Holland & Knight Financial Recovery Team: Financial Markets Update
 
December 2, 2008
 
Steven Nesmith - Washington

Federal Reserve to Purchase the Direct Obligations of Housing-related Government-sponsored Enterprises and Mortgage-backed Securities Backed by Fannie Mae, Freddie Mac and Ginnie Mae

On November 25, 2008, the Federal Reserve Board announced that it will implement a program to purchase up to $100 billion in direct obligations of housing-related government-sponsored enterprises (GSEs), i.e., the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal Home Loan Banks. The purchases of GSE direct obligations will be conducted with the Federal Reserve’s primary dealers through a series of competitive auctions. The Federal Reserve further announced that it will purchase up to $500 billion in mortgage-backed securities (MBS) backed by Fannie Mae, Freddie Mac and the Government National Mortgage Association (Ginnie Mae) under the same program. The purchases of MBS will be conducted by asset managers selected via a competitive process with a goal of beginning these purchases before year-end. Purchases of both GSE direct obligations and MBS are expected to take place over several quarters. “This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Federal Reserve Board stated in its press release.
For a copy of the Federal Reserve Board press release click on this link:

http://www.federalreserve.gov/newsevents/press/monetary/20081125b.htm

Federal Reserve Announces Term Asset-Backed Securities Loan Facility to Spur Lending

Also on November 25, 2008, the Federal Reserve Board announced the creation of the Term Asset-Backed Securities Loan Facility (TALF), a facility under which the Federal Reserve Bank of New York (FRBNY) will lend up to $200 billion to support the issuance of AAA-rated asset-backed securities (ABS) collateralized by student loans, auto loans, credit card loans and loans guaranteed by the Small Business Administration (SBA). The U.S. Treasury Department is providing $20 billion of credit protection to the FRBNY in connection with the TALF pursuant to its authority under the Troubled Assets Relief Program of the Emergency Economic Stabilization Act of 2008. TALF loans will have a one-year term and will be non-recourse to the borrower and fully secured by eligible ABS. The FRBNY will cease making new loans under the facility on December 31, 2009, unless the Federal Reserve Board agrees to extend the facility. In a press release detailing the new loan facility, the Federal Reserve Board stated that the markets for asset-backed securities “historically have funded a substantial share of consumer credit and SBA-guaranteed small-business loans.” The facility is designed to generate increased credit availability and to support economic activity by facilitating renewed issuance of consumer and small-business asset-backed securities at what the Federal Reserve Board called “more normal interest-rate spreads.”

For TALF terms and conditions – including executive compensation requirements – click on the following link. Note that the terms and conditions are subject to change based on the Federal Reserve’s discussions with market participants in the coming weeks.

http://www.federalreserve.gov/newsevents/press/monetary/monetary20081125a1.pdf

For copies of the Federal Reserve Board and the U.S. Treasury Department press releases click on the following links:

http://www.federalreserve.gov/newsevents/press/monetary/20081125a.htm

http://www.treas.gov/press/releases/hp1292.htm

Holland & Knight’s November 19, 2008 Financial Recovery Conference/Discussion Now Available for Viewing U.S. and Global Financial Crisis: New Business Opportunities and Pitfalls in a Highly Regulated and Legislative Environment

On November 19, 2008, Holland & Knight and its Financial Recovery Team hosted a panel discussion at its Washington, D.C. office. The discussion focused on the recent actions taken by the Congress, Federal Reserve Board, U.S. Department of Housing and Urban Development, U.S. Treasury Department, Securities and Exchange Commission and other federal agencies to combat the global economic crisis. Distinguished panelists included the Hon. Gregory W. Meeks (D-6th/NY), Committee Member, House of Representatives Committee on Financial Services; Sabeth Siddique, Assistant Director, Federal Reserve Board, Division of Banking Supervision and Regulation; Michael Flynn, Acting General Counsel, U.S. Department of Housing and Urban Development; and Holland & Knight attorneys experienced in a broad range of disciplines. We appreciate the positive feedback from clients who attended or listened to this program in person, online or via teleconference and we look forward to planning future programs.

To register to view a recording of the panel discussion click on the following link:

http://webinars.hklaw.com/e83814015/event/registration.html

Holland & Knight Article on the American International Group Inc. (AIG) Crisis Receives National Attention What AIG’s $85 Billion Bailout Means for Your D&O Insurance Policy: A Q&A with AIG Executive Liabilitysm

To read the article click on the following link:

http://www.hklaw.com/id24660/publicationid3/returnid33/contentid52748/

Holland & Knight’s Financial Recovery Team