Bankin’ Bits

The TARP banner keeps unfurling. In a speech delivered to the Independent Community Bankers of America on May 13, 2009, U.S. Treasury Secretary Tim Geithner announced plans to re-open the TARP Capital Purchase Program (CPP) application window for financial institutions with less than $500 million in total assets. And unlike the relatively brief application window for prior CPP consideration, the re-opened window will remain open for six months. The window will be open to all entities eligible for CPP participation—public and private corporations, Subchapter S corporations and mutual institutions.

Secretary Geithner also announced that Treasury will increase the amount of CPP capital that qualifying institutions will be eligible to receive. While previous CPP investments were limited to 3% of an institution’s risk-weighted assets, Treasury will increase its CPP investment limit to up to 5% of an institution’s risk weighted assets. In addition, institutions that have already received CPP funding under the 3% limit will be allowed to apply for additional capital under the new 5% limit. Secretary Geithner added that the window for small banks to form a holding company to participate in CPP will also be re-opened for six months.

Although the announcement may be welcome news for community bankers who did not apply for CPP funding during the previous application period, Secretary Geithner’s speech was short on details. For example, he did not indicate whether previously declined applications will be reconsidered, and he did not provide the date when the application window will re-open. Rest assured, however, that Stinson Morrison Hecker LLP will be scrutinizing the details of the re-opened application process and will keep you informed of the facts as they unfold