Deadline Nears for Banks as Treasury Program Progresses
Tuesday, November 11, 2008
NEW YORK, Nov. 10 -- Publicly traded banks have until Friday to apply for capital injections from the Treasury Department, and it will take "a few months" for the government to invest all of the $250 billion that was set aside for preferred-stock investments in financial firms, according to the Treasury official overseeing the program.
Meanwhile, the department is soliciting bids from firms that want to serve as asset managers for the program. It also plans to expand the newly created Office of Financial Stability, which already has a staff of 40.
Neel Kashkari, Treasury's interim assistant secretary for financial stability, said Monday that there is enough money in the capital purchase program for "all qualifying banks, potentially thousands," to participate. About half the $250 billion already has been funneled to nine large banks, including Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan Chase and Bank of America.
Kashkari, speaking in New York at the Securities Industry and Financial Markets Association's conference on Treasury's Troubled Asset Relief Program, declined to say how soon Treasury might start buying mortgage-related securities and other assets from banks that have been weighed down by the holdings. The plan to purchase bank assets, initially billed as the centerpiece of Treasury Secretary Henry M. Paulson Jr.'s financial industry bailout plan, has been overshadowed by capital infusions meant to encourage bank lending.
"Ultimately, Secretary Paulson will make the decision on when to roll out which tools," Kashkari said in response to a question about Treasury's plans for buying up distressed assets.
Treasury already has awarded contracts for several pieces of the Troubled Asset Relief Program. Ernst & Young was selected to provide accounting services; PricewaterhouseCoopers will provide accounting internal controls support; legal services will be overseen by Hughes, Hubbard & Reed and Squire, Sanders & Dempsey; and Lindholm & Associates will provide human resources support.
Treasury also has named three interim officials to key posts at the Office of Financial Stability. James Lambright, chairman of the Export-Import Bank, was named interim chief investment officer; Howard Schweitzer, the bank's general counsel, was named interim chief operating officer. Former Motorola executive Don McLellan, an attorney with a background in mergers and acquisitions, is serving as capital purchase program manager.
Financial agents seeking to manage the stock, warrants and debt received from firms accepting capital from Treasury will have until Thursday to apply.
The deadline a day later for banks requesting capital infusions will be extended for non-public banks. Treasury is working out terms for planned investments in private banks, Kashkari said, with decisions expected to be made in "the next few days."