Expiration of the Issuance Period for the Debt Guarantee Program; Establishment of Emergency Guarantee Facility, 47489-47494 [E9-22372]

Download as PDF 47489 Proposed Rules Federal Register Vol. 74, No. 178 Wednesday, September 16, 2009 This section of the FEDERAL REGISTER contains notices to the public of the proposed issuance of rules and regulations. The purpose of these notices is to give interested persons an opportunity to participate in the rule making prior to the adoption of the final rules. FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 370 RIN 3064–AD37 Expiration of the Issuance Period for the Debt Guarantee Program; Establishment of Emergency Guarantee Facility srobinson on DSKHWCL6B1PROD with PROPOSALS AGENCY: Federal Deposit Insurance Corporation (FDIC). ACTION: Notice of proposed rulemaking. SUMMARY: The FDIC is issuing this Notice of Proposed Rulemaking to present two alternatives for phasing out the Debt Guarantee Program (DGP), a component of the Temporary Liquidity Guarantee Program (TLGP). Under the first alternative, the DGP would conclude as provided in the current regulation. Thus, insured depository institutions (IDIs) and certain other participating entities would be permitted to issue FDIC-guaranteed debt no later than October 31, 2009, with the FDIC’s guarantee for such debt expiring no later than December 31, 2012. Under the second alternative, the DGP would expire as indicated above; however, the FDIC would establish a limited six-month emergency guarantee facility to be made available in emergency circumstances to insured depository institutions (IDIs) and certain other entities participating in the DGP upon application to and with the prior approval of the FDIC. Under the proposed emergency guarantee facility, the FDIC would guarantee senior unsecured debt issued on or before April 30, 2010. The emergency guarantee facility would be available on a limited, case-by-case basis to insured depository institutions (IDIs) participating in the DGP and to other entities participating in the DGP that have issued FDIC-guaranteed debt under the DGP by September 9, 2009. Entities seeking to participate in the emergency guarantee facility would be required to submit an application to the FDIC on or before April 30, 2010, and demonstrate VerDate Nov<24>2008 16:46 Sep 15, 2009 Jkt 217001 an inability to issue non-guaranteed debt to replace maturing senior unsecured debt as a result of market disruptions or other circumstances beyond the entity’s control. If approved by the FDIC, senior unsecured debt issued under the emergency guarantee facility would be guaranteed by the FDIC until a date no later than December 31, 2012, and would be subject to an annualized participation fee of at least 300 basis points. DATES: Written comments must be received by the FDIC by October 1, 2009. ADDRESSES: You may submit comments on the Notice of Proposed Rulemaking, by any of the following methods: • Agency Web Site: http:// www.FDIC.gov/regulations/laws/ federal/notices.html. Follow instructions for submitting comments on the Agency Web Site. • E-mail: Comments@FDIC.gov. Include RIN # 3064–AD37 on the subject line of the message. • Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. • Hand Delivery: Comments may be hand delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. Instructions: All comments received will be posted generally without change to http://www.fdic.gov/regulations/laws/ federal/final.html, including any personal information provided. FOR FURTHER INFORMATION CONTACT: (for questions or comments related to applications) Lisa D Arquette, Associate Director, Division of Supervision and Consumer Protection, (202) 898–8633 or larquette@fdic.gov; Serena L. Owens, Associate Director, Supervision and Applications Branch, Division of Supervision and Consumer Protection, (202) 898–8996 or sowens@fdic.gov; Gail Patelunas, Deputy Director, Division of Resolutions and Receiverships, (202) 898–6779 or gpatelunas@fdic.gov; Donna Saulnier, Manager, Assessment Policy Section, Division of Finance, (703) 562–6167 or dsaulnier@fdic.gov; Munsell St. Clair, Chief, Bank and Regulatory Policy Section, Division of Insurance and Research, (202) 898–8967 or mstclair@fdic.gov; Robert C. Fick, Counsel, Legal Division, (202) 898–8962 or rfick@fdic.gov; or A. Ann Johnson, PO 00000 Frm 00001 Fmt 4702 Sfmt 4702 Counsel, Legal Division, (202) 898–3573 or aajohnson@fdic.gov. SUPPLEMENTARY INFORMATION: I. Background The FDIC adopted the TLGP in October, 2008 following a determination of systemic risk by the Secretary of the Treasury (after consultation with the President) that was supported by recommendations from the FDIC and the Board of Governors of the Federal Reserve System (Federal Reserve).1 The TLGP is part of a coordinated effort by the FDIC, the U.S. Department of the Treasury (Treasury), and the Federal Reserve to address unprecedented disruptions in credit markets and the resultant difficulty of many financial institutions to obtain funds and to make loans to creditworthy borrowers. On October 23, 2008, the FDIC’s Board of Directors (Board) authorized the publication in the Federal Register of an interim rule that outlined the structure of the TLGP.2 Designed to assist in the stabilization of the nation’s financial system, the FDIC’s TLGP is composed of two distinct components: the DGP and the Transaction Account Guarantee Program (TAG program). The DGP initially permitted participating entities to issue FDIC-guaranteed senior unsecured debt until June 30, 2009, with the FDIC’s guarantee for such debt to expire on the earlier of the maturity of the debt (or the conversion date, for mandatory convertible debt) or June 30, 2012. To reduce market disruption at the conclusion of the DGP and to facilitate the orderly phase-out of the program, the Board issued a final rule that generally extended for four months the period during which participating entities could issue FDIC-guaranteed debt.3 Under this rule, all IDIs and those other participating entities that had issued FDIC-guaranteed debt on or 1 See Section 13(c)(4)(G) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 1823(c)(4)(G). The determination of systemic risk triggered the FDIC’s authority—‘‘in its sole discretion and upon such terms and conditions as the [FDIC’s] Board of Directors may prescribe—to take actions to avoid or mitigate serious adverse effects on economic conditions or financial stability. See also Section 9(a)Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth. The FDIC implemented the TLGP in response. 2 73 FR 64179 (October 29, 2008). This interim rule was finalized and a final rule was published in the Federal Register on November 26, 2008. 73 FR 72244 (November 26, 2008). 3 74 FR 26521 (June 3, 2009). E:\FR\FM\16SEP1.SGM 16SEP1 srobinson on DSKHWCL6B1PROD with PROPOSALS 47490 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Proposed Rules before April 1, 2009 are permitted to participate in the extended DGP without application to the FDIC. Other participating entities that receive approval from the FDIC also may participate in the extended DGP. The rule also extended the expiration of the guarantee period from June 30, 2012 to December 31, 2012. As a result, participating entities may issue FDICguaranteed debt through and including October 31, 2009, where the FDIC’s guarantee expires on the earliest of the debt’s mandatory conversion date, the stated maturity date, or December 31, 2012. On June 23, 2009, the Board proposed two alternatives for phasing out the TAG. The first proposed alternative provided that the TAG would expire on December 31, 2009, as required by the terms of the existing rule. The second proposed alternative provided for a limited six month extension to that program. Following consideration of the comments submitted in response to the two alternatives, on August 26, 2009, the Board adopted and approved for publication in the Federal Register a final rule providing for a six-month extension of the TAG program, through June 30, 2010.4 The extended TAG program is available to any participating IDI that does not elect to opt-out of the extension, subject to an increased fee for the FDIC’s guarantee of qualifying noninterest bearing transaction accounts during the extension period. Recent data suggest that the TLGP and other federal efforts to restore liquidity to and confidence in the banking and financial services industries have had a positive impact. For example, only a few participating entities have issued FDIC-guaranteed debt under the extended DGP, and a number of banking organizations have conducted successful public offerings of non-FDICguaranteed debt and equity. A number of banking organizations also have repaid the preferred shares purchased by the U.S. Treasury through its Capital Purchase Program. Funding costs have eased as the three-month Libor rate has reached record lows and related credit spreads have moderated substantially. Since there is evidence that the domestic credit and liquidity markets are beginning to normalize and since there has been a decrease in the number of entities that now are issuing debt under the DGP, the current regulation may provide an appropriate means for concluding the DGP. On the other hand, however, it may be prudent for the FDIC to allow the DGP to expire by its terms, while establishing an emergency 4 74 FR 45093 (September 1, 2009). VerDate Nov<24>2008 16:46 Sep 15, 2009 Jkt 217001 guarantee facility to be accessed on a limited, case-by-case basis by IDIs and certain other entities participating in the DGP if emergency circumstances warrant. This limited emergency guarantee facility could afford protection to entities participating in the DGP that are unable to issue nonguaranteed debt to replace maturing debt because of market disruptions or other circumstances beyond their control.5 II. Proposed Alternatives for Concluding the Debt Guarantee Program As it did when proposing alternatives for concluding the TAG, in this Notice of Proposed Rulemaking the FDIC presents two alternatives for concluding the FDIC’s guarantee of senior unsecured debt under the DGP. In general, under Alternative A, IDIs and certain other participating entities would be permitted to issue FDICguaranteed debt under the DGP no later than October 31, 2009, with the FDIC’s guarantee for such debt expiring no later than December 31, 2012, as provided for in the current regulation. Under Alternative B, although the DGP effectively would end as provided for in the current regulation, the FDIC would establish and make available on a limited, case-by-case basis, an emergency guarantee facility. The proposed emergency guarantee facility would be made available only following FDIC approval of an application submitted by an IDI or other entity that issued FDIC-guaranteed senior unsecured debt on or before September 9, 2009. If approved by the FDIC, an applicant would be permitted to issue FDIC-guaranteed senior unsecured debt during the period between November 1, 2009 and April 30, 2010, subject to any other restrictions and conditions deemed appropriate by the FDIC, including limiting executive compensation, bonuses, or the payment of dividends. 