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16 October 2008


[Federal Register: October 16, 2008 (Volume 73, Number 201)]
[Notices]               
[Page 61452-61453]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16oc08-104]                         

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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.

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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 
class.
    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 
below.
    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 
guaranteeing MBS?
    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

[[Page 61453]]

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.
Lindsay Valdeon,
Deputy Executive Secretary, Treasury Department.
 [FR Doc. E8-24686 Filed 10-14-08; 4:15 pm]

BILLING CODE 4810-25-P