo view or p rin t the HUH content on this page, download the tree Adobe® Acrobat® Header®.
February 25, 2009
tg-40
U.S. Treasury Releases Terms of Capital Assistance Program
To view the White Paper, Term Sheet and FAQ, visit
www.FinanciaiStability.gov.
Alongside the forward-looking economic assessments now being conducted by the
Federal banking agencies, the U.S. Department of the Treasury today announced
the terms and conditions for the Capital Assistance Program (CAP). The CAP is a
core element of the 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.
Under CAP, federal banking supervisors will conduct forward-looking assessments
to evaluate the capital needs of the major U.S. banking institutions under a more
challenging economic environment. Should that assessment indicate that an
additional capital buffer is warranted, banks will have an opportunity to turn first to
private sources of capital. In light of the current challenging market environment,
the Treasury is making government capital available immediately through the CAP
to eligible banking institutions to provide this buffer. Details of the forward looking
capital assessments can be found at www.FinancialStability.gov.
Eligible U.S. banking institutions with assets in excess of $100 billion on a
consolidated basis are required to participate in the coordinated supervisory
assessments, and may access the CAP immediately as a means to establish any
necessary additional buffer. Eligible U.S. banking institutions with consolidated
assets below $100 billion may also obtain capital from the CAP.
To clarify the broader context and objectives for the Capital Assistance Program,
and its role in the Financial Stability Plan, the U.S. Treasury also released a white
paper on the program, as well as a set of frequently asked questions. Both can be
found at www.FinancialStability.gov.
As detailed in the CAP'S Terms and Conditions:
Terms
*
■
*
*
*
*
Capital provided under the CAP will be in the form of a preferred security
that is convertible into common equity at a 10 percent discount to the price
prevailing prior to February 9th.
CAP securities will carry a 9 percent dividend yield and would be convertible
at the issuer's option (subject to the approval of their regulator).
After 7 years, the security would automatically convert into common equity if
not redeemed or converted before that date.
The instrument is designed to give banks the incentive to replace USGprovided capital with private capital or to redeem the USG capital when
conditions permit.
With supervisory approval, banks will be able to request capital under the
CAP in addition to their existing CPP preferred stock.
With supervisory approval, banks will also be allowed to apply to exchange
http://www.treas.gov/press/releases/tg40.htm
8/3/2010
tg-40: U. S. Treasury Releases Terms o f Capital Assistance Program
Page 2 o f 2
the existing CPP preferred stock for the new CAP instrument.
Conditions
*
Recipients of capital under the CAP will be subject to the executive
compensation requirements in line with the Emergency Economic
Stabilization Act of 2008, as recently amended. The Treasury will shortly be
releasing rules to implement these amendments.
* As part of the application process, banks must submit a plan for how they
intend to use this capital to preserve and strengthen their lending capacity specifically, to increase lending above levels relative to what would have
been possible without government support. The Treasury Department will
make these plans public when the bank receives the capital under the CAP.
* Taxpayers will be able to monitor the performance of banks receiving capital
under the CAP. Banks receiving capital will be required to submit to
Treasury monthly reports on their lending broken out by category. These will
be posted on www.FinancialStability.gov.
* Recipients will also be subject to restrictions on paying quarterly common
stock dividends, repurchasing shares, and pursuing cash acquisitions.
By reassuring investors, creditors, and counterparties of banking institutions-as
well as the institutions themselves--that banks have capital in a sufficient amount
and quality to withstand even a considerably weaker-than-expected economic
environment, the CAP instrument should improve confidence and increase the
willingness of banking institutions to lend.
The Capital Assistance Program is a core element of the Financial Stability Plan
announced on February 10, 2009. Additional components of the plan include: a
Consumer Business Lending Initiative to unfreeze secondary credit markets, a
Public Private Investment Fund to raise private capital to purchase legacy assets,
and a Homeowner Affordability and Stability Plan to restructure or refinance
mortgages to help as many as 7-9 million families stay in their homes.
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Capital Assistance Program (CAP) Term Sheet
Capital Assistance Program (CAP) FAQs
http://www.treas.gov/press/releases/tg40.htm
8/3/2010
TREASURY WHITE PAPER
T h e C a p it a l A s s is t a n c e P r o g r a m
AND ITS ROLE IN THE FIN AN C IAL STABILITY PLAN
Program Motivation and Objectives
The financial system plays the critical role of channeling funds from savers in the
economy to the investors with the ideas and ability to turn those funds into productive
economic resources; no modem economy can thrive— can grow and improve the welfare
of its citizens over time—without a healthy and dynamic financial system. And no
financial system can thrive—can have strong institutions and deep and liquid capital
markets—without the tmst and confidence of those who save knowing that their funds
will be protected and grow in value over time.