5 Establishment of the emergency guarantee facility would be consistent with the rationale for establishing the existing TLGP and the determination of systemic risk made on October 14, 2008, pursuant to 12 U.S.C. section 1823(c)(4)(G), by the Secretary of the Treasury (after consultation with the President) following receipt of the written recommendation dated October 13, 2008, of the FDIC’s Board of Directors (Board) and the similar written recommendation of the Board of Governors of the Federal Reserve System (Federal Reserve). In addition to the authority granted to the FDIC by the systemic risk determination, the FDIC is authorized under Section 9(a)(Tenth) of the FDI Act, 12 U.S.C. 1819(a)Tenth, to prescribe, by its Board, such rules and regulations as it may deem necessary to carry out the provisions of the FDI Act. PO 00000 Frm 00002 Fmt 4702 Sfmt 4702 A. Alternative A Alternative A would preserve the current regulation regarding the duration of the FDIC’s guarantee of senior unsecured debt under the DGP. Thus, all IDIs participating in the DGP (and other participating entities that had either issued guaranteed debt before April 1, 2009, or had not issued guaranteed debt before April 1, 2009, but had otherwise received the FDIC’s permission to issue non-guaranteed debt) would be permitted to issue FDICguaranteed senior unsecured debt until October 31, 2009. The FDIC’s guarantee for such debt issuances would expire no later than December 31, 2012. B. Alternative B Under Alternative B, the DGP would expire as currently structured. In Alternative B, however, the FDIC proposes the establishment of a limited, six-month emergency guarantee facility upon expiration of the DGP on October 31, 2009, as currently structured. This emergency guarantee facility would be designed to address an entity’s inability to replace maturing debt through non-guaranteed sources as a result of a market disruption or other circumstance beyond the control of the participating entity. Under this emergency guarantee facility, the FDIC, after prior approval granted on a caseby-case basis, would guarantee senior unsecured debt (as defined in 12 CFR 370.2(e)) issued by certain entities participating in the DGP after October 31, 2009, through and including April 30, 2010, subject to restrictions and conditions deemed appropriate by the FDIC. The FDIC’s guarantee of principal and interest payments for senior unsecured debt issuances approved under the emergency guarantee facility would extend through the earliest of the mandatory conversion date (for mandatory convertible debt), the stated maturity date, or December 31, 2012. If Alternative B were adopted, with the exception of the prior approval requirement and the increased participation fee, the terms of the FDIC guarantee would remain unchanged from the existing DGP. Further, should Alternative B be adopted, there would be no effect on any conditions that the FDIC may have placed on the issuance of debt by an IDI or other entity participating in the DGP. Any IDI participating in the DGP and any other entity participating in the DGP that has issued FDIC-guaranteed debt by September 9, 2009, would be permitted to apply to use this emergency guarantee facility. Any use of the facility would require the prior E:\FR\FM\16SEP1.SGM 16SEP1 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Proposed Rules approval of the FDIC which is expected to be provided on a limited basis following case-by-case consideration. srobinson on DSKHWCL6B1PROD with PROPOSALS Application Requirements for Participation in the Emergency Guarantee Facility Applications to participate in the emergency guarantee facility would be required to be submitted to the Director of the Division of Supervision and Consumer Protection on or before April 30, 2010. The application would be expected to include a projection of the sources and uses of funds through December 31, 2012; a summary of the entity’s contingency plans; a description of any collateral that an entity can make available to secure the entity’s obligation to reimburse the FDIC for any payments made pursuant to the guarantee; a description of the plans for retirement of the FDIC-guaranteed debt; a description of the market disruptions or other circumstances beyond the entity’s control that prevent the entity from replacing maturing debt with nonguaranteed debt; a description of management’s efforts to mitigate the effects of such disruptions or circumstances; conclusive evidence that demonstrates an entity’s inability to issue non-guaranteed debt; and any other relevant information that the FDIC deems appropriate. Participation in the emergency guarantee facility would be limited only to those entities that demonstrated the inability to issue non-guaranteed debt to replace maturing debt as a result of market disruptions or other circumstances beyond the entities’ control. In order for an application to be accepted and considered by the FDIC, applicants would be required to describe the circumstances that gave rise to the request to participate in the emergency guarantee facility and also must include an explanation of how and the extent to which such circumstances were unanticipated by the applicant and remain beyond its control. In addition, applicants would be expected to include an explanation of the actions taken by its management to mitigate such circumstances. Participation Fee Under Alternative B, the FDIC would assess an annualized participation fee of at least 300 basis points on any FDICguaranteed debt issued by entities that are permitted to use the emergency guarantee facility. The FDIC would reserve the right to increase the participation fee on a case-by-case basis, depending upon the risks present in the issuing entity’s organization. The FDIC notes that the participation fee may VerDate Nov<24>2008 16:46 Sep 15, 2009 Jkt 217001 provide an appropriate deterrent to applications based on other, less severe circumstances or concerns. Consistent with the existing DGP, a participating entity may be required to pledge sufficient collateral to ensure the repayment of any principal and interest payments made by the FDIC under the guarantee facility, and also may be subject to other conditions and restrictions that the FDIC deems appropriate, including, for example, limiting executive compensation, bonuses, or the payment of dividends. IV. Request for Comments The FDIC requests comments on all aspects of this notice. Specifically, the FDIC notes that, upon approval of application, the emergency guarantee facility proposed in Alternative B would be available to all participating IDIs and to those other entities that had issued FDIC-guaranteed debt by September 9, 2009. The FDIC requests comment as to whether, if Alternative B is adopted, eligibility should be limited in this manner. Finally, the FDIC asks commenters to indicate a preference for either Alternative A or Alternative B as a means of providing the most appropriate phase out of the FDIC’s DGP. V. Regulatory Analysis and Procedure A. Regulatory Flexibility Act In accordance with section 3(a) of the Regulatory Flexibility Act (RFA), 5 U.S.C. 603(a), the FDIC must publish an initial regulatory flexibility analysis with this proposed rulemaking or certify that the proposed rule, if adopted, will not have a significant economic impact on a substantial number of small entities. For purposes of the RFA analysis or certification, financial institutions with total assets of $175 million or less are considered to be ‘‘small entities.’’ The FDIC hereby certifies pursuant to 5 U.S.C. 605(b) that the Alternative B of the proposed rule, if adopted, will not have a significant economic impact on a substantial number of small entities. (Alternative A, as described in the proposed rule, represents no change from the FDIC’s existing regulation. As such, Alternative A is not likely to have a significant economic impact on a substantial number of small entities.) Currently, 4,424 IDIs participate in the DGP, of which approximately 2,136 (or approximately 48 percent) are small entities. If Alternative B is adopted, all 2,136 IDIs that are considered small entities for purposes of this analysis would be eligible to apply to access the emergency guarantee facility. As a PO 00000 Frm 00003 Fmt 4702 Sfmt 4702 47491 result, the FDIC asserts that Alternative B could have some impact on a substantial number of IDIs that are small entities that participate in the DGP. Nevertheless, the FDIC has determined that, were Alternative B of the proposed rule to be adopted, the economic impact on small entities will not be significant for the following reasons. The emergency guarantee facility as contemplated in Alternative B is designed to be accessed on an emergency case-by-case basis by IDIs (and other entities that issued debt under the DGP) only if such entities are unable to replace maturing debt as a result of market disruptions or other circumstances beyond the entities’ control. Eighty-one IDIs have issued FDIC-guaranteed debt through the DGP since the program’s inception. It appears unlikely that a significant number of IDIs (or other qualifying entities) would satisfy the requirements to issue FDICguaranteed debt during such emergency circumstances. Accordingly, if adopted in final form, neither Alternate A nor Alternate B of the proposed rule would have a significant economic impact on a substantial number of small entities. B. Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), an agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. If Alternative B were adopted, the Proposed Rule would establish a new OMB-approved information collection, entitled the ‘‘Temporary Liquidity Guarantee Program—Emergency Guarantee Facility’’ (OMB No. 3064—NEW). (Should Alternative A be adopted, no change would occur in the existing regulation or the existing burden estimates.) Should Alternative B be adopted, the estimated burden for the proposed application process, described in Alternative B of the Proposed Rule, is as follows: Title: ‘‘Temporary Liquidity Guarantee Program—Emergency Guarantee Facility’’. OMB Number: 3064—NEW. Estimated Number of Respondents: Application to access emergency guarantee facility submitted by IDIs—8. Application to access emergency guarantee facility submitted by non-IDIs that issued FDIC-guaranteed debt under the DGP—4. Frequency of Response: Application to access emergency guarantee facility submitted by IDIs— once. E:\FR\FM\16SEP1.SGM 16SEP1 srobinson on DSKHWCL6B1PROD with PROPOSALS 47492 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Proposed Rules Application to access emergency guarantee facility submitted by non-IDIs that issued FDIC-guaranteed debt under the DGP—once. Affected Public: IDIs; thrift holding companies, bank and financial holding companies, and affiliates of IDIs that issued debt under the DGP. Average Time per Response: Application to access emergency guarantee facility submitted by IDIs—4 hours. Application to access emergency guarantee facility submitted by non-IDIs that issued FDIC-guaranteed debt under the DGP—4 hours. Estimated Annual Burden: Application to access emergency guarantee facility submitted by IDIs—32 hours. Application to access emergency guarantee facility submitted by non-IDIs that issued FDIC-guaranteed debt under the DGP—16 hours. Total Annual Burden—48 hours. The FDIC is requesting comment on the new TLGP-related information collection proposed in Alternative B. The FDIC is also giving notice that the proposed collection of information has been submitted to OMB for review and approval. Comments are invited on: (1) Whether this collection of information is necessary for the proper performance of the FDIC’s functions, including whether the information has practical utility; (2) the accuracy of the estimates of the burden of the information collection, including the validity of the methodologies and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the information collection on respondents, including through the use of automated collection techniques or other forms of information technology. Interested parties are invited to submit written comments on the estimated burden by any of the following methods: • http://www.FDIC.gov/regulations/ laws/federal/propose.html. • E-mail: comments@fdic.gov. Include the name and number of the collection in the subject line of the message. • Mail: Leneta Gregorie (202–898– 3719), Counsel, Federal Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 20429. • Hand Delivery: Comments may be hand-delivered to the guard station at the rear of the 550 17th Street Building (located on F Street), on business days between 7 a.m. and 5 p.m. A copy of the comment may also be submitted to the OMB Desk Officer for the FDIC, Office of Information and VerDate Nov<24>2008 16:46 Sep 15, 2009 Jkt 217001 Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 3208, Washington, DC 20503. All comments should refer to the name and number of the collection. Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818, 1819(a)(Tenth), 1820(f), 1821(a), 1821(c), 1821(d), 1823(c)(4). C. Solicitation of Comments on Use of Plain Language * Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The FDIC invites your comments on how to make this proposed regulation easier to understand. For example: • Has the FDIC organized the material to suit your needs? If not, how could this material be better organized? • Are the requirements in the proposed rule clearly stated? If not, how could the proposed rule be more clearly stated? • Does the proposed rule contain language or jargon that is not clear? If so, which language requires clarification? • Would a different format (grouping and order of sections, use of headings, paragraphing) make the proposed rule easier to understand? If so, what changes to the format would make the proposed rule easier to understand? • What else could the FDIC do to make the proposed rule easier to understand? D. The Treasury and General Government Appropriations Act, 1999— Assessment of Federal Regulations and Policies on Families The FDIC has determined that the proposed rule will not affect family well-being within the measure of section 654 of the Treasury and General Government Appropriations Act, enacted as part of the Omnibus Consolidated and Emergency Supplemental Appropriations Act of 1999 (Pub. L. 105–277, 112 Stat. 2681). List of Subjects in 12 CFR Part 370 Banks, Banking, Bank deposit insurance, Holding companies, National banks, Reporting and recordkeeping requirements, Savings associations. For the reasons discussed in the preamble, the Federal Deposit Insurance Corporation proposes to amend 12 CFR Part 370 as follows: PART 370—TEMPORARY LIQUIDITY GUARANTEE PROGRAM 1. The authority citation for part 370 continues to read as follows: PO 00000 Frm 00004 Fmt 4702 Sfmt 4702 2. Amend § 370.2 by revising paragraph (n) to read as follows: § 370.2 Definitions. * * * * (n) Issuance period. Except as provided in paragraph (n)(2) of this section, the term ‘‘issuance period’’ means (i) With respect to the issuance, by a participating entity that is either an insured depository institution, an entity that has issued FDIC-guaranteed debt before April 1, 2009, or an entity that has been approved pursuant to § 370.3(h) to issue FDIC-guaranteed debt after June 30, 2009 and on or before October 31, 2009, of: (A) Mandatory convertible debt, the period from February 27, 2009 to and including October 31, 2009, and (B) All other senior unsecured debt, the period from October 14, 2008 to and including October 31, 2009; and (ii) With respect to the issuance, by any other participating entity, of (A) Mandatory convertible debt, the period from February 27, 2009 to and including June 30, 2009, and (B) All other senior unsecured debt, the period from October 14, 2008 to and including June 30, 2009. (2) The ‘‘issuance period’’ for a participating entity that has been approved to issue FDIC-guaranteed debt pursuant to § 370.3(k) of this part is the period after October 31, 2009 and on or before April 30, 2010. * * * * * 3. Amend section 370.3 as follows: a. Revise paragraph (d)(2); b. Revise paragraphs (h)(1) through (h)(3), (h)(5), and (h)(6); and c. Add paragraph (k), to read as follows: § 370.3 Debt Guarantee Program. * * * * * (d) * * * (2) With respect to debt that is issued on or after April 1, 2009 by a participating entity that is either an insured depository institution, a participating entity that has issued guaranteed debt before April 1, 2009, a participating entity that has been approved pursuant to § 370.3(h) to issue guaranteed debt after June 30, 2009 and on or before October 31, 2009, or a participating entity that has been approved pursuant to § 370.3(k) to issue guaranteed debt after October 31, 2009, the guarantee expires on the earliest of the mandatory conversion date for mandatory convertible debt, the E:\FR\FM\16SEP1.SGM 16SEP1 srobinson on DSKHWCL6B1PROD with PROPOSALS Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Proposed Rules maturity date of the debt, or December 31, 2012. * * * * * (h) Applications for exceptions, eligibility, and issuance of certain debt. (1) The following requests require written application to the FDIC and the appropriate Federal banking agency of the entity or the entity’s lead affiliated insured depository institution: (i) A request by a participating entity to establish, increase, or decrease its debt guarantee limit, (ii) A request by an entity that becomes an eligible entity after October 13, 2008, for an increase in its presumptive debt guarantee limit of zero, (iii) A request by a non-participating surviving entity in a merger transaction to opt in to either the debt guarantee program or the transaction account guarantee program, (iv) A request by an affiliate of an insured depository institution to participate in the debt guarantee program, (v) A request by a participating entity to issue FDIC-guaranteed mandatory convertible debt, (vi) A request by a participating entity that is neither an insured depository institution nor an entity that has issued FDIC-guaranteed debt before April 1, 2009, to issue FDIC-guaranteed debt after June 30, 2009 and on or before October 31, 2009, (vii) A request by a participating entity to issue senior unsecured nonguaranteed debt after June 30, 2009, and (viii) A request by a participating entity to issue FDIC-guaranteed debt after October 31, 2009 under the Emergency Guarantee Facility pursuant to paragraph (k) of this section. (2) Each letter application must describe the details of the request, provide a summary of the applicant’s strategic operating plan, describe the proposed use of the debt proceeds, and (i) With respect to an application for approval of the issuance of mandatory convertible debt, must also include: (A) The proposed date of issuance, (B) The total amount of the mandatory convertible debt to be issued, (C) The mandatory conversion date, (D) The conversion rate (i.e., the total number of shares of common stock that will result from the conversion divided by the total dollar amount of the mandatory convertible debt to be issued), (E) Confirmation that all applications and all notices required under the Bank Holding Company Act of 1956, as amended, the Home Owners’ Loan Act, as amended, or the Change in Bank VerDate Nov<24>2008 16:46 Sep 15, 2009 Jkt 217001 Control Act, as amended, have been submitted to the applicant’s appropriate Federal banking agency in connection with the proposed issuance, and (F) Any other relevant information that the FDIC deems appropriate; (ii) With respect to an application pursuant to paragraph (h)(1)(vi) of this section to extend the period for issuance of FDIC-guaranteed debt to and including October 31, 2009, the entity’s plans for the retirement of the guaranteed debt, a description of the entity’s financial history, current condition, and future prospects, and any other relevant information that the FDIC deems appropriate; (iii) With respect to an application pursuant to paragraph (h)(1)(vii) of this section to issue senior unsecured nonguaranteed debt, a summary of the applicant’s strategic operating plan and the entity’s plans for the retirement of any guaranteed debt; and (iv) With respect to an application pursuant to paragraph (h)(1)(viii) of this section to issue FDIC-guaranteed debt under the Emergency Guarantee Facility, a projection of the sources and uses of funds through December 31, 2012, a