16 October 2008
[Federal Register: October 16, 2008 (Volume 73, Number 201)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DEPARTMENT OF THE TREASURY
Development of a Guarantee Program for Troubled Assets
AGENCY: Department of the Treasury, Departmental Offices.
ACTION: Notice and request for comments.
SUMMARY: The Department of the Treasury invites the general public to
comment on a program to guarantee the timely payment of principal of,
and interest on, troubled assets originated or issued prior to March
14, 2008, as authorized by Section 102 of the Emergency Economic
Stabilization Act of 2008 (EESA).
DATES: Written comments should be received on or before October 28,
2008 to be assured of consideration.
Submission of Comments: Please submit comments electronically
through the Federal eRulemaking Portal--``Regulations.gov.'' Go to
http://www.regulations.gov to submit or view public comments. The ``How
to Use this Site'' and ``User Tips'' link on the Regulations.gov home
page provides information on using Regulations.gov, including
instructions for submitting or viewing public comments, viewing other
supporting and related materials, and viewing the docket after the
close of the comment period.
Please include your name, affiliation, address, e-mail address and
telephone number(s) in your comment. All statements received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. You should submit only
information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: TARPInsurance@do.treas.gov.
SUPPLEMENTARY INFORMATION: Section 102 of the Emergency Economic
Stabilization Act of 2008 (Pub. L. 110-343) (EESA) charges the
Secretary of the Treasury to develop a program to guarantee the timely
payment of principal of, and interest on, troubled assets originated or
issued prior to March 14, 2008. The Secretary is authorized to set and
collect premiums from participating financial institutions by category
or class of asset, taking into consideration the credit risk
characteristics of the asset being guaranteed. The premium must be
sufficient to cover anticipated claims, based on actuarial analysis,
and ensure that taxpayers are fully protected. The structure of the
guarantee program may take any number of forms and may vary by asset
The Treasury Department is soliciting comments to assist in the
development of the guarantee program. The Treasury Department is
particularly interested in comments on the specific questions set forth
1 What are the key issues Treasury should address in establishing
the guarantee program for troubled assets?
1.1 Should the program offer insurance against losses for both
individual whole loans and individual mortgage backed securities (MBS)?
1.2 What is the appropriate structure for such a program? How
should the program accommodate various classes of troubled assets?
Should the program differ by the degree to which an asset is troubled?
1.2.1 What are the key issues to consider with respect to
guaranteeing whole first mortgages?
1.2.2 What are the key issues to consider with respect to
guaranteeing HELOCs and other junior liens?
1.2.3 What are the key issues to consider with respect to
1.2.4 What are the key issues associated with guaranteeing
financial instruments other than mortgage related assets originated or
issued before March 14, 2008 that could be important for promoting
financial market stability?
1.3 What are the key issues to consider with respect to setting the
payout of the guarantee?
1.3.1 Should the payout be equal to principal and interest at the
time the asset was originated or to some other value? What should that
value be? What would be the impact of offering guarantees of less than
100 percent of original principal and interest?
1.3.2 Should payout vary by asset class? If so, please describe
using the same asset classes as enumerated under 1.21-1.24.
1.4 What event should trigger the payout under the guarantee?
Should the holder be able to present the claim at will or should there
be a set date? Should this date differ by asset class? Should this date
differ by the degree to which the asset is troubled?
1.5 Should the holder be permitted to sell the troubled asset with
the program guarantee? If appropriate, should asset sales be restricted
to eligible financial institutions or should
there be no restrictions to promote liquidity in the marketplace?
1.6 What are the key issues the Treasury should consider in
determining the possible losses to which the government would be
exposed in offering the guarantee? What methodology should be used to
determine possible losses? Does it differ by asset class? If so, please
describe using the same asset classes as enumerated under 1.21-1.24.
Does it differ by the degree to which the asset is troubled?
1.7 What are the key elements the Treasury should consider in
setting premiums for this program? Is it feasible or appropriate to set
premiums reflecting the prices of similar assets purchased under
Section 101 of the EESA?
1.7.1 If use of prices of similar assets purchased under Section
101 of the EESA are not feasible or appropriate, should premiums be set
by use of market mechanisms similar to (but separate from) those
contemplated for the troubled assets purchase program? How would this
be implemented? If not feasible or appropriate, what methodologies
should be used to set premiums?
1.7.2 Do these considerations of feasibility or appropriateness
vary by asset class? If so, please describe using the same asset
classes as enumerated under 1.21-1.24. Should the premiums vary by the
degree to which the asset is troubled?
1.8 How and in what form should payment of premiums be scheduled?
2 How should a guarantee program be designed to minimize adverse
selection, given that the program must be voluntary? Is there a way to
limit adverse selection that avoids individually analyzing assets?
3 What legal, accounting, or regulatory issues would such a
guarantee program raise?
4 What administrative and/or operational challenges would such a
guarantee program create?
4.1 What expertise would Treasury need to operate such a guarantee
program? Please describe for all facets of the program.
5 What are the key issues to be considered in determining the
eligibility of a given type of financial institution to participate in
this program? Should these eligibility provisions differ from those of
the troubled asset purchase program?
6 What are the key issues to be considered in determining the
eligibility of a given asset to be guaranteed by this program? Should
eligibility provisions of assets to be guaranteed under this program
differ from those of the troubled asset purchase program?
7 Assuming the guarantee is priced to cover expected claims, are
there situations (perhaps created by regulatory or accounting
considerations) in which financial institutions would prefer this
program to the troubled asset purchase program? Please describe.
7.1 Does this preference differ by type and condition of the asset?
For what troubled assets might financial institutions choose to
participate in the guarantee program rather than sell under the
troubled asset purchase program? Is accommodating this choice likely to
best promote the goals of the EESA? Does it adequately protect the
taxpayer? If not, what design feature should be included to assure
these goals are met?
Dated: October 10, 2008.
Deputy Executive Secretary, Treasury Department.
[FR Doc. E8-24686 Filed 10-14-08; 4:15 pm]
BILLING CODE 4810-25-P