The capital assistance program is a US government initiative to assist American banks facing financial trouble in the wake of the 2008 Financial Crisis. According to a joint statement issued by the Treasury, FDIC, OCC, OTS, and Federal Reserve, under this program, banks deemed to be facing significant capital duress will have the opportunity to seek capital from the private sector and then, if incapable of procuring said capital, will receive funds from the federal government.[1] The capital provided under the plan is not intended to be a continuing long-term option for banks, but instead is a safe-guard against larger than expected losses.
Any government capital will be in the form of convertible preferred stock.[1] Any government capital previously put into the companies under the Troubled Assets Relief Program (TARP) will also be eligible to be exchanged for the convertible preferred stock.[1]
To determine which banks are in need of capital assistance, the Government will use Tangible Common Equity as its benchmark for "healthy capital".[2]
See Also
References
- ↑ 1.0 1.1 1.2 Wall Street Journal Blog post detailing the specifics of the capital assistance program 2/23/2009.
- ↑ New York Times Article discussing Tangible Common Equity in the recent valuation of banks, 2/24/2009.