summary of the entity’s contingency plans, a description of the collateral that an entity can make available to secure the entity’s obligation to reimburse the FDIC for any payments made pursuant to the guarantee, a description of the plans for retirement of the FDIC-guaranteed debt, a description of the market disruptions or other circumstances beyond the entity’s control that prevent the entity from replacing maturing debt with nonguaranteed debt, a description of management’s efforts to mitigate the effects of such disruptions or circumstances, conclusive evidence that demonstrates an entity’s inability to issue non-guarantee debt, and any other relevant information. (3) In addition to any other relevant factors that the FDIC deems appropriate, the FDIC will consider the following factors in evaluating applications filed pursuant to paragraph (h) of this section: (i) For applications pursuant to paragraphs (h)(1)(i), (h)(1)(ii), (h)(1)(iii), and (h)(1)(v) of this section: the proposed use of the proceeds; the financial condition and supervisory history of the eligible/surviving entity; (ii) For applications pursuant to paragraph (h)(1)(iv) of this section: the proposed use of the proceeds; the extent of the financial activity of the entities within the holding company structure; the strength, from a ratings perspective of the issuer of the obligations that will PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 47493 be guaranteed; the size and extent of the activities of the organization; (iii) For applications pursuant to paragraph (h)(1)(vi) of this section: the proposed use of the proceeds; the entity’s plans for the retirement of the guaranteed debt, the entity’s financial history, current condition, future prospects, capital, management, and the risk presented to the FDIC; (iv) For applications pursuant to paragraph (h)(1)(vii) of this section: the entity’s plans for the retirement of the guaranteed debt, and (v) For applications pursuant to paragraph (h)(1)(viii) of this section, the applicant’s strategic operating plan, the proposed use of the debt proceeds, the entity’s plans for the retirement of the FDIC-guaranteed debt, the entity’s contingency plans, the nature and extent of the market disruptions or other circumstances beyond the entity’s control that prevent the entity from replacing maturing debt with nonguaranteed debt, the collateral that an entity can make available to secure the entity’s obligation to reimburse the FDIC for any payments made pursuant to the guarantee, management’s efforts to mitigate the effects of such conditions or circumstances, the evidence that demonstrates an entity’s inability to issue non-guarantee debt, and the risk presented to the FDIC. * * * * * (5) The filing deadlines for certain applications are: (i) At the same time the merger application is filed with the appropriate Federal banking agency, for an application pursuant to paragraph (h)(1)(iii) of this section (which must include a copy of the merger application); (ii) October 31, 2009, for an application pursuant to paragraph (h)(1)(v) of this section that is filed by a participating entity that is either an insured depository institution, an entity that has issued FDIC-guaranteed debt before April 1, 2009, or an entity that has been approved pursuant to paragraph (h) of this section to issue FDIC-guaranteed debt after June 30, 2009 and on or before October 31, 2009; (iii) June 30, 2009, for an application pursuant to paragraph (h)(1)(v) of this section that is filed by a participating entity other than an entity described in paragraph (h)(5)(ii) of this section; (iv) June 30, 2009, for an application pursuant to paragraph (h)(1)(vi); and (v) April 30, 2010, for applications pursuant to paragraph (h)(1)(viii). (6) In granting its approval of an application filed pursuant to paragraph (h) of this section the FDIC may impose E:\FR\FM\16SEP1.SGM 16SEP1 47494 Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / Proposed Rules any conditions it deems appropriate, including without limitation, requirements that the issuer (i) Hedge any foreign currency risk, or (ii) Pledge collateral to secure the issuer’s obligation to reimburse the FDIC for any payments made pursuant to the guarantee. (iii) Limit executive compensation and bonuses, and/or (iv) Limit or refrain from the payment of dividends. * * * * * (k) Emergency Guarantee Facility. In the event that a participating entity that is either an insured depository institution or an entity that has issued FDIC-guaranteed debt on or before September 9, 2009 is unable, after October 31, 2009, to issue nonguaranteed debt to replace maturing senior unsecured debt as a result of market disruptions or other circumstances beyond the entity’s control, the participating entity may, with the FDIC’s prior approval under paragraph (h) of this section, issue FDIC-guaranteed debt after October 31, 2009 and on or before April 30, 2010. Any such issuance is subject to all of the terms and conditions imposed by the FDIC in its approval decision as well as all of the provisions of this part, including without limitation, the payment of the applicable assessment and compliance with the disclosure requirements. 4. Amend section 370.5 as follows: a. Revise paragraph (f); and b. Revise paragraph (h)(2), to read as follows: § 370.5 Participation. srobinson on DSKHWCL6B1PROD with PROPOSALS * * * * * (f) Except as provided in paragraphs (g), (j), and (k) of § 370.3, participating entities are not permitted to select which newly issued senior unsecured debt is guaranteed debt; all senior unsecured debt issued by a participating entity up to its debt guarantee limit must be issued and identified as FDICguaranteed debt as and when issued. * * * * * (h) * * * (2) Each participating entity that is either an insured depository institution, an entity that has issued FDICguaranteed debt before April 1, 2009, an entity that has been approved pursuant to § 370.3(h) to issue FDIC-guaranteed debt after June 30, 2009 and on or before October 31, 2009, or a participating entity that has been approved pursuant to § 370.3(k) to issue FDIC-guaranteed debt after October 31, 2009, must include the following disclosure statement in all written materials provided to lenders or creditors regarding any senior unsecured debt VerDate Nov<24>2008 18:11 Sep 15, 2009 Jkt 217001 that is issued by it during the applicable issuance period and that is guaranteed under the debt guarantee program: This debt is guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program and is backed by the full faith and credit of the United States. The details of the FDIC guarantee are provided in the FDIC’s regulations, 12 CFR Part 370, and at the FDIC’s Web site, http:// www.fdic.gov/tlgp. [If the debt being issued is mandatory convertible debt, add: The expiration date of the FDIC’s guarantee is the earlier of the mandatory conversion date or December 31, 2012]. [If the debt being issued is any other senior unsecured debt, add: The expiration date of the FDIC’s guarantee is the earlier of the maturity date of the debt or December 31, 2012.] * * * * * 5. Amend section 370.6 as follows: a. Revise paragraph (d)(1); and b. Add paragraph (i), to read as follows: § 370.6 Assessments under the Debt Guarantee Program. * * * * * (d) Amount of assessments for debt within the debt guarantee limit (1) Calculation of assessment. Subject to paragraphs (d)(3) and (h) of this section, and except as provided in paragraph (i) of this section, the amount of assessment will be determined by multiplying the amount of FDICguaranteed debt times the term of the debt or, in the case of mandatory convertible debt, the time period from issuance to the mandatory conversion date, times an annualized assessment rate determined in accordance with the following table. Federal Deposit Insurance Corporation. Robert E. Feldman, Executive Secretary. [FR Doc. E9–22372 Filed 9–15–09; 8:45 am] BILLING CODE P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration 14 CFR Part 25 [Docket No. FAA–2008–1292; Notice No. 09– 05A] RIN 2120–AJ35 Flightcrew Alerting; Reopening of Comment Period AGENCY: Federal Aviation Administration (FAA), DOT. ACTION: Notice of proposed rulemaking (NPRM); reopening of comment period. SUMMARY: On July 9, 2009, the FAA published an NPRM to amend the airworthiness standards for flightcrew alerting and invited comments for a 60day period. The comment period closed on September 8, 2009; however, the FAA is reopening the comment period for an additional 15 days in response to requests from The Boeing Company; the Air Line Pilots Association, International; the General Aviation Manufacturers Association; and Airbus. All of the requestors stated that reopening the comment period is needed to permit them additional time to develop comments responsive to The annualized Notice No. 09–05. Reopening the For debt with a maturity or time assessment comment period will allow the period to conversion date of rate (in requestors and others additional time to basis review and comment on the proposal. points) is DATES: The comment period for the 180 days or less (excluding NPRM published on July 9, 2009 (74 FR overnight debt) ...................... 50 181–364 days ........................... 75 32810) closed September 8, 2009, and is 365 days or greater .................. 100 reopened until October 1, 2009. ADDRESSES: You may send comments * * * * * identified by Docket Number FAA– (i) Assessment for Debt issued under 2008–1292 using any of the following the Emergency Guarantee Facility. The methods: amount of the assessment for FDIC• Federal eRulemaking Portal: Go to guaranteed debt issued pursuant to http://www.regulations.gov and follow § 370.3(k) of this part is equal to the the instructions for sending your amount of the debt times the term of the comments electronically. debt (or in the case of mandatory • Mail: Send comments to Docket convertible debt, the time period to Operations, M–30, U.S. Department of conversion) times an annualized Transportation, 1200 New Jersey assessment rate of 300 basis points, or Avenue, SE., West Building Ground such greater rate as the FDIC may Floor, Room W12–140, Washington, DC determine in its decision approving 20590. such issuance. • Fax: Fax comments to Docket Operations at 202–493–2251. Dated at Washington DC, this 9th day of September 2009. • Hand Delivery: Bring comments to By order of the Board of Directors. Docket Operations in Room W12–140 of PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 E:\FR\FM\16SEP1.SGM 16SEP1