With the recent deterioration in the U.S. and global economic outlook, there has
been a marked increase in the already considerable uncertainty around the ability of
financial institutions to absorb potentially large future losses and continue to perform
their vital role of lending to creditworthy households and businesses throughout the
economy. If the current uncertainty around the health and viability o f our financial
institutions continues unchecked, this uncertainty itself could spark a self-reinforcing
dynamic that further erodes the capacity of our financial system to perform its critical
function and further weakens economic growth.
Regulators and market participants recognize the critical role that the capital held
by financial institutions plays in supporting confidence in the health of those institutions
and of the system as a whole. While the vast majority of U.S. banking organizations
have capital in excess of the amounts required to be considered well capitalized, the
uncertain economic environment has eroded confidence in the amount and quality of
capital held by some. In turn, market participants’ concerns over the capital positions of
some institutions is impairing the ability of the system overall to perform its critical role
of credit origination and intermediation.
In normal times, market forces would be expected to address a capital shortfall as
private capital flowed to where it was in greatest demand and would yield the highest
return. But in the current strained environment where the normal functioning o f financial
markets has been impaired, there is a concern that private capital inflows, at least over the
near-term, may not be sufficiently large to break the dynamic between the perceived
shortage of capital in the system and the loss of confidence that shortage engenders in the
health of individual institutions.
Recognizing that until confidence in the strength and viability of our financial
institutions is restored, our institutions will not be able to play their critical role as
intermediaries, the Capital Assistance Program (CAP) seeks to ensure the continued
ability of U.S. financial institutions to lend to creditworthy borrowers in the face of a
weaker than expected economic environment and larger than expected potential losses.
1
The CAP consists of two core elements. The first, which is a supervisory
exercise, is forward-looking capital assessment to determine whether any of the major
U.S. banking organizations need to establish an additional capital buffer during this
period of heightened uncertainty. The second is access for qualifying financial
institutions to contingent common equity provided by the U.S. government as a bridge to
private capital in the future.
Forward-Looking Capital Assessment
Supervisors have long worked with the major banking organizations to ensure that
their capital planning processes incorporate the implications o f adverse economic
developments. As an essential part o f restoring confidence in the condition of the U.S.
banking system during this period o f heighted uncertainty, federal banking and thrift
supervisors will undertake a coordinated supervisory capital planning exercise with each
of 19 major U.S. banking organizations1.
This special forward-looking capital assessment exercise involves evaluating
expected losses and the resources to absorb those losses if economic conditions were to
be more adverse than generally expected. This exercise will allow supervisors to
determine whether an additional capital buffer today, particularly one that strengthens the
composition of capital, is needed for the banking organization to comfortably absorb
losses and continue lending even in a more adverse environment. Should this assessment
indicate the need for a bank to establish an additional capital buffer to withstand more
stressful conditions, the bank will have a six month window to raise that capital privately
or to access the capital made available by the Treasury under the CAP.
The additional capital acquired by a banking organization in conjunction with the
special supervisory assessment exercise—whether that capital is raised on the private
market or through the CAP— does not represent a new capital standard and it is not
expected to be maintained on an ongoing basis. Instead, it is available to help banking
institutions absorb larger than expected future losses, should they occur, and to support
lending to creditworthy borrowers during the economic downturn.
CAP Contingent Common Capital
The capital provided to eligible banking organizations under this program will be
in the form of a preferred security that is convertible into common equity . Market
participants pay particular attention to common equity as a measure o f health in stressed
environments, and regulators have long believed that common equity should be the
dominant component of a banking organization’s highest quality forms o f capital. The
1Examinations w ill be conducted across the 19 banking organization with assets in excess o f $100 billion,
as measured according to the data reported for 2008Q4 in the Board o f Governors o f the Federal Reserve
System Consolidated Financial Statements for Bank Holding Companies (FR Y-9C).
2 E lig ib ility for capital under the CAP is consistent w ith the criteria and process established for identifying
Qualifying Financial Institutions (QFIs) in the TARP Capital Purchase Program (CPP). As indicated
above, eligible U.S. banking organization w ith assets in excess o f $100B w ill participate in the special
supervisory forward-looking capital assessment process whether or not they access the capital provided
under the CAP. Eligible U.S. banking organizations w ith assets less than $100B w ill also have the
opportunity to access the CAP to increase capital buffers as necessary.
2
convertible preferred security provided through the CAP will serve as a source of
contingent common capital for the firm, convertible into common equity when and if
needed to retain the confidence o f investors or to meet supervisory expectations regarding
the amount and composition of capital.
