Financial Crisis News Center

Public Offering of Warrants to Purchase TCF Financial Stock Announced

This story appeared in Bank Digest.

The Treasury Department announced that it has commenced a secondary public offering of approximately 3,199,988 warrants to purchase the common stock of TCF Financial Corporation. Treasury stated that the proceeds of this sale will provide an additional return to the American taxpayer from Treasury's investment in the company beyond the dividend payments it received on the related preferred stock. The offering is expected to price through a modified Dutch auction. Deutsche Bank Securities Inc. is the sole book-running manager for the offering.

Treasury Reacts To Citigroup's Intention To Repay Taxpayers

This story appeared in Bank Digest.

Following Citigroup's announcement to repay taxpayers for the assistance provided by the government, the Treasury Department stated: “We are pleased that Citigroup is moving ahead with plans to pay the taxpayers back. Treasury has repeatedly stated that the United States never intended to be a long term shareholder in private companies. As banks replace Treasury investments with private capital, confidence in the financial system increases, government's unprecedented involvement in the private sector diminishes, and taxpayers are made whole.”

Bernanke Argues For Maintaining Fed Supervisory Authority

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

Federal Reserve Board Chairman Ben Bernanke told Congress it would be a “mistake” to remove the central bank’s supervisory authority due to the key role it plays in enabling the Fed to maintain financial stability and act as the lender of last resort.

Bernanke appeared December 3 before the Senate Banking, Housing and Urban Affairs Committee, which is considering his nomination for a second four-year term as Fed Chairman. Committee Chairman Sen. Chris Dodd, D-Conn., who said he strongly supports Bernanke’s re-nomination, has proposed stripping the Fed of its bank supervisory responsibilities so that it can focus on its core mission of monetary policy.

Grassley Requests AIG Accounting

This story appeared in Bank Digest.

Senator Chuck Grassley, R-Iowa, the Ranking Member of the Senate finance Committee has asked Treasury Secretary Timothy Geithner and the President and CEO of the Federal Reserve Bank of New York, William Dudley, to discuss the government's handling of its bailout of American International Group. In a letter sent to both Geithner and Dudley, Grassley asked for an assessment of how taxpayers get a better deal from holding AIG equity instead of debt, following an announcement by the New York Federal Reserve Bank that AIG retired $25 billion of debt by providing the New York FRBank with shares in two AIG subsidiaries.

Federal Judge Implements SEC's Pro Rata Distribution Plan in Connection with Money Market Fund That Collapsed in Lehman Chaos

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

A federal judge has approved the SEC’s pro-rata distribution plan providing an equal payout to all shareholders of a liquidating money market fund who have not had their redemption requests fulfilled, regardless of when they submitted those redemption requests. The court determined that distributing the fund’s limited assets on the basis of unreliable NAV calculations would not be equitable. While acknowledging that pro rata distribution is not necessarily a plan that everyone would like, the court said it was the most equitable means of distributing the remaining assets of the fund in light of the unprecedented circumstances surrounding its collapse. The court found authority under Section 21(d)(5) of the Exchange Act to grant any equitable relief that may be appropriate or necessary for the benefit of investors. SEC v. Reserve Management Company, Inc., 09 Civ. 4346 (PGG), 11-25-09.

Problem Bank List Rises Despite Earnings Improvement

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Federal Deposit Insurance Corp. has reported that the number of institutions on its “Problem List” rose to its highest level in 16 years. At the end of September 2009, there were 552 insured institutions on the “Problem List,” up from 416 on June 30, 2009. This is the largest number of “problem” institutions since Dec. 31, 1993, when there were 575 institutions on the list. Total assets of “problem” institutions increased during the quarter from $299.8 billion to $345.9 billion, the highest level since the end of 1993, when they totaled $346.2 billion. Fifty institutions failed during the third quarter, bringing the total number of failures in the first nine months of 2009 to 95.

Bachus Seeks Information on AIG's Treatment of U.S. Regional Banks

This story appeared in Bank Digest.

Financial Services Committee Ranking Member Spencer Bachus, R-Ala., requested information from Treasury Secretary Timothy Geithner regarding the disparate treatment of U.S. banks and foreign institutions by insurance giant American International Group (AIG). In March, Bachus urged Financial Services Committee Chairman Barney Frank, D-Mass., to convene hearings in order to obtain facts and fully understand the consequences of AIG's bailout on U.S. banks. Since March, Bachus has also asked Secretary Geithner for information on why U.S. banks are being asked to take haircuts while foreign and domestic counterparties were made whole.

FDIC Deposit Insurance Fund Drops Below Zero; Problem Banks Rise

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

The Federal Deposit Insurance Corp’s deposit insurance fund balance dropped to negative $8.2 billion in the third quarter of 2009, while the number of banks on its “problem list” rose to the highest level in 16 years.

The last time the DIF fell below zero was in the third quarter of 1992, the FDIC said, noting that the decline was primarily due to $21.7 billion in additional provisions for bank failures. The FDIC noted that the negative $8.2 billion already reflects a $38.9 billion contingent loss reserve set aside to cover estimated losses over the next year, so that total DIF reserves actually stand at $30.7 billion.

Republican Leaders Call for Hearing on Payments by AIG

This story appeared in Bank Digest.

Financial Services Committee Ranking Member Spencer Bachus, R-Ala., and Roy Blunt, R-Mo., the second ranking Republican on the Energy and Commerce Committee, have asked that the Financial Services Committee look into payments made by AIG to both domestic and foreign counterparties. They have asked specifically that the committee address whether the financial health of AIG's counterparties was a factor in paying the counterparties' claims in full, the rationale for keeping the list of counterparties secret and the impact of paying counterparties at par value if Congress enacts legislation to create a $200 billion bailout fund.

GAO Reports on Effects of Interchange Fees

This story appeared in Bank Digest.

Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO report required by the 2009 Credit Card Accountability, Responsibility, and Disclosure Act. The agency attributed some of that increase to how Visa and MasterCard have competed for card issuers by increasing the number of interchange fee categories and the level of these fees. For some issuers, such as community banks, these fees generate significant revenue, and they also have been among large banks' most profitable activities. The report considers four options for reducing such fees but notes that implementation problems exist for each.