Agencies

[Federal Register Volume 74, Number 178 (Wednesday, September 16, 2009)]
[Proposed Rules]
[Pages 47489-47494]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-22372]


========================================================================
Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

========================================================================


Federal Register / Vol. 74, No. 178 / Wednesday, September 16, 2009 / 
Proposed Rules

[[Page 47489]]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 370

RIN 3064-AD37


Expiration of the Issuance Period for the Debt Guarantee Program; 
Establishment of Emergency Guarantee Facility

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: The FDIC is issuing this Notice of Proposed Rulemaking to 
present two alternatives for phasing out the Debt Guarantee Program 
(DGP), a component of the Temporary Liquidity Guarantee Program (TLGP).
    Under the first alternative, the DGP would conclude as provided in 
the current regulation. Thus, insured depository institutions (IDIs) 
and certain other participating entities would be permitted to issue 
FDIC-guaranteed debt no later than October 31, 2009, with the FDIC's 
guarantee for such debt expiring no later than December 31, 2012.
    Under the second alternative, the DGP would expire as indicated 
above; however, the FDIC would establish a limited six-month emergency 
guarantee facility to be made available in emergency circumstances to 
insured depository institutions (IDIs) and certain other entities 
participating in the DGP upon application to and with the prior 
approval of the FDIC. Under the proposed emergency guarantee facility, 
the FDIC would guarantee senior unsecured debt issued on or before 
April 30, 2010. The emergency guarantee facility would be available on 
a limited, case-by-case basis to insured depository institutions (IDIs) 
participating in the DGP and to other entities participating in the DGP 
that have issued FDIC-guaranteed debt under the DGP by September 9, 
2009. Entities seeking to participate in the emergency guarantee 
facility would be required to submit an application to the FDIC on or 
before April 30, 2010, and demonstrate an inability to issue non-
guaranteed debt to replace maturing senior unsecured debt as a result 
of market disruptions or other circumstances beyond the entity's 
control. If approved by the FDIC, senior unsecured debt issued under 
the emergency guarantee facility would be guaranteed by the FDIC until 
a date no later than December 31, 2012, and would be subject to an 
annualized participation fee of at least 300 basis points.

DATES: Written comments must be received by the FDIC by October 1, 
2009.

ADDRESSES: You may submit comments on the Notice of Proposed 
Rulemaking, by any of the following methods:
     Agency Web Site: http://www.FDIC.gov/regulations/laws/federal/notices.html. Follow instructions for submitting comments on 
the Agency Web Site.
     E-mail: Comments@FDIC.gov. Include RIN  3064-AD37 
on the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7 a.m. and 5 p.m.
    Instructions: All comments received will be posted generally 
without change to http://www.fdic.gov/regulations/laws/federal/final.html, including any personal information provided.

FOR FURTHER INFORMATION CONTACT: (for questions or comments related to 
applications) Lisa D Arquette, Associate Director, Division of 
Supervision and Consumer Protection, (202) 898-8633 or 
larquette@fdic.gov; Serena L. Owens, Associate Director, Supervision 
and Applications Branch, Division of Supervision and Consumer 
Protection, (202) 898-8996 or sowens@fdic.gov; Gail Patelunas, Deputy 
Director, Division of Resolutions and Receiverships, (202) 898-6779 or 
gpatelunas@fdic.gov; Donna Saulnier, Manager, Assessment Policy 
Section, Division of Finance, (703) 562-6167 or dsaulnier@fdic.gov; 
Munsell St. Clair, Chief, Bank and Regulatory Policy Section, Division 
of Insurance and Research, (202) 898-8967 or mstclair@fdic.gov; Robert 
C. Fick, Counsel, Legal Division, (202) 898-8962 or rfick@fdic.gov; or 
A. Ann Johnson, Counsel, Legal Division, (202) 898-3573 or 
aajohnson@fdic.gov.

SUPPLEMENTARY INFORMATION: 

I. Background

    The FDIC adopted the TLGP in October, 2008 following a 
determination of systemic risk by the Secretary of the Treasury (after 
consultation with the President) that was supported by recommendations 
from the FDIC and the Board of Governors of the Federal Reserve System 
(Federal Reserve).\1\ The TLGP is part of a coordinated effort by the 
FDIC, the U.S. Department of the Treasury (Treasury), and the Federal 
Reserve to address unprecedented disruptions in credit markets and the 
resultant difficulty of many financial institutions to obtain funds and 
to make loans to creditworthy borrowers.
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    \1\ See Section 13(c)(4)(G) of the Federal Deposit Insurance Act 
(FDI Act), 12 U.S.C. 1823(c)(4)(G). The determination of systemic 
risk triggered the FDIC's authority--``in its sole discretion and 
upon such terms and conditions as the [FDIC's] Board of Directors 
may prescribe--to take actions to avoid or mitigate serious adverse 
effects on economic conditions or financial stability. See also 
Section 9(a)Tenth of the FDI Act, 12 U.S.C. 1819(a)Tenth. The FDIC 
implemented the TLGP in response.
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    On October 23, 2008, the FDIC's Board of Directors (Board) 
authorized the publication in the Federal Register of an interim rule 
that outlined the structure of the TLGP.\2\ Designed to assist in the 
stabilization of the nation's financial system, the FDIC's TLGP is 
composed of two distinct components: the DGP and the Transaction 
Account Guarantee Program (TAG program). The DGP initially permitted 
participating entities to issue FDIC-guaranteed senior unsecured debt 
until June 30, 2009, with the FDIC's guarantee for such debt to expire 
on the earlier of the maturity of the debt (or the conversion date, for 
mandatory convertible debt) or June 30, 2012.
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    \2\ 73 FR 64179 (October 29, 2008). This interim rule was 
finalized and a final rule was published in the Federal Register on 
November 26, 2008. 73 FR 72244 (November 26, 2008).
---------------------------------------------------------------------------

    To reduce market disruption at the conclusion of the DGP and to 
facilitate the orderly phase-out of the program, the Board issued a 
final rule that generally extended for four months the period during 
which participating entities could issue FDIC-guaranteed debt.\3\ Under 
this rule, all IDIs and those other participating entities that had 
issued FDIC-guaranteed debt on or

[[Page 47490]]

before April 1, 2009 are permitted to participate in the extended DGP 
without application to the FDIC. Other participating entities that 
receive approval from the FDIC also may participate in the extended 
DGP. The rule also extended the expiration of the guarantee period from 
June 30, 2012 to December 31, 2012. As a result, participating entities 
may issue FDIC-guaranteed debt through and including October 31, 2009, 
where the FDIC's guarantee expires on the earliest of the debt's 
mandatory conversion date, the stated maturity date, or December 31, 
2012.
---------------------------------------------------------------------------

    \3\ 74 FR 26521 (June 3, 2009).
---------------------------------------------------------------------------

    On June 23, 2009, the Board proposed two alternatives for phasing 
out the TAG. The first proposed alternative provided that the TAG would 
expire on December 31, 2009, as required by the terms of the existing 
rule. The second proposed alternative provided for a limited six month 
extension to that program. Following consideration of the comments 
submitted in response to the two alternatives, on August 26, 2009, the 
Board adopted and approved for publication in the Federal Register a 
final rule providing for a six-month extension of the TAG program, 
through June 30, 2010.\4\ The extended TAG program is available to any 
participating IDI that does not elect to opt-out of the extension, 
subject to an increased fee for the FDIC's guarantee of qualifying non-
interest bearing transaction accounts during the extension period.
---------------------------------------------------------------------------

    \4\ 74 FR 45093 (September 1, 2009).
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    Recent data suggest that the TLGP and other federal efforts to 
restore liquidity to and confidence in the banking and financial 
services industries have had a positive impact. For example, only a few 
participating entities have issued FDIC-guaranteed debt under the 
extended DGP, and a number of banking organizations have conducted 
successful public offerings of non-FDIC-guaranteed debt and equity. A 
number of banking organizations also have repaid the preferred shares 
purchased by the U.S. Treasury through its Capital Purchase Program. 
Funding costs have eased as the three-month Libor rate has reached 
record lows and related credit spreads have moderated substantially.
    Since there is evidence that the domestic credit and liquidity 
markets are beginning to normalize and since there has been a decrease 
in the number of entities that now are issuing debt under the DGP, the 
current regulation may provide an appropriate means for concluding the 
DGP. On the other hand, however, it may be prudent for the FDIC to 
allow the DGP to expire by its terms, while establishing an emergency 
guarantee facility to be accessed on a limited, case-by-case basis by 
IDIs and certain other entities participating in the DGP if emergency 
circumstances warrant. This limited emergency guarantee facility could 
afford protection to entities participating in the DGP that are unable 
to issue non-guaranteed debt to replace maturing debt because of market 
disruptions or other circumstances beyond their control.\5\
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    \5\ Establishment of the emergency guarantee facility would be 
consistent with the rationale for establishing the existing TLGP and 
the determination of systemic risk made on October 14, 2008, 
pursuant to 12 U.S.C. section 1823(c)(4)(G), by the Secretary of the 
Treasury (after consultation with the President) following receipt 
of the written recommendation dated October 13, 2008, of the FDIC's 
Board of Directors (Board) and the similar written recommendation of 
the Board of Governors of the Federal Reserve System (Federal 
Reserve). In addition to the authority granted to the FDIC by the 
systemic risk determination, the FDIC is authorized under Section 
9(a)(Tenth) of the FDI Act, 12 U.S.C. 1819(a)Tenth, to prescribe, by 
its Board, such rules and regulations as it may deem necessary to 
carry out the provisions of the FDI Act.
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II. Proposed Alternatives for Concluding the Debt Guarantee Program