The CAP instrument will be designed to give banks the incentive to redeem or
replace the government-provided capital with private capital when feasible. Finally, with
supervisory approval, banking organizations will be allowed to exchange their existing
TARP preferred stock for the new preferred instrument. The CAP is open immediately.
Eligibility will be consistent with the criteria and deliberative process established for
identifying Qualifying Financial Institutions (QFIs) in the TARP Capital Purchase
Program (CPP).
The economy functions better when banking organizations are well managed in
the private sector. U.S. government ownership is not an objective of CAP. However, to
the extent that significant government stake in a financial institution is an outcome o f the
program, our goal will be to keep the period of government ownership as temporary as
possible and encourage the return of private capital to replace government investment. In
addition, any capital investments made by Treasury under this plan will be placed in a
separate trust set up to manage the government’s investments in US financial institutions.
The objective of the trustees will be to protect and create value for the taxpayer as a
shareholder over time.
Program Design Elements
A key component of the CAP is a one-time forward looking supervisory
assessment of the 19 largest bank holding companies (BHCs) (those with risk weighted
assets of $100 billion or more). Supervisors will use the results of this exercise, along
with their considerable specific knowledge o f the financial institutions’ portfolios and
management strategies, to assess whether the BHCs have the capital necessary to
continue lending and to absorb the potential losses that could result from a more severe
decline in the economy than projected.
To conduct this exercise, supervisors have constructed two economic scenarios
for BHCs to use to estimate expected losses over the next two years. The “baseline”
economic scenario represents a consensus outlook and is based on the most recent
forecasts available from professional forecasters. In particular, the baseline assumptions
for real GDP growth and the unemployment rate for 2009 and 2010 are assumed to be
equal to the average of the projections published in February by Consensus Forecasts, the
Blue Chip survey, and the Survey o f Professional Forecasters. The alternative “more
adverse” scenario for the path of the U.S. economy, by design, reflects a deeper and
longer recession than in the consensus baseline.
The agencies will provide real GDP growth, the civilian unemployment rate, and
changes in residential house prices for 2009 and 2010 for the baseline and more adverse
economic scenarios. BHCs will be asked to analyze their loan and securities portfolios,
as well as off-balance sheet commitments and contingencies, to determine expected
3
future losses under each of the scenarios. The BHCs will also forecast internal resources
available to absorb losses, including pre-provision net revenue and reserves. The BHCs
will report their estimates using a standardized template provided by the agencies, and
will provide firm-level information to support their estimates.
An important part o f the process is that the agencies will meet with each financial
institution to review their loss and revenue forecasts. Based on those discussions, the
agencies will determine the amount of a regulatory capital necessary for each institution
to hold today in order to remain well-capitalized under the more adverse scenario as
capital is drawn down.
BHCs will be given a six month period to raise any additional capital needed to
establish this buffer from private sources. BHCs can apply to the CAP immediately at
the conclusion o f the assessment exercise to provide certainty of access to the program,
but delay funding for six months in order to have the opportunity to raise as much private
capital as possible. BHCs that have undergone this forward-looking capital test will have
access to Treasury capital in the form of mandatory convertible preferred shares. These
shares can convert at the firm’s discretion (with the approval o f their regulator) into
common equity if needed to preserve lending in worse-than-expected economic
environment at a conversion price set at a 10% discount from the prevailing level o f the
institution’s stock price as of February 9, 2009.
A program that emphasizes the forward-looking nature of the capital planning
process and pre-positions an additional capital buffer has important advantages relative to
capital provided only on a when-needed basis. Market participants will gain confidence
from the major U.S. banking organizations having undergone a systematic disciplined
exercise designed to prepare them for a more severe and protracted recession than is
currently generally expected to occur. A capital buffer today may be especially valuable
given the uncertainty about the economic outlook and about whether capital would be
available as needed if an unexpectedly adverse scenario unfolds.
A capital buffer also reduces the risk that problems at a very small number of
counterparties, through the many linkages across institutions, lead to the failure of
otherwise viable institutions. While some firms may be asked to hold more capital than
they might otherwise, the beneficial effects on confidence in the stability of the financial
system and the creditworthiness o f borrowers should lead to more lending, not less.
By reassuring investors, creditors, and counterparties o f financial institutions— as
well as the institutions themselves—that there is a sufficient amount and quality of
capital to withstand even a considerably weaker-than-expected economic environment—
the Capital Assistance Program should improve confidence and increase the willingness
of financial institutions to lend. This increase in lending, in turn, will help to stimulate
economic activity and restore to U.S. economy to a path o f robust economic growth.