    As it did when proposing alternatives for concluding the TAG, in 
this Notice of Proposed Rulemaking the FDIC presents two alternatives 
for concluding the FDIC's guarantee of senior unsecured debt under the 
DGP. In general, under Alternative A, IDIs and certain other 
participating entities would be permitted to issue FDIC-guaranteed debt 
under the DGP no later than October 31, 2009, with the FDIC's guarantee 
for such debt expiring no later than December 31, 2012, as provided for 
in the current regulation. Under Alternative B, although the DGP 
effectively would end as provided for in the current regulation, the 
FDIC would establish and make available on a limited, case-by-case 
basis, an emergency guarantee facility. The proposed emergency 
guarantee facility would be made available only following FDIC approval 
of an application submitted by an IDI or other entity that issued FDIC-
guaranteed senior unsecured debt on or before September 9, 2009. If 
approved by the FDIC, an applicant would be permitted to issue FDIC-
guaranteed senior unsecured debt during the period between November 1, 
2009 and April 30, 2010, subject to any other restrictions and 
conditions deemed appropriate by the FDIC, including limiting executive 
compensation, bonuses, or the payment of dividends.

A. Alternative A

    Alternative A would preserve the current regulation regarding the 
duration of the FDIC's guarantee of senior unsecured debt under the 
DGP. Thus, all IDIs participating in the DGP (and other participating 
entities that had either issued guaranteed debt before April 1, 2009, 
or had not issued guaranteed debt before April 1, 2009, but had 
otherwise received the FDIC's permission to issue non-guaranteed debt) 
would be permitted to issue FDIC-guaranteed senior unsecured debt until 
October 31, 2009. The FDIC's guarantee for such debt issuances would 
expire no later than December 31, 2012.

B. Alternative B

    Under Alternative B, the DGP would expire as currently structured. 
In Alternative B, however, the FDIC proposes the establishment of a 
limited, six-month emergency guarantee facility upon expiration of the 
DGP on October 31, 2009, as currently structured.
    This emergency guarantee facility would be designed to address an 
entity's inability to replace maturing debt through non-guaranteed 
sources as a result of a market disruption or other circumstance beyond 
the control of the participating entity. Under this emergency guarantee 
facility, the FDIC, after prior approval granted on a case-by-case 
basis, would guarantee senior unsecured debt (as defined in 12 CFR 
370.2(e)) issued by certain entities participating in the DGP after 
October 31, 2009, through and including April 30, 2010, subject to 
restrictions and conditions deemed appropriate by the FDIC. The FDIC's 
guarantee of principal and interest payments for senior unsecured debt 
issuances approved under the emergency guarantee facility would extend 
through the earliest of the mandatory conversion date (for mandatory 
convertible debt), the stated maturity date, or December 31, 2012. If 
Alternative B were adopted, with the exception of the prior approval 
requirement and the increased participation fee, the terms of the FDIC 
guarantee would remain unchanged from the existing DGP. Further, should 
Alternative B be adopted, there would be no effect on any conditions 
that the FDIC may have placed on the issuance of debt by an IDI or 
other entity participating in the DGP.
    Any IDI participating in the DGP and any other entity participating 
in the DGP that has issued FDIC-guaranteed debt by September 9, 2009, 
would be permitted to apply to use this emergency guarantee facility. 
Any use of the facility would require the prior

[[Page 47491]]

approval of the FDIC which is expected to be provided on a limited 
basis following case-by-case consideration.
Application Requirements for Participation in the Emergency Guarantee 
Facility
    Applications to participate in the emergency guarantee facility 
would be required to be submitted to the Director of the Division of 
Supervision and Consumer Protection on or before April 30, 2010. The 
application would be expected to include a projection of the sources 
and uses of funds through December 31, 2012; a summary of the entity's 
contingency plans; a description of any collateral that an entity can 
make available to secure the entity's obligation to reimburse the FDIC 
for any payments made pursuant to the guarantee; a description of the 
plans for retirement of the FDIC-guaranteed debt; a description of the 
market disruptions or other circumstances beyond the entity's control 
that prevent the entity from replacing maturing debt with non-
guaranteed debt; a description of management's efforts to mitigate the 
effects of such disruptions or circumstances; conclusive evidence that 
demonstrates an entity's inability to issue non-guaranteed debt; and 
any other relevant information that the FDIC deems appropriate.
    Participation in the emergency guarantee facility would be limited 
only to those entities that demonstrated the inability to issue non-
guaranteed debt to replace maturing debt as a result of market 
disruptions or other circumstances beyond the entities' control. In 
order for an application to be accepted and considered by the FDIC, 
applicants would be required to describe the circumstances that gave 
rise to the request to participate in the emergency guarantee facility 
and also must include an explanation of how and the extent to which 
such circumstances were unanticipated by the applicant and remain 
beyond its control. In addition, applicants would be expected to 
include an explanation of the actions taken by its management to 
mitigate such circumstances.
Participation Fee
    Under Alternative B, the FDIC would assess an annualized 
participation fee of at least 300 basis points on any FDIC-guaranteed 
debt issued by entities that are permitted to use the emergency 
guarantee facility. The FDIC would reserve the right to increase the 
participation fee on a case-by-case basis, depending upon the risks 
present in the issuing entity's organization. The FDIC notes that the 
participation fee may provide an appropriate deterrent to applications 
based on other, less severe circumstances or concerns. Consistent with 
the existing DGP, a participating entity may be required to pledge 
sufficient collateral to ensure the repayment of any principal and 
interest payments made by the FDIC under the guarantee facility, and 
also may be subject to other conditions and restrictions that the FDIC 
deems appropriate, including, for example, limiting executive 
compensation, bonuses, or the payment of dividends.

IV. Request for Comments

    The FDIC requests comments on all aspects of this notice. 
Specifically, the FDIC notes that, upon approval of application, the 
emergency guarantee facility proposed in Alternative B would be 
available to all participating IDIs and to those other entities that 
had issued FDIC-guaranteed debt by September 9, 2009. The FDIC requests 
comment as to whether, if Alternative B is adopted, eligibility should 
be limited in this manner. Finally, the FDIC asks commenters to 
indicate a preference for either Alternative A or Alternative B as a 
means of providing the most appropriate phase out of the FDIC's DGP.

V. Regulatory Analysis and Procedure

A. Regulatory Flexibility Act

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 603(a), the FDIC must publish an initial regulatory 
flexibility analysis with this proposed rulemaking or certify that the 
proposed rule, if adopted, will not have a significant economic impact 
on a substantial number of small entities. For purposes of the RFA 
analysis or certification, financial institutions with total assets of 
$175 million or less are considered to be ``small entities.'' The FDIC 
hereby certifies pursuant to 5 U.S.C. 605(b) that the Alternative B of 
the proposed rule, if adopted, will not have a significant economic 
impact on a substantial number of small entities. (Alternative A, as 
described in the proposed rule, represents no change from the FDIC's 
existing regulation. As such, Alternative A is not likely to have a 
significant economic impact on a substantial number of small entities.)
    Currently, 4,424 IDIs participate in the DGP, of which 
approximately 2,136 (or approximately 48 percent) are small entities. 
If Alternative B is adopted, all 2,136 IDIs that are considered small 
entities for purposes of this analysis would be eligible to apply to 
access the emergency guarantee facility. As a result, the FDIC asserts 
that Alternative B could have some impact on a substantial number of 
IDIs that are small entities that participate in the DGP.
    Nevertheless, the FDIC has determined that, were Alternative B of 
the proposed rule to be adopted, the economic impact on small entities 
will not be significant for the following reasons. The emergency 
guarantee facility as contemplated in Alternative B is designed to be 
accessed on an emergency case-by-case basis by IDIs (and other entities 
that issued debt under the DGP) only if such entities are unable to 
replace maturing debt as a result of market disruptions or other 
circumstances beyond the entities' control. Eighty-one IDIs have issued 
FDIC-guaranteed debt through the DGP since the program's inception. It 
appears unlikely that a significant number of IDIs (or other qualifying 
entities) would satisfy the requirements to issue FDIC-guaranteed debt 
during such emergency circumstances. Accordingly, if adopted in final 
form, neither Alternate A nor Alternate B of the proposed rule would 
have a significant economic impact on a substantial number of small 
entities.

B. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3501 et seq.), an agency may not conduct or sponsor, and a person is 
not required to respond to, a collection of information unless it 
displays a currently valid OMB control number. If Alternative B were 
adopted, the Proposed Rule would establish a new OMB-approved 
information collection, entitled the ``Temporary Liquidity Guarantee 
Program--Emergency Guarantee Facility'' (OMB No. 3064--NEW). (Should 
Alternative A be adopted, no change would occur in the existing 
regulation or the existing burden estimates.) Should Alternative B be 
adopted, the estimated burden for the proposed application process, 
described in Alternative B of the Proposed Rule, is as follows:
    Title: ``Temporary Liquidity Guarantee Program--Emergency Guarantee 
Facility''.
    OMB Number: 3064--NEW.
    Estimated Number of Respondents:
    Application to access emergency guarantee facility submitted by 
IDIs--8.
    Application to access emergency guarantee facility submitted by 
non-IDIs that issued FDIC-guaranteed debt under the DGP--4.
    Frequency of Response:
    Application to access emergency guarantee facility submitted by 
IDIs--once.

[[Page 47492]]

    Application to access emergency guarantee facility submitted by 
non-IDIs that issued FDIC-guaranteed debt under the DGP--once.
    Affected Public: IDIs; thrift holding companies, bank and financial 
holding companies, and affiliates of IDIs that issued debt under the 
DGP.
    Average Time per Response: Application to access emergency 
guarantee facility submitted by IDIs--4 hours.
    Application to access emergency guarantee facility submitted by 
non-IDIs that issued FDIC-guaranteed debt under the DGP--4 hours.
    Estimated Annual Burden:
    Application to access emergency guarantee facility submitted by 
IDIs--32 hours.
    Application to access emergency guarantee facility submitted by 
non-IDIs that issued FDIC-guaranteed debt under the DGP--16 hours.
    Total Annual Burden--48 hours.
    The FDIC is requesting comment on the new TLGP-related information 
collection proposed in Alternative B. The FDIC is also giving notice 
that the proposed collection of information has been submitted to OMB 
for review and approval. Comments are invited on: (1) Whether this 
collection of information is necessary for the proper performance of 
the FDIC's functions, including whether the information has practical 
utility; (2) the accuracy of the estimates of the burden of the 
information collection, including the validity of the methodologies and 
assumptions used; (3) ways to enhance the quality, utility, and clarity 
of the information to be collected; and (4) ways to minimize the burden 
of the information collection on respondents, including through the use 
of automated collection techniques or other forms of information 
technology. Interested parties are invited to submit written comments 
on the estimated burden by any of the following methods:
     http://www.FDIC.gov/regulations/laws/federal/propose.html.
     E-mail: comments@fdic.gov. Include the name and number of 
the collection in the subject line of the message.
     Mail: Leneta Gregorie (202-898-3719), Counsel, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429.
     Hand Delivery: Comments may be hand-delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street), on business days between 7 a.m. and 5 p.m.

A copy of the comment may also be submitted to the OMB Desk Officer for 
the FDIC, Office of Information and Regulatory Affairs, Office of 
Management and Budget, New Executive Office Building, Room 3208, 
Washington, DC 20503. All comments should refer to the name and number 
of the collection.

C. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, 113 
Stat. 1338, 1471 (Nov. 12, 1999), requires the federal banking agencies 
to use plain language in all proposed and final rules published after 
January 1, 2000. The FDIC invites your comments on how to make this 
proposed regulation easier to understand. For example:
     Has the FDIC organized the material to suit your needs? If 
not, how could this material be better organized?
     Are the requirements in the proposed rule clearly stated? 
If not, how could the proposed rule be more clearly stated?
     Does the proposed rule contain language or jargon that is 
not clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the proposed rule easier to 
understand? If so, what changes to the format would make the proposed 
rule easier to understand?
     What else could the FDIC do to make the proposed rule 
easier to understand?

D. The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the proposed rule will not affect 
family well-being within the measure of section 654 of the Treasury and 
General Government Appropriations Act, enacted as part of the Omnibus 
Consolidated and Emergency Supplemental Appropriations Act of 1999 
(Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 12 CFR Part 370

    Banks, Banking, Bank deposit insurance, Holding companies, National 
banks, Reporting and recordkeeping requirements, Savings associations.

    For the reasons discussed in the preamble, the Federal Deposit 
Insurance Corporation proposes to amend 12 CFR Part 370 as follows:

PART 370--TEMPORARY LIQUIDITY GUARANTEE PROGRAM

    1. The authority citation for part 370 continues to read as 
follows:

    Authority:  12 U.S.C. 1813(l), 1813(m), 1817(i), 1818, 
1819(a)(Tenth), 1820(f), 1821(a), 1821(c), 1821(d), 1823(c)(4).

    2. Amend Sec.  370.2 by revising paragraph (n) to read as follows:


Sec.  370.2  Definitions.

* * * * *
    (n) Issuance period. Except as provided in paragraph (n)(2) of this 
section, the term ``issuance period'' means
    (i) With respect to the issuance, by a participating entity that is 
either an insured depository institution, an entity that has issued 
FDIC-guaranteed debt before April 1, 2009, or an entity that has been 
approved pursuant to Sec.  370.3(h) to issue FDIC-guaranteed debt after 
June 30, 2009 and on or before October 31, 2009, of:
    (A) Mandatory convertible debt, the period from February 27, 2009 
to and including October 31, 2009, and
    (B) All other senior unsecured debt, the period from October 14, 
2008 to and including October 31, 2009; and
    (ii) With respect to the issuance, by any other participating 
entity, of
    (A) Mandatory convertible debt, the period from February 27, 2009 
to and including June 30, 2009, and
    (B) All other senior unsecured debt, the period from October 14, 
2008 to and including June 30, 2009.
    (2) The ``issuance period'' for a participating entity that has 
been approved to issue FDIC-guaranteed debt pursuant to Sec.  370.3(k) 
of this part is the period after October 31, 2009 and on or before 
April 30, 2010.
* * * * *
    3. Amend section 370.3 as follows:
    a. Revise paragraph (d)(2);
    b. Revise paragraphs (h)(1) through (h)(3), (h)(5), and (h)(6); and
    c. Add paragraph (k), to read as follows:


Sec.  370.3  Debt Guarantee Program.

* * * * *
    (d) * * *
    (2) With respect to debt that is issued on or after April 1, 2009 
by a participating entity that is either an insured depository 
institution, a participating entity that has issued guaranteed debt 
before April 1, 2009, a participating entity that has been approved 
pursuant to Sec.  370.3(h) to issue guaranteed debt after June 30, 2009 
and on or before October 31, 2009, or a participating entity that has 
been approved pursuant to Sec.  370.3(k) to issue guaranteed debt after 
October 31, 2009, the guarantee expires on the earliest of the 
mandatory conversion date for mandatory convertible debt, the

[[Page 47493]]