4
Capital Assistance Program
Mandatorily Convertible Preferred Stock and Warrants
Summary of Mandatorilv Convertible Preferred Stock (“Convertible Preferred”)
Terms
Issuer:
Qualifying Financial Institution (“QFI”) means (i) any
U.S. bank or U.S savings association not controlled by a
Bank Holding Company (“BHC”) or Savings and Loan
Company (“SLHC”), (ii) any top-tier U.S. BHC, and (iii)
any top-tier U.S. SLHC which engages solely or
predominately in activities that are permitted for financial
holding companies under relevant law. QFI shall not
mean any BHC, SLHC, bank or savings association
controlled by a foreign bank or company. For purposes of
this program, “U.S. bank”, “U.S. savings association”,
“U.S. BHC” and “U.S. SLHC” means a bank, savings
association, BHC or SLHC organized under the laws of
the United States or any State o f the United States, the
District of Columbia, any territory or possession of the
United States, Puerto Rico, Northern Mariana Islands,
Guam, American Samoa, or the Virgin Islands. The
United States Department of the Treasury will
determine eligibility and allocation for QFIs after
consultation with the appropriate Federal banking
agency.
Application Process:
The Capital Assistance Program is available only to
publicly traded1 QFIs that meet eligibility requirements,
which will be substantially similar to those used for the
Capital Purchase Program. QFIs must apply to their
appropriate Federal banking agency for participation in
the Capital Assistance Program. The appropriate Federal
banking agency will make a recommendation to the
Department of the Treasury regarding an applicant’s
viability.
Separate term sheets are expected to be made available for
participation in the Capital Assistance Program for QFIs
1 For the purposes o f this term sheet “ publicly traded” means a company (1) whose securities are traded on
a national securities exchange and (2) required to file, under the federal securities laws, periodic reports
such as the annual (Form 10-K) and quarterly (Form 10-Q) reports with either the Securities and Exchange
Commission or its appropriate Federal banking agency.
095331-0003-08347-A ctive . 11553380.12
1
which are not publicly traded or are organized as
subchapter S corporations or in mutual form.
Qualified Equity
Offering for
Capital Purchase
Program Preferred Stock:
The issuance by the QFI o f the Convertible Preferred to
the UST will be a “Qualified Equity Offering” under the
Capital Purchase Program to the extent the proceeds from
the sale of the Convertible Preferred are used to redeem
the Preferred Shares sold to the UST under the Capital
Purchase Program in whole or in part in accordance with
their terms (thus effecting an “exchange” of the
Convertible Preferred for the Preferred Shares sold under
the Capital Purchase Program). Proceeds that are used to
redeem the Preferred Shares sold to the UST under the
Capital Purchase Program will count towards the
Qualified Equity Offering proceeds that are required to be
raised in order to reduce the number of shares o f common
stock underlying the warrant issued to the UST under the
Capital Purchase Program. If applicable, the proceeds
from the sale of the Convertible Preferred may also be
used to redeem the Preferred Shares sold to the UST under
the Targeted Investment Program in whole or in part in
accordance with their terms.
Initial Holder:
United States Department o f the Treasury (the “UST”).
Size:
QFIs may sell Convertible Preferred to the UST subject to
the limits and terms described below.
Each QFI may issue an amount of Convertible Preferred
equal to not less than 1% of its risk-weighted assets and
not more than 2% of its risk-weighted assets plus any
amount of Convertible Preferred to the extent the proceeds
of such additional Convertible Preferred are used to
redeem Preferred Shares sold under the Capital Purchase
Program and, if applicable, the Targeted Investment
Program.
A QFI must receive the approval o f the appropriate
Federal banking agency to issue Convertible Preferred in
excess of the amount set forth in the paragraph above and
will be deemed as needing “exceptional assistance.” The
determination to provide such exceptional assistance will
be solely in the discretion of the UST in consultation with
the appropriate Federal banking agency and will be made
095331-0003-08347-Active. 11553380.12
2
on a case by case basis in order to ensure or promote
financial market stability. QFIs receiving exceptional
assistance may be subject to additional terms and
conditions.
Security:
Mandatorily Convertible Preferred, liquidation preference
$1,000 per share. (Depending upon the QFI’s available
authorized preferred shares, the UST may agree to
purchase Convertible Preferred with a higher liquidation
preference per share, in which case the UST may require
the QFI to appoint a depositary to hold the Convertible
Preferred and issue depositary receipts.)
T er m/Mandatory
Conversion:
Mandatorily converts to common stock after 7 years at the
Conversion Price.
Optional Conversion:
Convertible in whole or from time to time in part at the
Conversion Price at the option of the QFI at any time,
subject to the approval of the QFI’s primary Federal
banking agency.
Convertible at the Conversion Price at the option of the
holder upon specified corporate events, including certain
sales, mergers or changes of control o f the QFI.
Conversion Price:
Conversion price is 90% o f the average closing price for
the common stock for the 20 trading day period ending
February 9, 2009, subject to customary anti-dilution
adjustments. If applicable, the conversion price shall be
reduced by 15% of the original conversion price on each
six-month anniversary of the issue date of the Convertible
Preferred if the consent of the QFI stockholders described
below has not been received, subject to a maximum
reduction of 45% of the original conversion price.
Upon any conversion, the QFI shall also pay any accrued
and unpaid dividends at its option in either cash or shares
of common stock, which shares shall be valued for this
purpose at the closing price on the second preceding
trading day.
Ranking:
Senior to common stock and pari passu with existing
preferred shares other than preferred shares which by their
terms rank junior to any existing preferred shares.
Regulatory Capital Status:
Tier 1, for holding companies.
095331-0003-08347-Active. 11553380.12
3
Dividend:
The Convertible Preferred will pay cumulative dividends
at a rate o f 9% per annum, compounding quarterly.
Notwithstanding the foregoing, if applicable, the dividend
rate on the Convertible Preferred shall increase to 20% per
annum on the sixth month anniversary o f the issue date of
the Convertible Preferred if the consent o f the QFI
stockholders described below has not been received by
such date, and shall remain at such level until the date on
which such stockholder approval is received.
Redemption of
Convertible Preferred:
Convertible Preferred may be redeemed, subject to the
approval of the QFI’s primary Federal banking agency, in
whole or in part at any time solely with the proceeds of
one or more issuances of common stock for cash which
results in aggregate gross proceeds to the QFI of not less
than 25% o f the issue price o f the Convertible Preferred,
or additions to retained earnings.
Convertible Preferred redeemed within the first two years
of issuance will be redeemable at par, plus any accrued
and unpaid dividends. After the first two years of
issuance, Convertible Preferred will be redeemable at the
greater of par plus accrued and unpaid dividends and the
as-converted value.
Following the redemption in whole o f the Convertible
Preferred held by the UST, the QFI shall have the right to
repurchase the Warrant and any common stock then held
by the UST under the Capital Assistance Program at fair
market value.
Dividend Stopper:
For as long as any Convertible Preferred is outstanding,
no dividends may be declared or paid on junior preferred
shares, preferred shares ranking pari passu with the
Convertible Preferred, or common shares (other than in
the case o f pari passu preferred shares, dividends on a pro
rata basis with the Convertible Preferred), nor may the
QFI repurchase or redeem any junior preferred shares,
preferred shares ranking pari passu with the Convertible
Preferred or common shares, unless all accrued and
unpaid dividends for all past dividend periods on the
Convertible Preferred are fully paid.
Common Dividends:
For so long as any Convertible Preferred is outstanding
and owned by the UST or the UST owns any common
stock of the QFI issued under the Capital Assistance
Program, dividends declared and paid on the common
095331 -0003-08347-Active. 11553380.12
4
stock must be no greater than $0.01 per share per quarter
unless the UST consents to a higher amount.
Restrictions on
Repurchases:
For so long as any Convertible Preferred is outstanding
and owned by the UST or the UST owns any common
stock of the QFI, the UST’s consent shall be required for
any repurchases of equity securities or trust preferred
securities, subject to certain exceptions similar to those in
Section 4.8 of the Securities Purchase Agreement —
Standard Terms of the UST’s Capital Purchase Program.
In addition, there shall be no share repurchases o f junior
preferred shares, preferred shares ranking pari passu with
the Convertible Preferred, or common shares, if prohibited
as described above under “Dividend Stopper”.
Voting rights:
The Convertible Preferred shall have no voting rights prior
to conversion to common stock, other than class voting
rights on (i) any authorization or issuance of shares
ranking senior to the Convertible Preferred, (ii) any
amendment to the rights o f the Convertible Preferred, or
(iii) any merger, exchange or similar transaction which
would adversely affect the rights of the Convertible
Preferred.
If dividends on the Convertible Preferred are not paid in
full for six dividend periods, whether or not consecutive,
the Convertible Preferred will have the right to elect 2
directors. The right to elect directors will end when full
dividends have been paid for four consecutive dividend
periods.
Upon conversion of the Convertible Preferred, the UST
will have the voting rights associated with the QFI’s
common stock. UST will publish a set o f principles
governing its use of these r
@FedFRASER