maturity date of the debt, or December 31, 2012.
* * * * *
    (h) Applications for exceptions, eligibility, and issuance of 
certain debt. (1) The following requests require written application to 
the FDIC and the appropriate Federal banking agency of the entity or 
the entity's lead affiliated insured depository institution:
    (i) A request by a participating entity to establish, increase, or 
decrease its debt guarantee limit,
    (ii) A request by an entity that becomes an eligible entity after 
October 13, 2008, for an increase in its presumptive debt guarantee 
limit of zero,
    (iii) A request by a non-participating surviving entity in a merger 
transaction to opt in to either the debt guarantee program or the 
transaction account guarantee program,
    (iv) A request by an affiliate of an insured depository institution 
to participate in the debt guarantee program,
    (v) A request by a participating entity to issue FDIC-guaranteed 
mandatory convertible debt,
    (vi) A request by a participating entity that is neither an insured 
depository institution nor an entity that has issued FDIC-guaranteed 
debt before April 1, 2009, to issue FDIC-guaranteed debt after June 30, 
2009 and on or before October 31, 2009,
    (vii) A request by a participating entity to issue senior unsecured 
non-guaranteed debt after June 30, 2009, and
    (viii) A request by a participating entity to issue FDIC-guaranteed 
debt after October 31, 2009 under the Emergency Guarantee Facility 
pursuant to paragraph (k) of this section.
    (2) Each letter application must describe the details of the 
request, provide a summary of the applicant's strategic operating plan, 
describe the proposed use of the debt proceeds, and
    (i) With respect to an application for approval of the issuance of 
mandatory convertible debt, must also include:
    (A) The proposed date of issuance,
    (B) The total amount of the mandatory convertible debt to be 
issued,
    (C) The mandatory conversion date,
    (D) The conversion rate (i.e., the total number of shares of common 
stock that will result from the conversion divided by the total dollar 
amount of the mandatory convertible debt to be issued),
    (E) Confirmation that all applications and all notices required 
under the Bank Holding Company Act of 1956, as amended, the Home 
Owners' Loan Act, as amended, or the Change in Bank Control Act, as 
amended, have been submitted to the applicant's appropriate Federal 
banking agency in connection with the proposed issuance, and
    (F) Any other relevant information that the FDIC deems appropriate;
    (ii) With respect to an application pursuant to paragraph 
(h)(1)(vi) of this section to extend the period for issuance of FDIC-
guaranteed debt to and including October 31, 2009, the entity's plans 
for the retirement of the guaranteed debt, a description of the 
entity's financial history, current condition, and future prospects, 
and any other relevant information that the FDIC deems appropriate;
    (iii) With respect to an application pursuant to paragraph 
(h)(1)(vii) of this section to issue senior unsecured non-guaranteed 
debt, a summary of the applicant's strategic operating plan and the 
entity's plans for the retirement of any guaranteed debt; and
    (iv) With respect to an application pursuant to paragraph 
(h)(1)(viii) of this section to issue FDIC-guaranteed debt under the 
Emergency Guarantee Facility, a projection of the sources and uses of 
funds through December 31, 2012, a summary of the entity's contingency 
plans, a description of the collateral that an entity can make 
available to secure the entity's obligation to reimburse the FDIC for 
any payments made pursuant to the guarantee, a description of the plans 
for retirement of the FDIC-guaranteed debt, a description of the market 
disruptions or other circumstances beyond the entity's control that 
prevent the entity from replacing maturing debt with non-guaranteed 
debt, a description of management's efforts to mitigate the effects of 
such disruptions or circumstances, conclusive evidence that 
demonstrates an entity's inability to issue non-guarantee debt, and any 
other relevant information.
    (3) In addition to any other relevant factors that the FDIC deems 
appropriate, the FDIC will consider the following factors in evaluating 
applications filed pursuant to paragraph (h) of this section:
    (i) For applications pursuant to paragraphs (h)(1)(i), (h)(1)(ii), 
(h)(1)(iii), and (h)(1)(v) of this section: the proposed use of the 
proceeds; the financial condition and supervisory history of the 
eligible/surviving entity;
    (ii) For applications pursuant to paragraph (h)(1)(iv) of this 
section: the proposed use of the proceeds; the extent of the financial 
activity of the entities within the holding company structure; the 
strength, from a ratings perspective of the issuer of the obligations 
that will be guaranteed; the size and extent of the activities of the 
organization;
    (iii) For applications pursuant to paragraph (h)(1)(vi) of this 
section: the proposed use of the proceeds; the entity's plans for the 
retirement of the guaranteed debt, the entity's financial history, 
current condition, future prospects, capital, management, and the risk 
presented to the FDIC;
    (iv) For applications pursuant to paragraph (h)(1)(vii) of this 
section: the entity's plans for the retirement of the guaranteed debt, 
and
    (v) For applications pursuant to paragraph (h)(1)(viii) of this 
section, the applicant's strategic operating plan, the proposed use of 
the debt proceeds, the entity's plans for the retirement of the FDIC-
guaranteed debt, the entity's contingency plans, the nature and extent 
of the market disruptions or other circumstances beyond the entity's 
control that prevent the entity from replacing maturing debt with non-
guaranteed debt, the collateral that an entity can make available to 
secure the entity's obligation to reimburse the FDIC for any payments 
made pursuant to the guarantee, management's efforts to mitigate the 
effects of such conditions or circumstances, the evidence that 
demonstrates an entity's inability to issue non-guarantee debt, and the 
risk presented to the FDIC.
* * * * *
    (5) The filing deadlines for certain applications are:
    (i) At the same time the merger application is filed with the 
appropriate Federal banking agency, for an application pursuant to 
paragraph (h)(1)(iii) of this section (which must include a copy of the 
merger application);
    (ii) October 31, 2009, for an application pursuant to paragraph 
(h)(1)(v) of this section that is filed by a participating entity that 
is either an insured depository institution, an entity that has issued 
FDIC-guaranteed debt before April 1, 2009, or an entity that has been 
approved pursuant to paragraph (h) of this section to issue FDIC-
guaranteed debt after June 30, 2009 and on or before October 31, 2009;
    (iii) June 30, 2009, for an application pursuant to paragraph 
(h)(1)(v) of this section that is filed by a participating entity other 
than an entity described in paragraph (h)(5)(ii) of this section;
    (iv) June 30, 2009, for an application pursuant to paragraph 
(h)(1)(vi); and
    (v) April 30, 2010, for applications pursuant to paragraph 
(h)(1)(viii).
    (6) In granting its approval of an application filed pursuant to 
paragraph (h) of this section the FDIC may impose

[[Page 47494]]

any conditions it deems appropriate, including without limitation, 
requirements that the issuer
    (i) Hedge any foreign currency risk, or
    (ii) Pledge collateral to secure the issuer's obligation to 
reimburse the FDIC for any payments made pursuant to the guarantee.
    (iii) Limit executive compensation and bonuses, and/or
    (iv) Limit or refrain from the payment of dividends.
* * * * *
    (k) Emergency Guarantee Facility. In the event that a participating 
entity that is either an insured depository institution or an entity 
that has issued FDIC-guaranteed debt on or before September 9, 2009 is 
unable, after October 31, 2009, to issue non-guaranteed debt to replace 
maturing senior unsecured debt as a result of market disruptions or 
other circumstances beyond the entity's control, the participating 
entity may, with the FDIC's prior approval under paragraph (h) of this 
section, issue FDIC-guaranteed debt after October 31, 2009 and on or 
before April 30, 2010. Any such issuance is subject to all of the terms 
and conditions imposed by the FDIC in its approval decision as well as 
all of the provisions of this part, including without limitation, the 
payment of the applicable assessment and compliance with the disclosure 
requirements.
    4. Amend section 370.5 as follows:
    a. Revise paragraph (f); and
    b. Revise paragraph (h)(2), to read as follows:


Sec.  370.5  Participation.

* * * * *
    (f) Except as provided in paragraphs (g), (j), and (k) of Sec.  
370.3, participating entities are not permitted to select which newly 
issued senior unsecured debt is guaranteed debt; all senior unsecured 
debt issued by a participating entity up to its debt guarantee limit 
must be issued and identified as FDIC-guaranteed debt as and when 
issued.
* * * * *
    (h) * * *
    (2) Each participating entity that is either an insured depository 
institution, an entity that has issued FDIC-guaranteed debt before 
April 1, 2009, an entity that has been approved pursuant to Sec.  
370.3(h) to issue FDIC-guaranteed debt after June 30, 2009 and on or 
before October 31, 2009, or a participating entity that has been 
approved pursuant to Sec.  370.3(k) to issue FDIC-guaranteed debt after 
October 31, 2009, must include the following disclosure statement in 
all written materials provided to lenders or creditors regarding any 
senior unsecured debt that is issued by it during the applicable 
issuance period and that is guaranteed under the debt guarantee 
program:

    This debt is guaranteed under the Federal Deposit Insurance 
Corporation's Temporary Liquidity Guarantee Program and is backed by 
the full faith and credit of the United States. The details of the 
FDIC guarantee are provided in the FDIC's regulations, 12 CFR Part 
370, and at the FDIC's Web site, http://www.fdic.gov/tlgp. [If the 
debt being issued is mandatory convertible debt, add: The expiration 
date of the FDIC's guarantee is the earlier of the mandatory 
conversion date or December 31, 2012]. [If the debt being issued is 
any other senior unsecured debt, add: The expiration date of the 
FDIC's guarantee is the earlier of the maturity date of the debt or 
December 31, 2012.]
* * * * *
    5. Amend section 370.6 as follows:
    a. Revise paragraph (d)(1); and
    b. Add paragraph (i), to read as follows:


Sec.  370.6  Assessments under the Debt Guarantee Program.

* * * * *
    (d) Amount of assessments for debt within the debt guarantee limit 
(1) Calculation of assessment. Subject to paragraphs (d)(3) and (h) of 
this section, and except as provided in paragraph (i) of this section, 
the amount of assessment will be determined by multiplying the amount 
of FDIC-guaranteed debt times the term of the debt or, in the case of 
mandatory convertible debt, the time period from issuance to the 
mandatory conversion date, times an annualized assessment rate 
determined in accordance with the following table.

------------------------------------------------------------------------
                                                                 The
                                                              annualized
 For debt with a maturity or time period to conversion date   assessment
                             of                                rate (in
                                                                basis
                                                              points) is
------------------------------------------------------------------------
180 days or less (excluding overnight debt)................           50
181-364 days...............................................           75
365 days or greater........................................          100
------------------------------------------------------------------------

* * * * *
    (i) Assessment for Debt issued under the Emergency Guarantee 
Facility. The amount of the assessment for FDIC-guaranteed debt issued 
pursuant to Sec.  370.3(k) of this part is equal to the amount of the 
debt times the term of the debt (or in the case of mandatory 
convertible debt, the time period to conversion) times an annualized 
assessment rate of 300 basis points, or such greater rate as the FDIC 
may determine in its decision approving such issuance.

    Dated at Washington DC, this 9th day of September 2009.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. E9-22372 Filed 9-15-09; 8:45 am]
BILLING CODE P